Yesterday, President Trump signed the Families First Coronavirus Response Act, which responds to the economic issues that have arisen as a result of COVID-19. Our summary of the Act, and other economic measures, is below. The mandates in the Act are effective on April 2, 2020. We aim to keep you informed of the relevant and novel issues, so you can make the best decisions for your businesses and be a source of information for your employees.
The Families First Coronavirus Response Act is referred to as Phase II legislation that Congress is enacting in response to the economic realities of the COVID-19 pandemic. Phase III legislation is forthcoming. Phase III legislation proposes a $1 trillion economic stimulus for specified uses, such as the airline industry, and authorizes and appropriates funds for two rounds of direct payments to individual taxpayers, with payments to be fixed and tiered based on income level and family size. Phase III legislation also proposes small business interruption loans, which would authorize the creation of a small business interruption loan program and appropriate $300 billion for the program.
We know that you have many questions at this time and we endeavor to provide you with up-to-date information. Because this situation is ever-changing, the information below may change. We are continually monitoring new legislation, as well as local and federal mandates, and will provide updates as needed. Neel, Hooper & Banes, P.C. is here to help you during this time—we are dedicated to helping you manage any challenges you face as a result of COVID-19. We hope that you stay safe and healthy during this challenging time.
National Emergency Declaration / Stafford Act
- Opens access to $50 billion in emergency funding.
- Waives interest on all student loans held by federal government agencies, until further notice.
- Will be partnering with private industry to speed up the rate of coronavirus testing.
- Allows states to request a 75% federal cost-share for expenses related to mitigation efforts—including emergency workers, medical supplies, vaccinations and medical tests.
- Waives laws to enable telehealth services for remote doctor visits and hospital check-ins.
- Waives certain federal licensing requirements so doctors from other states can provide services.
- Waives requirements that critical-access hospitals limit the number of beds to 25 or the length of stay of 96 hours.
- Waives a requirement for a three-day hospital stay before transfer to a nursing home.
- Allows hospitals to bring additional physicians on board and obtain additional office space.
- Waives rules that severely restrict hospital care of patients within the hospital itself, ensuring that the emergency capacity can be enhanced.
Defense Production Act
- The Defense Production Act was invoked to streamline and expand supply of resources, specifically to increase the production of medical supplies and equipment
- Under the Act, companies are required to accept and prioritize contracts from the Government. Historically, the Act has been invoked to increase military production.
- Increase its holdings of Treasury securities by at least $500 billion and of agency mortgage-backed securities by at least $200 billion.
- Reinvest principal payments from the Federal’s holdings of agency debt and agency mortgage-backed securities.
- Encourage deposit-taking banks to turn to the Federal’s discount window to help manage their liquidity risk and continue lending.
- Lower the primary credit rate by 1.5 percentage points, to 0.25 percent, effective Monday, a move designed to encourage banks to turn to the discount window.
- Allow banks to borrow from the discount window for as long as 90 days.
- Urge banks to use their capital and liquidity buffers to lend to households and businesses affected by the coronavirus. It noted that the bank holding companies have built up “substantial levels of capital and liquidity” since the 2007-2008 crisis.
- Reduce reserve requirement ratios to zero percent, effective March 26, when the next reserve maintenance period begins. “This action eliminates reserve requirements for thousands of depository institutions and will help to support lending to households and businesses.”
- Lower the pricing on standing U.S. dollar liquidity swap line arrangements by a quarter of a percentage point and offer dollars weekly with an 84-day maturity, in addition to one-week maturities now offered. The changes will take effect this week and were coordinated with central banks of Canada, England, Japan, the European Union, and Switzerland.
Foreclosure and Eviction Moratorium
On March 18, 2020, the United States Department of Housing and Urban Development (“HUD”) authorized the Federal Housing Administration (“FHA”) to suspend all foreclosure and evictions for the next 60 days for single family homeowners with FHA-insured mortgages. HUD has also encouraged local public housing authorities to suspend evictions on public housing residents. Many public housing authorities, including New York, Boston, Los Angeles, San Antonio, Oakland, and Boston, have suspended evictions as well, and it is expected that others will follow.
H.R. 6201 – Families First Coronavirus Response Act
Effective as of April 2, 2020
Nutrition: The measure appropriates $250 million for Health and Human Services Department programs that aid elderly Americans, divided as follows:
- $160 million for home-delivered nutrition services.
- $80 million for congregate nutrition services that provide food in group settings, such as adult day care centers and meal sites.
- $10 million for nutrition services for American Indians.
- $64 million to the Indian Health Service for items and services related to COVID-19.
State matching requirements would not apply to funds provided under the Act.
