On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act or the “CARES Act”, into law. The CARES Act will provide significant financial relief to individuals and small businesses, especially those businesses in certain sectors of the U.S. economy that have been hit hardest by the COVID-19 pandemic, by providing $2 trillion in stimulus to the U.S. economy.
A significant portion of the CARES Act focuses on supporting American workers, families and businesses through a combination of unemployment provisions, tax rebates, retirement plan changes and modifications to the Internal Revenue Code of 1986, as amended (the “Code”). This Quick Study focuses on the Expanded Unemployment Benefits included in the CARES Act. Please note that Locke Lord has separate Quick Studies that review the CARES Act’s provisions related to Business Tax Changes, Employee Benefits Changes, Executive Compensation Limits, and Charitable Contributions.
For more CARES Act information please see: Saving Our Small Businesses: CARES Act Expands Economic Injury Disaster Loan Program to Provide Additional Financial Relief to Small Businesses, Saving Our Small Businesses: Lender Considerations for Participating in the New Forgivable Paycheck Protection Program Loans to Small Businesses, Saving Our Small Businesses: Congress Reaches Agreement on New Forgivable Paycheck Protection Loans to Small Businesses, Saving Our Small Businesses: “Phase Three” Economic Recovery Proposal Includes New Forgivable SBA Loans for Small Businesses Impacted and Saving Our Small Businesses: SBA Disaster Assistance Loans for Small Businesses Impacted by COVID-19.
Building on the benefits created by the Family First Coronavirus Act Response Act (FFCRA), the CARES Act creates substantial rights for workers who find themselves wholly or partially unemployed due to the COVID-19 pandemic. This article examines those expanded rights, which will likely be the greatest source of income protection for American workers amongst the flurry of new laws.
EXPANSION OF UNEMPLOYMENT BENEFITS
A primary feature of the CARES Act is to significantly increase unemployment protections for the growing number of jobless Americans, both by creating new benefits and broadly expanding existing state level benefits.
Increased Coverage. First, the CARES Act creates a temporary federal Pandemic Unemployment Assistance program for individuals unable to work due to the COVID-19 public health emergency during the timeframe beginning on January 27, 2020 and ending on December 31, 2020. To be covered under the new Pandemic Unemployment Assistance program, workers must be:
- (1) ineligible for or have exhausted regular unemployment resources available under state or federal law (including independent contractors, who are typically excluded from unemployment protections); and
- (2) must certify that he or she is capable of and available to work but unable or unavailable to work or telework because the individual:
- is diagnosed with COVID-19, or is experiencing symptoms or seeking a diagnosis of COVID-19;
- has a member of his or her household that has been diagnosed with the illness;
- is providing care to a family member with COVID-19;
- has primary caregiving responsibility for a child who is unable to attend school due to COVID-19;
- cannot reach his or her place of work because of a quarantine or the advice of a health care provider to self-quarantine;
- has become a breadwinner after the head of household has died from COVID-19;
- has had to quit working as a direct result of COVID-19; or
- has a work location that is closed as a direct result of a COVID-19 public health emergency.
Assistance under the new Pandemic Unemployment Assistance program is capped at 39 weeks. This 39-week maximum includes any weeks for which the covered individual receives unemployment or extended benefits under any federal or state law.
Increased Amount.
In addition to the landmark creation of the Pandemic Unemployment Assistance program, the CARES Act includes provisions increasing the amount of unemployment benefits. Notably, these increased benefits are generally applicable to unemployed workers and do not require a similar certification that such unemployment is directly related to the COVID-19 pandemic.
The CARES Act permits each state to contract with the federal government for the reimbursement of 100% of:
- an additional $600 per week for payments states make to individuals eligible for unemployment benefits under applicable state law (beginning after the date of the agreement between the applicable state and the federal government and lasting through July 31, 2020);
- an additional 13 weeks of unemployment benefits (ending on December 31, 2020) on top of the normal amount of time available under state law (typically up to 26 weeks) for individuals who have exhausted their unemployment benefits under state law and are able, available, and actively seeking work; and
- compensation equal to the first week of unemployment, which is intended to address those states that required a one week waiting period before a worker could begin to receive unemployment assistance.
It is unclear if the Department of Labor or the legislature will impose any further caps on the amount of unemployment assistance available to eligible employees. As the CARES Act is currently written, the additional $600 per week could provide unemployment compensation in excess of the normal wages for some and, thus, potentially create an incentive for employees to choose unemployment over gainful employment.
Funding for Employees with Reduced Hours Through Short-Time Compensation Programs.
Lastly, the CARES Act provides additional funding for states that now have or create “short-time compensation” programs. A “short-time compensation” program is a program, approved by a state, whereby employers reduce the number of hours worked by more than 10% and no more than 60%, in lieu of layoffs. Those employees are then entitled to a pro rata portion of the unemployment compensation the employee would have received if he or she were unemployed. Under the CARES Act, states with “short-time compensation” programs are entitled to federal reimbursement for short-time compensation paid through December 31, 2020. Employers that plan to reduce the hours of their employees should ensure that any such reductions are done in compliance with state and federal wage and hour law, particularly pertaining to workers exempt from the Fair Labor Standards Act (See Key Questions for Employers Facing COVID-19 (FAQ), Question Number 20).
Though there is no requirement that states accept any of the federal reimbursements provided by the CARES Act, the majority, if not all, of the states are expected to participate in these programs. As a result, the CARES Act provides additional flexibility to employers trying to strike the delicate balance of managing costs and ensuring their employees continue to have a paycheck.
CLARIFICATIONS TO THE FFCRA
In addition to the sweeping changes to unemployment assistance for workers affected by the COVID-19 crisis, the CARES Act includes amendments to the previously-enacted FFCRA. The CARES Act clarifies that paid family leave under the FFCRA is capped at $200 per day and $10,000 in aggregate to each qualifying employee. Paid sick leave under the FFCRA is capped at $511 per day and $5,110 in aggregate to an individual qualifying for sick leave, other than for employees caring for a sick or quarantined individual or a child whose school or child care provider is close due to COVID-19. In the latter instances, the caps of $200 per day and $2,000 in aggregate apply. The CARES Act also relaxes the requirement that workers be employed for at least 30 calendar days to be eligible for paid family leave under the FFCRA. Under the CARES Act, employees laid off after March 1, 2020 and later rehired are eligible for paid family leave under the FFCRA if they worked for the employer for more than 30 days prior to being laid off. For a more detailed analysis of the CARES Act’s amendments to the FFCRA, please see the Locke Lord Quick Study on the FFCRA.
