COVID-19 Important Information for Employers and Employees

By Lamarca Insurance

On March 27, 2020, the United States Congress approved a massive stimulus package called the CARES Act that provides (1) forgivable loans to small businesses so they can pay their employees and avoid insolvencies and (2) increased unemployment benefits to laid-off or furloughed workers.

The CARES Act also expands the Emergency EIDL Grants and provides employee retention credits and payroll tax relief. We will provide more details on these and other provisions of the CARES Act in future e-Alerts.

The Small Business Owner’s Guide to the CARES Act

https://www.sbc.senate.gov/public/_cache/files/9/7/97ac840c-28b7-4e49-b872-d30a995d8dae/F2CF1DD78E6D6C8C8C3BF58C6D1DDB2B.small-business-owner-s-guide-to-the-cares-act-final-.pdf

Paycheck Protection Program (PPP) Loans for Small Businesses

This new program provides 8 weeks of cash-flow assistance to small employers, including sole proprietors and independent contractors. Employers who maintain their payroll can get the loan forgiven for the portion of the loan that is used for payroll, rent, and utilities. Applications for these loans can be submitted starting this Friday, April 3rd. Applications are available from your local banker or from the US Treasury website here.

For a Fact Sheet on these new loans from the US Treasury, click here.

The maximum loan amount is 250% of the business’s average monthly payroll costs for the 1-year period immediately prior to the date of the loan. Payroll costs include salary, wages (including cash tips), employee group health care insurance premiums, retirement contributions, and medical/sick leave.

Loans must be used for payroll costs, salaries, commissions, employee health care insurance premiums/benefits, interest on mortgage obligations (not the principal), rent, utilities, and interest on any other debt incurred prior to February 15, 2020.

Businesses will be able to get the portion of the loan that they spend on the above items forgiven and will not have to repay it. If the loan proceeds are used for other items or are not spent, that portion of the loan will be converted to a 10-year loan with a 4% interest rate. And reducing your number of employees or employee salaries also reduces your loan forgiveness. It’s very important that you keep very good records of what you spend the loan on so you can prove you spent it on the approved items in order to get the loan forgiven later.

These new Paycheck Protection Program loans will be handled through private banks and lenders. If you want to apply for a PPP loan, you should contact your local banker to ask if they are approved to handle PPP loans. If your bank is an authorized 7a lender, you will be able to apply for these loans through them. For more details, click here. You can also go to the US Treasury Department’s new website at home.treasury.gov/cares.

Paycheck Protection Program FAQ’s for Small Businesses

https://sbecouncil.org/wp-content/uploads/2020/03/Paycheck-Protection-Program-FAQs-for-Small-Businesses.pdf

Paycheck Protection Program Loans for Small Businesses

Qualifying small businesses are eligible for federal-guaranteed emergency “Paycheck Protection Program” (“PPP”) loans that have an interest rate capped at 4% for business interruption because of the coronavirus.

Loans are to help small businesses cover (a) payroll costs for employees earning less than $100,000 in annual salary and (b) other working capital expenses not already covered by previous federal coronavirus
Loans are eligible for forgiveness, but any unforgiven portion is repayable after 10 years with an option for deferral.
There is no pre-payment penalty. There is also no double-dipping from SBA Economic Injury Disaster Loan (EIDL) program.

Who is eligible?

Small businesses with fewer than 500 employees, including sole proprietors/independent contractors/self- employed persons
Eligible borrowers must make good faith certification to lender that borrower needs the funds to operate because of current economic disruption and will deploy funds for eligible uses.

What is the maximum loan amount?
A business’ total average monthly payroll for the previous year, excluding compensation above $100K/employee, times 2.5.

What can the money be used for?
Payroll costs, employee benefits, including commissions or similar compensation; operating costs (e.g., rent; mortgage interest payments; utilities; interest on debts incurred before covered period)

Does the loan have to be paid back?
If a business can demonstrate that the loan was used for eligible purposes, including payroll/benefits (excluding employee comp above $100K); mortgage interest; rent; and utilities, all or part of the loan will be forgiven.

“Covered Period” means the eight-week period beginning on date lender originates PPP loan for borrower.
The amount forgiven is limited to the principal amount borrowed and does not include interest.
If the business reduces salaries, its number of employees, or both during the first 8 weeks after receiving the loan, the loan amount available for forgiveness is reduced. But, if a small business borrower rehires or ends the salary reduction(s) before June 30, 2020, the small business has eliminated the layoff or salary cuts and its loan amount eligible for forgiveness is not affected.

Assistance for Small Businesses

The Paycheck Protection Program prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retention and certain other expenses.

Small businesses and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors, are eligible if they also meet program size standards.

Hold Control and Left click your mouse to access these links below

Florida Small Business Emergency Bridge Loan Program

Small businesses with fewer than 100 employees that are affected by the coronavirus can apply for an emergency bridge loan from the State of Florida. Loans are up to $50,000 (and up to $100,000 in special circumstances) and are interest-free for up to one year.

The Florida Department of Economic Opportunity (DEO) administers these loans. To be eligible, a business must have been established prior to March 9, 2020, and demonstrate economic impacts as a result of the coronavirus. The application period ends May 8, 2020. Businesses can apply at floridasbdc.org/disaster/ebl/.

