June 1, 2020
On March 27, 2020, Congress passed the initial round of the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, to address the economic fallout caused by the coronavirus (COVID-19) pandemic and to provide financial relief to those persons and small businesses impacted by the health crisis. A primary goal of the CARES Act is to help businesses, especially small businesses, stay alive.
Some of the provisions of the first round of CARES are detailed further in this blog, below.
One major aspect of the relief available to employers under CARES is tax relief, which helps businesses that are struggling to survive the pandemic stay afloat temporarily, improving their cash flow.
Tax Credits to Enable Employee Retention
The design is that the government is subsidizing the short-term continued employment of workers by providing significant tax relief to incentivize and facilitate employee retention.
Deferral of Social Security Taxes:
A second major aspect of the relief available to employers under CARES is a financing program to allow businesses almost immediate access to money to keep them afloat.
Under CARES, private employers (including businesses, cooperatives, employee stock ownership plans, and tribal small business concerns with 500 or more employees as well as sole proprietors and independent contractors—with or without employees), are entitled to an Economic Injury Disaster Loan Emergency Advance.
This program covers January 31, 2020 through December 31, 2020.
The money can be used to pay for a range of expenses / financial obligations:
The usage of money under this program is less restrictive than under the parallel Paycheck Protection Program
Paycheck Protection Program (PPP)
A third major aspect of the relief available to employers under CARES is a more significant, longer term loan to enable businesses to cover forthcoming costs, particularly to avoid layoffs and keep people employed. As with the Economic Injury Disaster Loan Emergency Advance, the eligibility is very broad for businesses employing fewer than 500 workers, including non-profits and independent contractors.
Businesses that take advantage of this Small Business Association loan program should keep careful records of their spending to meet documentation requirements and make sure that at least 75% of the usage is for payroll purposes. The design is to enable businesses to survive the immediate impact of the COVID-19 pandemic and ultimately to keep people employed. It can be a valuable complement to the already existing SBA loan programs under these trying circumstances because of the business-friendly terms.
By Angela Reddock-Wright, Esq., Employment Mediator, Arbitrator & Workplace Investigator
Nothing in this blog, written materials or otherwise is intended as legal advice by the Reddock Law Group, Managing Partner Angela Reddock-Wright, or any person associated with the firm. This blog is intended for educational purposes only. The Reddock Law Group does not represent clients in legal matters. We are a full-service mediation, neutral, investigations and alternative dispute resolution firm. For legal advice, please contact a licensed attorney with experience in employment law.