March 30, 2020
There’s a lot of news and information coming at you fast, so we’ve tried to boil down some major points of interest on various pieces of legislation impacting small businesses and employees. We’ve included some information from small business loans, forgivable loans, unemployment benefits, paid leave programs, and other items of interest. There is far too much to comprehensively cover here, so feel free to email our office at email@example.com if you have specific questions and we will work on getting you an answer.
SBA Economic Disaster Loans
Early in this crisis, the Guilford Legislative Delegation requested an economic disaster declaration for Guilford County. Unfortunately, our community demonstrated economic injury early on with the cancellation of many meetings, conferences, and conventions. We documented these losses and were granted an economic disaster declaration in mid-March, which opened a disaster loan facility from the Small Business Administration. These loans are for small businesses or non-profit organizations. They can be short or long-term, with a low interest rate of around 3.75%, borrowing limit of $2M.
To apply for a federal disaster loan visit: disasterloan.sba.gov
Paycheck Protection Program
The Paycheck Protection Program (PPP) was passed by Congress last weekend and includes provisions for forgivable loans. It allows businesses and non-profits that receive an economic disaster loan to have portions of that loan forgiven. Those portions include funds that are used for payroll, rent and utilities.
Under the SBA Paycheck Protection Program, small businesses will
be eligible to receive SBA loans for purposes of maintaining payroll and
covering other expenses. Businesses that receive these covered loans and
use them for those designated purposes will be generally entitled to have the
loans forgiven so long as the business does not terminate its employees or
reduce its employees’ wages.
Loans available under the SBA program will generally be available to small businesses who were in operation on February 15, 2020. For purposes of this program, eligible businesses must employ fewer than 500 employees. The loan amount will be determined by the business’s payroll. Businesses and organizations are entitled to receive a loan of up to 250% of their monthly payroll costs, capped at $10M.
The loan can be used by the business or non-profit for:
- payroll costs,
- costs related to continuation of group health care benefits during periods of paid sick leave, family or medical leave, and insurance premiums, employee salaries, commissions, or other similar compensation,
- rent payments and payments on mortgage interest,
- utility payments, and
- interest on other previously accrued debt obligations.
We are awaiting guidance from the SBA and US Treasury for information on how to apply for these loans. We anticipate receiving guidance this week and will pass it along as it comes in. In the meantime, you are encouraged to be in touch with your business banker, as this program is going to be administered by local banks in order to accelerate the ability of businesses and non-profits to receive funding.
Enhancements to Unemployment
Part of the CARES Act, the Relief for Workers Affected by Coronavirus Act, expands short-term unemployment to provide an additional $600.00 per week for up to four months to individuals who lose their job or are unable to work due to COVID-19. This amount is provided in addition to the weekly amounts currently provided by states. For North Carolinians, this means that eligible individuals would be able to receive up to a maximum of $950.00 per week. In addition, the new law also provides funds for states to expand their state unemployment benefits for an additional 13 weeks beyond their current maximums. The new law also authorizes the Department of Labor to create regulations to allow individuals to receive such benefits for previous weeks beginning on or after January 27, 2020.
Individuals who may be eligible include those who:
- have been diagnosed or are experiencing symptoms and are a seeking a diagnosis of COVID-19,
- have a member of their household who has been diagnosed with COVID-19; or are providing care for a family member who has been diagnosed,
- have to provide care for a child or other person in their household who is unable to attend school or some other care facility due to a COVID-19 closure,
- are subject to a quarantine or have been told to self-quarantine by a health care provider,
- have their place of employment closed as a direct result of COVID-19,
- have become the breadwinner for their household due to the head of household dying from COVID-19,
- have to quit their job as a direct result of COVID-19, or
- were scheduled to commence new employment and is unable to reach the new job as a direct result of COVID-19.
Independent contractors and self-employed individuals may also qualify for benefits. Likewise, individuals who are partially unemployed as a result of their hours being reduced due to COVID-19 may also qualify. Individuals who are still working their regular full-time hours, who have the ability to telework with pay, or who are receiving paid leave cannot receive unemployment benefits.
On March 17, 2020, Governor Roy Cooper issued an executive order making temporary changes to North Carolina’s unemployment benefits program in order to make it easier for individuals whose jobs are impacted by the coronavirus outbreak to apply for and receive benefits. The new federal law will assist in providing those benefits to individuals.
In addition to providing the $600 per week payment, the federal government has also agreed to cover the first week of unemployment payments provided by the state when the state agrees to waive any waiting period it has. Under Governor Cooper’s executive order, North Carolina’s one-week waiting period was waived for COVID-19 related claims. Under the new law, the federal government will pay for that week.
All those eligible should continue to apply for unemployment benefits on the state website.
On March 18, 2020, Congress passed the Families First Coronavirus Response, which requires many employers to provide paid leave for employees who are dealing with the ongoing outbreak of COVID-19. The new law provides two different types of paid leave: sick leave and leave under Family and Medical Leave Act (“FMLA”). To help offset the cost of such leave for employers, the new law also allows for employers to claim a payroll tax credit in an amount equal to the amount of the paid leave. The law applies to employers with fewer than 500 employees, and the paid leave requirements go into effect on April 2, 2020. The paid leave requirements do not apply to employers with 500 or more employees.
Full-time employees are entitled to eighty hours of paid sick leave for any of the reasons listed below. Impacted part-time employees are entitled to a number of hours equal to the number of hours that a part-time employee works on average over a two-week period. This paid sick leave must be made available for immediate use, regardless of how long the employee has been employed by the employer. An employer cannot require an employee to use other paid leave already provided by the employer before using this paid sick leave.
Leave will be extended for any of the reasons listed below:
- the employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19,
- the employee has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19,
- the employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis,
- the employee is caring for an individual who is has been instructed to isolate or self-quarantine related to COVID-19,
- the employee is caring for their child whose school or place of care has closed, or because the child’s childcare provider is unavailable, due to COVID-19 precautions, or
- the employee is experiencing any other substantially similar condition specified by the Department of Health and Human Services in consultation with the Department of Treasury and the Department of Labor.
The law also provides paid leave (Family Medical Leave Act) for employees who are forced to take time off from work to care for their children because of school or childcare provider closures. Unlike the paid sick leave required under the bill, which can be taken for self-quarantine or caring for other family members under quarantine, the paid leave (Family Medical Leave Act) can only be taken by employees who are unable to work or telework due to a need for leave to care for their son or daughter under 18 years of age where the child’s school or place of care has been closed due to the COVID-19 public health emergency.
In order to assist employers in covering the additional costs, they may claim 100% tax credit against their quarterly payroll taxes.
Other Forms of Economic Relief
- Employee retention credit
- Payroll tax deferral
- Direct payments to individuals and families (varies based on income)
- Federally backed student loan deferral
For more information on these and other policies instituted or altered at the federal level, I recommend reading this New York Times article, “F.A.Q. on Stimulus Checks, Unemployment and the Coronavirus Plan”
I will continue to strive to keep you updated and in the loop with information to aid your families, businesses, and non-profit organizations. Please know I am here to assist any way I can. Feel free to reach out with questions, comments or ideas.
In absence of a special session the General Assembly is scheduled to return on April 28th. We aren’t sure what that looks like or what is on the agenda. One thing is for sure: COVID-19 will dominate this session. I will continue supporting Gov. Cooper’s efforts to support our State, our local governments, our families, and our neighbors. We are all in this together, and together we not only will get through this, but we will be stronger when we do.
All the best,