It is very important to realize that this Emergency Bridge Loan is an actual loan – it is not a grant program and these loans will not be forgiven at a later date. If a borrower does not repay the loan funds when due, the annual interest rate on the loan will increase from zero to 12%. The Bridge Loan Program will also utilize standard commercial collection efforts to recover funds not repaid when due.

United States Small Business Administration Disaster Loan Assistance

The US Small Business Administration’s (SBA) low-interest Economic Injury Disaster Loans (EIDLs) are available to small businesses unable to pay their operating expenses due to loss of revenue from due to the coronavirus that are unable to pay ordinary operating expenses. These loans are intended to provide working capital to help small businesses until normal operations resume.

To download an application for an EIDL loan, go to covid19relief.sba.gov. You can call the SBA’s Customer Service Center at 800-659-2955 or email them at disastercustomerservice@sba.gov.

Paid Leave & Compensation For Your Employees & Business

New Paid Leave Requirement – Families First Coronavirus Response Act
Starting April 1, 2020 (originally scheduled to take effect April 2, but the US Department of Labor has clarified that it begins April 1), there are 2 new types of paid leave small businesses will have to give their employees. The first is emergency paid sick leave which is 10 days’ paid leave if an employee meets one of 6 requirements. Businesses cannot require employees to take accrued PTO prior to giving them these 10 days of paid leave.

The second kind of leave is emergency medical leave and is 12 weeks of paid leave. Employees can only qualify for this leave if they cannot work because their minor child’s school or child care is closed.

Exemptions/hardship waivers for small businesses: Hardship waivers and exemptions from this leave may be available for employers with fewer than 50 employees, and additional guidance on that topic is forthcoming in the form of regulations which will be released by the US Department of Labor in April. You can find the most up-to-date information at their website: https://www.dol.gov/agencies/whd/pandemic

There is a dollar-for-dollar tax credit for employers who do provide this paid leave. Employers can claim this tax credit against their next payroll tax deposit.

Click here for more information about this new leave and its specific requirements, as well as information about the tax credit.

Click here for a Fact Sheet on this leave from the US Department of Labor in English.

Click here for a Fact Sheet on this leave from the US Department of Labor in Spanish.

If My Business Closes, Do I Still Have to Pay My Employees?
If you close your business, you are not obligated to continue paying your employees. But you will have to give paid leave to any employee who still works for you on April 1, 2020. Employers cannot terminate employees to get out of paying for this leave. If you have to lay employees off or close your business, make sure to document layoffs and closures so you can show that the layoffs/closure were due to the economic viability of the keeping the business open instead of trying to avoid paying for this leave.

New Poster Required
The new paid leave law requires all employers to provide a notice/poster to their employees explaining the new paid time off that they may be eligible for as a result of COVID-19.

US Department of Labor FAQ’s about the new poster (such as what to do if your employees are not coming to your business, what languages you have to provide the poster in, whether you have to provide the poster to employees who have been laid off, etc.: https://www.dol.gov/agencies/whd/pandemic/ffcra-poster-questions

Link to Poster in English: https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf

Link to Poster in Spanish: https://www.dol.gov/sites/dolgov/files/WHD/Pandemic/1422-spanish.pdf

Laid-Off Employees Should Apply for Unemployment Compensation

Small businesses who have had to lay employees off due to a business closure because of the coronavirus should advise their employees to apply for unemployment compensation (also called ‘reemployment assistance’). In Florida, laid-off employees can get up to $275 a week for up to 12 weeks.

Under the new federal CARES act, the amount of unemployment benefits and their duration is increased, as well as who qualifies for unemployment. Click here for a summary of this new law.

Laid-off employees can file for unemployment benefits here: floridajobs.org/Reemployment-Assistance-Service-Center/reemployment-assistance/claimants/apply-for-benefits.

Bartender Emergency Assistance Program

The United States Bartenders Guild’s National Charity Foundation has launched a program for bartenders in need of assistance during the coronavirus outbreak. The Bartender Emergency Assistance Program is meant to aid service industry personnel experiencing financial difficulties as a direct result of the outbreak. Eligible applicants can receive a grant, in undisclosed sums, to help pay their bills. Click here for more details.

Expanded Unemployment Benefits for Laid-Off and Furloughed Employees

The CARES Act increases unemployment benefits and expands who can qualify for unemployment.

Under the bill, employees who are still employed by your business but who are unable to work due to the coronavirus will be able to receive unemployment benefits.

Also, workers who don’t normally qualify for unemployment – like independent contractors and the self-employed – are also eligible for benefits.

The maximum unemployment benefit in Florida is $275 a week, but the CARES Act adds $600 per week to this amount, for a maximum total benefit of $875 per week.

And the bill adds on an additional 13 weeks of unemployment benefits to Florida’s existing 12 weeks, so employees can stay on unemployment for a total of 25 weeks.

These changes go through the end of 2020, so they aren’t permanent.

To get these increased benefits, Florida’s Governor must sign an agreement with the federal government. As of the date of this e-alert, that had not happened yet, but it is anticipated that it will happen soon. And while we can’t be certain, we believe that anyone who has already filed for unemployment will begin receiving these increased benefits as soon as they are approved.