President Trump signed the latest COVID-19 stimulus package into law. FCA Legal Counsel on what signatory contractors need to know about the bill.
Last week, President Trump signed the latest COVID-19 stimulus package into law. Despite spanning more than 5,000 pages, many analysts feel that the package does not do enough to help struggling individuals and small businesses.
For signatory construction contractors, there are two key takeaways:
- First, the stimulus bill did not extend the paid leave requirements contained in the Families First Coronavirus Response Act (or FFCRA). Thus, the requirement that employers with 500 or fewer employees provide paid leave expired on December 31. Tax credits for employers that voluntarily choose to provide leave are available through March 31, 2021.
- Second, the stimulus bill created a second round of forgivable PPP loans, which are only available to smaller employers (i.e., 300 or fewer employees) that sustained a significant business reduction in 2020 (i.e., 25 percent reduction in gross revenues during a specific period).
No FFCRA Extension – But Tax Credits Extended Through March 31
The first key takeaway of the new stimulus bill is what it does not include – namely, an extension of paid leave requirements of the FFCRA. Thus, as of Dec. 31, 2020, employers with 500 or fewer employees are no longer required to provide eligible employees with paid leave under the FFCRA – i.e., Emergency Paid Sick Leave (or E-PSL) or Emergency FMLA (or E-FMLA).
Employers may choose to voluntarily provide employees with E-PSL and E-FMLA after Dec. 31. In fact, under the new stimulus law, employers that voluntarily allow employees to use E-PSL and E-FMLA after Dec. 31 (but before March 31) will be allowed to claim the FFCRA’s payroll tax credits.
As the DOL explained in a recent FAQ:
FAQ#101. I was eligible for leave under the FFCRA in 2020 but I did not use any leave. Am I still entitled to take paid sick or expanded family and medical leave after December 31, 2020?
Your employer is not required to provide you with FFCRA leave after December 31, 2020, but your employer may voluntarily decide to provide you such leave. The obligation to provide FFCRA leave applies from the law’s effective date of April 1, 2020, through December 31, 2020. Any change to extend the requirement to provide leave under the FFCRA would require an amendment to the statute by Congress. The Consolidated Appropriations Act, 2021, extended employer tax credits for paid sick leave and expanded family and medical leave voluntarily provided to employees until March 31, 2021. However, this Act did not extend an eligible employee’s entitlement to FFCRA leave beyond December 31, 2020.
But, benevolent employers beware: the stimulus bill does not appear to increase the cap on the total amount of tax credits an employer can claim per employee. Specifically, the tax credits for providing E-PSL is capped at $511 per employee per day and $5,110 in the aggregate (or $200 and $2,000 depending on use) and E-FMLA is capped at $200 per employee per day and $10,000 in the aggregate.
This means that tax credits claimed for leave taken before Dec. 31, 2020 will likely count towards available credits that employers may claim for leave taken through March 31, 2021. Thus, unless we receive contrary guidance from the DOL or IRS, employers should take care to ensure that any voluntarily-provided E-PSL or E-FMLA between January 1 and March 31 does not exceed the aforementioned caps.
Regardless of whether an employer chooses to voluntarily provide paid leave under the terms of the former FFCRA after it expired on Dec. 31, 2020, the employer should still be mindful of any applicable local paid leave regulations in addition to general FMLA and ADA considerations.
Second Round of Targeted PPP Loans
The new stimulus bill also included $284 billion in funding for a second round of “forgivable” loans under the Paycheck Protection Program (“PPP”). The new funding, however, is available only to smaller employers that can demonstrate a significant reduction in business during 2020.
Specifically, the new funding is available for businesses with 300 or fewer employees who can demonstrate at least a 25 percent reduction in gross revenues in comparable 2019 and 2020 quarters. The maximum loan amount is 2.5 times the business’s average monthly payroll costs, up to $2 million (although restaurants and other hospitality businesses are eligible for more funding).
The loan is fully-forgivable, provided that the business spends at least 60 percent of the loan amount on payroll costs. Additionally, the stimulus bill provides that $20 billion is set aside for PPP loans to businesses in low-income communities.
We expect additional guidance from the IRS and SBA regarding the next round of PPP funding.
After months of arguing, Congress and the President finally passed a new stimulus package that provides some direct assistance to businesses. The stimulus bill, nevertheless eliminates the mandatory paid leave provisions of the FFCRA while still providing a tax credit for those employers who continue to provide it through March 31.
President-elect Joe Biden has already announced that he will introduce another stimulus package after he takes office on Jan. 20 so we will continue to watch for more updates.