COVID-19 Legislation Considerations for Small Business Owners

Thursday, April 2nd, 2020

NOTE: This document is not legal advice and is up to date as of April 1, 2020. This situation is still changing rapidly and you should
work with your HR team/CPA and/or attorneys to determine the right course of action for your company or organization.

 

Emergency FMLA

Emergency Paid Sick Leave Act

Purpose

  • FMLA has been expanded to cover all employers with fewer than 500 employees, but employers with fewer than 50 employees are exempt if they feel providing leave would jeopardize the viability of their business. (See exemption section below)
  • Anyone unable to work from home who has been employed for more than 30 days may take up to 12 weeks of job-protected leave to care for their child if their school or childcare is closed.
  • These changes to FMLA are only in place until December 31, 2020.

Provides paid sick leave for all employees who are unable to work or telework due to the need to take emergency sick leave.  

  • An employee subject to a federal, state or local quarantine or isolation order related to COVID-19
  • An employee who has been advised by a health care provider to self-quarantine due to COVID-19 concerns
  • An employee experiencing COVID-19 symptoms and seeking medical diagnosis
  • An employee caring for an individual subject to a federal, state or local quarantine or isolation order or advised by a health care provider to self-quarantine due to COVID-19 concerns (2/3 pay)
  • An employee caring for the employee’s child if the child’s school or place of care is closed or the child’s care provider is unavailable due to public health emergency (2/3 pay)
  • An employee experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of Labor (2/3 pay)

Required for all employers under 500 employees

Financials 

  • First 10 days can be unpaid.   
  • Employees may elect to use vacation/PTO, unused sick leave to cover that time OR Emergency Paid Sick Leave
  • The remaining time (up to 10 weeks) paid at 2/3 regular pay, capped at $200/day and $10k in aggregate.  

For Employee Illness:

  • Employee can take up to 80 hours of paid sick leave, due to quarantine or isolation order for their own illness.  
  • Capped at $511/day and $5,111 in aggregate. 

For Employee to care for others…

  • 80 hours paid sick leave at 2/3 rate, capped at $200/day and $2,000 in aggregate
  • Individual in quarantine or isolation
  • Child, if school or childcare not available

Exemption

If the viability of your Company would be jeopardized by providing child care-related Paid Sick Leave and Expanded FMLA leave, and you have less than 50 employees, you may be exempted from these employer requirements. 

  • The Department of Labor recommends that you document why your business would be jeopardized. Do not send anything to them until they have issued guidance on how to do so; you must be approved in order to be exempted

 

Additional Shelter in Place Orders

County

Shelter in Place Extension Date

Additional Provisions

Alameda, Contra Costa, Marin, San Francisco, San Mateo, and Santa Clara + the City of Berkeley

May 3

  • Essential businesses must establish a social distancing protocol for employees by April 3
  • Essential businesses must maximize the number of employees that can work from home 
  • Funerals are limited to 10 people
  • Closes recreational areas like dog parks and playgrounds
  • Shared public recreational facilities such as golf courses, tennis and basketball courts, pools, etc must be closed
  • Severely restricts all construction activity, whether commercial or residential

UPDATE: The Department of Labor has advised that Shelter in Place does qualify as reason for taking leave under reason #1

 

Coronavirus Aid, Relief, and Economic Security Act

CARES Act

Open Legal Items

Paycheck Protection Program (PPP)

Provides loans through the SBA for companies of fewer than 500 employees whether for or non-profit, sole proprietors, independent contractors, self-employed individuals, etc. 

  • Loans are made by SBA lenders and guaranteed by the federal government.
  • Must be made between April 1 and June 30, 2020
  • Funds MUST be used to cover payroll, interest on mortgage obligations, rent, utilities, or interest on other debt incurred prior to obtaining the loan. 
  • CANNOT be used to pay salaries over $100,000

Questions as to venture-backed startup eligibility

Deferral of Payment of Employment Taxes

  • Employers may defer payment of their Employer Social Security Tax amounts for March 27 – December 31. This is a deferral only and must be paid on January 1, 2021 and January 1, 2022. 
  • Employers are not eligible for this deferral if they receive loans under the Paycheck Protection Program (PPP). 

Employee Retention Credit

  • Credit is calculated on a quarterly basis
  • An employer becomes an “eligible employer” for a given quarter if either of two criteria are met:
    • ​​​​​The operation of its trade or business is fully or partially suspended due to a COVID-19-related shutdown order.
    • Its gross receipts decline by more than 50% as compared to the same quarter the previous year. In this case, the employer continues to be an eligible employer until the next calendar quarter in which its gross receipts exceed 80% of its gross receipts for the same quarter the previous year.​
  • Only employers who do NOT receive a PPP loan are eligible
  • Eligible employers can receive a credit of up to $5k, which represents 50% of the first $10,000 in wages paid for the year
  • Credits are limited to the total employer social security liability for the quarter, but are reduced by any Families First Coronavirus Response Act credits.
  • Limits also apply to Qualified R&D credits and WOTC credits
  • Employers that have less than 100 employees can apply the credit to all employee wages, whether or not the employee was working during the shutdown
  • Employers with more than 100 employees apply the credit ONLY to wages paid when the employee was *not* providing services during a shutdown. (For example if you continue to pay your employees during a shutdown.)
  • Employers with more than 100 employees 

 

Unemployment/Layoff 

Federal and State Programs

Open Legal Items

Reduced Work Hours

Employees may apply for UI benefits to supplement their reduced working hours. 

  • The standard 7-day waiting period for benefits has been waived

Layoff

Employees may be laid off or furloughed

In CA the definitions between furlough and layoff are currently being challenged. 

Federal Unemployment Compensation Benefits (FPUC)

  • The federal government would provide a temporary $600 per week on top of state unemployment benefits, through July 31, 2020
  • Provides an additional 13 weeks of unemployment benefits to workers who have exhausted their state benefits

Unclear if federal program will automatically be applied to state applications or a separate application will be needed.

 

Other Employer Concerns

Issue

Guidance

Maintaining benefits for employees not working

Work with your carrier to determine coverage; most carriers are not discontinuing coverage

 

Employee Illness

Federal and State Programs

Company Response

Employee is diagnosed with COVID 19

CA State Disability applies

  • NOTE: an employee with COVID-19 symptoms but not a diagnosis can use Emergency Paid Sick Leave. Once diagnosed, they can use Disability.

Provide employee with information on how to apply for CA disability

 

Tax Information

Government Entity

Action Taken

IRS

Federal Tax Filing and Payment Deadline extended to July 15

Stimulus Payments will be made based on 2019 tax filings (specifically line 8b of the 2019 1040 form) as follows:

  • Single adults with an SSN and an adjusted gross income of $75,000 or less receive $1200
  • Married couples with no children earning $150,000 or less will receive $2400
  • Head of household earning $112,000 or less will receive $1200

Stimulus Payments are NOT received for:

  • Single adults earning over $99,000
  • Married couples with no children earning over $198,000
  • Families with two or more children and earning more than $218,000
  • If you’re claimed on anyone else’s taxes as a dependent, you will not receive a check

CA Employment Development Department (EDD)

Allowing businesses to request a 60-day extension for filing and paying state payroll taxes without penalty or interest

CA Office of Tax Appeals (OTA)

Automatic 60-day extension for taxpayers to file briefing or documentation for appeals that have deadlines between March 1 and May 18, 2020

Los Angeles County

Taxpayers unable to pay property taxes online may submit a request for penalty cancellation (forms available online)

San Diego County

Taxpayers unable to pay property taxes online may submit a request for penalty cancellation (forms available online)

 

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