What Do Employers Need to Know About the CARES Act?

On Wednesday, March 25, the U.S. Senate passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), a $2.2 trillion stimulus package aimed at limiting the economic fallout from COVID-19.  The CARES Act is expected to be passed by the U.S. House of Representatives in a vote on Friday, March 27.  Although the CARES Act is more than 800 pages long, we wanted to highlight some provisions that are particularly relevant to employers.

Unemployment: The CARES Act would make several significant changes to the unemployment compensation system, which received a record 3.3 million new claims filed nationwide last week.  It would extend the unemployment benefit period to 39 weeks (instead of the standard 26 weeks) during the period of January 27, 2020 to December 31, 2020 if an employee (or an independent contractor or self-employed individual) is unemployed or partially unemployed for certain reasons related to COVD-19.  It would also pay such individuals who are receiving unemployment an additional $600/week on top of the “weekly benefit rate” provided by state law for up to 4 months. 

Payroll Tax Credit/Employee Retention Credit: The CARES Act would also provide refundable payroll tax credits to employers whose operations were fully or partially suspended because of a shutdown order related to COVID-19.  Such credits would also be available to employers whose gross receipts have declined by more than 50% compared to the same quarter in 2019 until their gross receipts exceed 80% of their gross receipts for the same calendar quarter in 2019.  The credit would be provided for 50% of the first $10,000.00 in qualifying wages and health benefits per employee paid by qualifying employers between March 13, 2020 and December 31, 2020.  For qualifying employers with 100 or fewer full-time employees, all wages paid qualify for the credit.  For qualifying employers with more than 100 full-time employees, credit-eligible wages are those paid to employees when they are not providing services due to a qualifying reason.

Payroll Tax Deferral: Finally, the CARES Act would allow employers to defer payment of their share of Social Security taxes on employees’ wages for 2020 over the next two years.  Half of the required amount would need to be paid by the end of 2021, with the remaining half due at the end of 2022.

As previously mentioned, the CARES Act will not become law until it is passed by the House and signed by the President.  We will continue to keep employers updated on any employment-law developments related to the bill, as well as all aspects of COVID-19’s impact on the workplace.  Please be sure to subscribe to our blog and follow us on social media so that you can receive timely updates and analysis on the issues that affect your workplace.  For questions about this or any other labor and employment matter, please do not hesitate to contact the attorneys at Hoffman & Hlavac.