Congress Passes New Coronavirus Relief Package

Mar 27, 2020

Friday afternoon, the House approved the Senate’s version of the Coronavirus Aid, Relief, and Economic Security Act (or “CARES Act”) by unanimous voice vote. This massive 880 page, $2 trillion piece of legislation aims to provide relief for those workers and businesses that are struggling to maintain financial stability as our country continues to combat the spread of coronavirus. President Trump is expected to quickly sign the bill into law.

While the Act’s direct payments of $1,200 to low- and middle-income Americans will perhaps garner the most attention, the Act’s unemployment expansion, its tax credit for closed or distressed businesses, and its loan expansion programs are most consequential for employers. Each provision is detailed below.

Pandemic Unemployment Assistance –

Following a week in which a record 3.3 million unemployment claims were filed nationwide, the CARES Act creates a temporary Pandemic Unemployment Assistance program, set to expire at year’s end. For the first time, this program makes unemployment benefits accessible to independent contractors and self-employed individuals. These benefits have no waiting period and are available to workers who are unemployed, partially unemployed, or temporarily unavailable to work because of a coronavirus-related reason. The Act lists eleven acceptable coronavirus-related reasons that would qualify an employee for these unemployment payments, namely:
  1. The employee is diagnosed with coronavirus,
  2. The employee is experiencing symptoms of coronavirus and is seeking a diagnosis or test,
  3. A member of the employee’s household has been diagnosed with coronavirus,
  4. The employee is caring for a family member or household member who has been diagnosed with coronavirus,
  5. The employee is caring for a child or other household member whose school or daycare facility has been shut down due to the coronavirus pandemic,
  6. The employee is unable to reach his or her workplace due to quarantine imposed as a direct result of the coronavirus pandemic,
  7. The employee is unable to reach the place of employment because a health care provider has advised him or her to self-quarantine due to concerns related to coronavirus,
  8. The employee “was scheduled to commence employment and does not have a job or is unable to reach the job” as a direct result of the coronavirus pandemic
  9. The employee has become the breadwinner or major support for a household because the head of the household died from coronavirus,
  10. The employee quit his or her job as a direct result of the coronavirus pandemic, or
  11. The employee’s workplace as closed because of the coronavirus pandemic. These unemployment benefits are NOT available to individuals who still have the ability to telework. Neither are these benefits available to employees who are receiving paid sick leave or other sick leave benefits, even if they otherwise meet one or more qualifying criteria.
In addition to making unemployment benefits more widely available, the CARES Act also makes these benefits more generous than before. Workers are now entitled to an additional $600 per week on top of whatever their state’s unemployment office is giving them (even if this sum exceeds their normal wages). The Act also extends the duration of state unemployment benefits for an additional 13 weeks, from 26 to 39.

Tax Credit for Closed or Distressed Businesses –

To help incentivize businesses to retain as many workers as possible, the CARES Act establishes a temporary, fully-refundable tax credit available to closed or distressed businesses that continue to pay their workers. The credit covers 50% of payroll on the first $10,000 of each employee’s compensation, including the cost of health benefits.

The credit is available to employers (1) whose operations were fully or partially suspended, due to a coronavirus-related shutdown order, or (2) whose gross receipts declined by 50% or more compared to the same quarter of 2019. For businesses with more than 100 full-time employees, the credit is only available if the business is not providing any services because of coronavirus shutdowns, whereas businesses with 100 or fewer full-time employees can utilize it even if they remain open for business.

Loans for Small and Midsize Businesses –

The CARES Act temporarily amends the Small Businesses Act to provide 100% federally-backed loans for businesses with fewer than 500 employees. These loans are available for up to 2.5 times the employer’s monthly payroll or $10 million, whichever is lesser. The Act also provides mechanisms for some or all of the principle of these loans to be forgiven. The exact amount that is forgiven depends on how many workers the employer lays off and how much employees’ wages are cut during the life of the loan.

The Act also establishes new loan programs for midsize businesses of between 500-10,000 employees and for particularly distressed industries, including airlines and railroads. We encourage you to reach out to your financial advisors for more information regarding these new loan programs.

Ohio General Assembly Also Passes Pandemic Legislation –
Relatedly, the Ohio General Assembly recently passed its own coronavirus law, formally codifying a prior executive order that, among other things, made its unemployment benefits more accessible. The law temporarily does away with unemployment waiting periods and removes the requirement that unemployed workers seek alternative work while receiving unemployment benefits.

The past few weeks have been a whirlwind of new laws; we expect the next few weeks to be a whirlwind of new guidance. We will continue to keep you informed of new developments and encourage you to contact our attorneys with any questions or concerns you may have. Your workforce is our priority.

The K|W|W Team

Tom Green 330-697-0815
Scot Harvey 330-212-5208
Olivia Hochschwender 330-338-9114
Michael Karst 260-519-1311
Meg Matejkovic 330-524-4546
John McKenzie 330-714-5459
Amanda Smith 716-450-4745
Ken Stump 330-416-3641
Julie Trout 330-618-0639
Jim Wilkins 330-714-2186
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