On March 27, 2020, Congress passed and the President signed the “Coronavirus Aid, Relief, and Economic Security Act” – the “CARES Act”. The act:

• offers various forgivable loans and other loan programs for small and medium-sized businesses, but includes conditions designed to encourage businesses to retain or rehire laid-off employees;
• expand and increase benefit levels for unemployment insurance payments and make unemployment insurance payments available to sole proprietors, independent contractors and workers with limited employment history; and
• makes some clarifying changes to the Family First Coronavirus Response Act regarding the availability of paid sick leave for rehired employees.

Here are some of the highlights of the Act that affect labor and employment issues for businesses:

Small business administration forgivable loans for businesses with less than 500 employees

Title I of the CARES Act, the Keeping American Workers Paid and Employed Act, authorizes the Small Business Administration to provide $ 350 billion in forgivable loans.

Eligible Entities – In general, companies and certain associations with less than 500 employees are eligible for loans. There are membership rules by which nominally separate entities can be aggregated for the purpose of limiting the size of the company. Certain catering and hospitality businesses are exempt from the membership rules.

Loan amount – Loans are generally available up to the lesser of 2.5 times an entity’s average monthly salary cost or $ 10 million. Interest will not exceed 4%.

Use restrictions – The loan proceeds can be used for salaries and other compensation costs, mortgage interest payments, rent or lease payments, utilities and certain other specified items.

Reimbursement deferral – Full payment deferral is available between 6 and 12 months for borrowers who have been impacted by the COVID-19 pandemic.

Reimbursement of reimbursement – Loans are eligible for discount (and excluding gross income) for payments the recipient makes in the first 8 weeks of the loan for salary costs, mortgage interest, rent, and utility payments .

However, the amount remitted will be reduced (a) in proportion to the number of employees that a loan recipient terminates and (b) to the extent that the recipient reduces the salary or wages of employees who earn less than $ 100,000 by 25 % or more.

To encourage employers to rehire employees who have already been made redundant due to the COVID-19 crisis, rehired workers will not be factored into the loan forgiveness reduction calculation.

The CARES Act also provides for other emergency disaster loans with separate criteria.

Treasury loans to companies with 500 to 10,000 employees

Title IV of the CARES Act – Economic Stabilization and Assistance to Serious Sectors of the United States Economy – provides the Department of the Treasury with $ 500 billion in loans, guarantees and other investments to businesses, states and eligible municipalities.

Eligible Entities – In general, companies and certain non-profit associations with between 500 and 10,000 employees are eligible for relief.

Loan conditions – The loan will be subject to an interest rate not exceeding 2% per annum. During the first 6 months, or for a longer period if determined by the Secretary of the Treasury, no payment will be due. The Treasury Department will publish application procedures and minimum requirements within 10 days of the enactment of the CARES Act.

Certification requirement – The beneficiaries of the loan must make a certificate of good faith which:

• the funds it receives will be used to retain at least 90 percent of the recipient’s workforce, at full pay and benefits, until September 30, 2020;
• the recipient will reinstate at least 90% of the workforce he had as of February 1, 2020;
• the beneficiary will return all allowances and benefits to the beneficiary’s workers no later than 4 months after the end of the public health emergency declaration;
• the beneficiary will not outsource the work during the term of the loan and 2 years after the end of the repayment;
• the beneficiary will not revoke any collective agreement for the duration of the loan or for an additional period of 2 years, and will also remain neutral in any unionization effort during the duration of the loan

Other requirements, such as limitations on share repurchases, may apply.

Expansion of unemployment benefit payments

The CARES Act also expands unemployment benefit payments, providing an additional 13 weeks of benefits; a benefit increase of $ 600 over four months; and an extension of benefits to self-employed workers, independent contractors and people with limited employment history.

Leave with pay for rehired employees

The law also clarifies the Families First Coronavirus Response Act (FFCRA) to provide that employees who have been terminated by an employer after March 1, 2020 and then rehired, may have access to paid family and medical leave in certain cases.