On Monday, December 21, Congress passed a long-awaited stimulus package to provide much-needed relief to individuals and businesses affected by the pandemic. This final package includes direct payments to individuals; extension of critical unemployment insurance benefits; additional moneys for the small business Paycheck Protection Program; and other targeted relief. Equally notable is what is not included: liability and employment law protections for employers; significant funds for states and localities dealing with COVID-related budget shortfalls; and an extension of the mandate contained in the Families First Coronavirus Response Act (FFCRA) that employers provide emergency paid sick or Family and Medical Leave Act leave to employees (although as discussed below, employers will be able to voluntarily provide this leave and continue to obtain a federal tax credit for such leave through March 31, 2021). A summary of key provisions is set out below.
Unemployment Insurance (UI). The bill provides $300/week in increased federal unemployment benefits (a prior increase of $600/week expired in July). Under the bill, all UI recipients will receive an additional $300 per week through March 14, 2021. It also extends both the Pandemic Unemployment Assistance (PUA) program, with expanded coverage for the self-employed, gig workers, and others in non-traditional employment, and the Pandemic Emergency Unemployment Compensation (PEUC) program, which provides additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits. Additionally, the bill increases the maximum number of weeks an individual may claim benefits through regular state unemployment plus the PEUC program, or through the PUA program, to 50 weeks. Finally, it provides an extra benefit of $100 per week for certain workers who have both wage and self-employment income but whose base UI benefit calculation does not take their self-employment into account.
Direct Payment to Individuals. The bill provides an additional round of direct payments of $600 for individuals making up to $75,000 per year and $1,200 for couples making up to $150,000 per year, as well as a $600 payment for each child dependent (this means, e.g., that an eligible family of four will receive $2,400 in direct payments).
Paycheck Protection Program (PPP) Extension, Program Changes. The draft provides $284.5 billion for a second round of PPP loans for eligible businesses, defining eligibility for PPP second-draw loans as small businesses that have no more than 300 employees and demonstrate at least a 25% reduction in gross revenues between comparable quarters in 2019 and 2020. Under the bill, the maximum loan size is 2.5x average monthly payroll costs, up to $2 million. Small businesses assigned to the industry NAICS code 72 (Accommodation and Food Services) are eligible to receive PPP second-draw loans equal to 3.5x average monthly payroll costs. Borrowers will receive full loan forgiveness if they spend at least 60% of their PPP second-draw loan on payroll costs over a time period of their choosing between 8 weeks and 24 weeks. Finally, the bill includes set-asides to support first-time PPP borrowers with 10 or fewer employees, second-time PPP borrowers with 10 or fewer employees, first-time PPP borrowers who have been made newly eligible, and second-time returning PPP borrowers.
The bill also makes a number of changes to the existing PPP. It allows for full deductibility of business expenses on forgiven PPP loans for both first- and second-draw loans, and expands PPP allowable and forgivable expenses to include supplier costs on existing contracts and purchase orders, including the cost for perishable goods at any time, costs relating to worker protective equipment and adaptive costs, and technology operations expenditures. It further provides needed assurances to PPP lenders that no enforcement action can be taken against a lender who originated the loan in good faith, complied with all regulations, and relied in good faith on a borrower’s certification and documentation, and it enhances borrower flexibility by allowing borrowers to select their loan forgiveness covered period between 8 weeks and 24 weeks. Finally, the bill simplifies the forgiveness application process for smaller loans (up to $150,000) while increasing SBA’s ability to audit and review forgiven loans.
Tax Provisions. The legislation expands the employee retention credit intended to prevent layoffs. It also includes a two-year tax break for business and rolls over a variety of temporary tax breaks known as “extenders,” some for multiple years. Finally, it extends a payroll tax subsidy for employers offering workers paid sick leave and boosts the Earned Income Tax Credit.
Federal Contractors. The bill includes a three-month extension of a program that allows federal contractors to keep employees on the payroll if they are unable to work due to the pandemic. The legislation extends this provision through March 31, 2021. The program had been created under the CARES Act, and was initially set to expire on September 30, 2020, but had been previously extended. It allows the federal government to reimburse federal contractors that grant paid or sick leave to employees who cannot access federal facilities during the pandemic and are unable to telework.
No Extension of FFCRA Leave Requirements. The bill allows covered employers to voluntarily provide emergency paid sick leave or emergency paid Family and Medical Act Leave under the Families First Coronavirus Response Act (FFCRA) as adopted earlier this year, which is set to expire on December 31, 2020, and to take the tax credit associated with this leave through March 31, 2021. In other words, FFCRA leave is no longer required, but if covered employers voluntarily provide these leave benefits, they are eligible to take the tax credit for the leave. While employers with fewer than 500 employers will no longer be required to provide paid leave under federal law as of January 1, 2021, they should be mindful of other paid leave requirements under state and local laws, as well as their own paid leave and PTO policies.
No Significant Moneys for States/Localities or Liability Shields for Employers. Finally, the bill does not include significant funding for states dealing with COVID-related budget shortfalls, which had long been a priority of congressional Democrats. Nor does it include liability shields for employers facing potential claims of COVID-19 exposure under state law, or a variety of federal employment and labor laws, provisions that were championed by congressional Republicans.
It is unclear what the taste for additional COVID relief will be in the next Congress, and whether Democrats and Republicans will be able to forge consensus on what a new relief package would look like. Littler’s WPI will continue to keep you apprised of relevant development as they occur.
Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.