Medicaid Funding: States are eligible for a 6.2 percentage point increase in their Federal Medical Assistance Percentages (“FMAP”). They would have to provide coverage of coronavirus testing without cost sharing and meet other criteria, such as not imposing more stringent eligibility standards or additional premiums
- States can cover tests for uninsured people through their Medicaid programs and receive a 100% FMAP to cover the cost.
- Medicaid funding for U.S. territories would be increased.
- $500 million in emergency funding for the WIC program (“The Special Supplemental Nutrition Program for Women, Infants and Children.”).
- $400 million for the Commodity Assistance Program for The Emergency Food Assistance Program (“TEFAP”), $100 million of which is for costs related to the storage and distribution of goods and $300 million of which is for purchase of nutritious foods
- $100 million for grants to the Northern Mariana Islands, Puerto Rico, and American Samoa for nutrition assistance provided in response to the virus
SNAP Benefits for Kids: If a school is closed for at least five consecutive days because of a coronavirus-related public health emergency, states can adjust their Supplemental Nutrition Assistance Programs (“SNAP”) to provide additional aid to households with children eligible for free or reduced price school meals.
Additional benefits would have to be equal to the value of the meals for each eligible child in a household. Benefits could be distributed through an electronic benefits transfer card system. The United States Department of Agriculture (“USDA”) could purchase food commodities to ensure it can distribute them in areas where a public health emergency has been declared. “Such amounts as are necessary” are appropriated for the meal provisions.
SNAPWork Requirements: The measure waives federal work requirements for SNAP eligibility. The waiver begins the first full month after the Act is enacted and terminates at the end of the first full month after a federal coronavirus-related emergency declaration is lifted. State-imposed work requirements are not changed, but a person’s participation in SNAP during the emergency could not be counted for determining compliance with work requirements.
Other SNAP Benefits: States that make their own emergency or disaster declarations related to COVID-19 could request emergency allotments of food aid to support increased participation in SNAP and address temporary food needs. The provision does not change the maximum monthly allotment for any household size. States have to provide data sufficient to demonstrate the need for additional aid.
Meal Program Waivers: The package allows USDA to waive statutory requirements for several food programs to ensure that meals can be provided during the emergency and to implement safety measures related to preventing the spread of COVID-19. It allows nationwide waivers of eligible National School Lunch Program, School Breakfast Program, Child and Adult Care Food Program, and Summer Food Service Program requirements.
- The department could waive nutritional content requirements and rules to provide meals through the Child and Adult Care Food Program in group settings.
- Waivers related to COVID-19 that increase the cost to the federal government for school meals would be allowed.
USDA has granted waivers to all 50 states, D.C., and Puerto Rico as of March 19, 2020 to allow school systems to continue serving meals during prolonged coronavirus-related closures.
WIC Waivers: The measure allows states to request waivers for the requirement that WIC recipients certify their eligibility in person and for deferring biometric and bloodwork requirements. USDA could also modify or waive WIC administrative requirements that a state can’t meet due to the COVID-19 outbreak.
Coronavirus Emergency Leave—FMLA Expansion: Private sector employers with fewer than 500 workers and government entities have to provide as many as 12 weeks of job-protected leave under the Family and Medical Leave Act (“FMLA”) for employees, employed for at least 30 days by the employer, who has to:
- Comply with a requirement or recommendation to quarantine because of exposure to or symptoms of coronavirus.
- Provide care to a family member who is complying with such a requirement or recommendation.
- Provide care for child younger than 18 whose school or day care has closed because of coronavirus.
The first 10 days of leave could be unpaid, though a worker could choose to use accrued vacation days, personal leave, or other available paid leave for unpaid time off. However, an employer cannot require an employee to use vacation or other sick time before this benefit applies. Following the 10-day period, workers will receive a benefit from their employers that will be at least two-thirds of their normal pay rate, if providing care for a family member who is self-isolating or experiencing symptoms of coronavirus or if caring for a child if the school or place of care is closed or otherwise unavailable because of the coronavirus. If an employee has the coronavirus or is self-isolating, the worker would receive 100% of their pay. For the 10 weeks of long-term FMLA leave, the employer must pay two-thirds of the employee’s regular wage. However, regardless of the employee’s salary, the Act limits the amount of payments the employer must make:
- For long-term FMLA payments, the employee may receive $200.00 per day and $10,000.00 in the aggregate.
Employers who provide the above leave will be eligible to receive a 100% payroll tax credit for these costs. In short, the amount of wages paid under short-term or long-term leave will never exceed the tax credit that the employer will be permitted to apply against certain taxes. Because this comes from the social security contribution, amounts in excess of the social security liability will be paid for directly by the Treasury.
The measure also modifies the FMLA to allow individuals to use unpaid leave if they are diagnosed with the virus, caring for a family member, or caring for a child whose school or day care has closed because of a public health emergency, defined as a declaration of public health emergency, based on an outbreak of COVID-19 or another coronavirus with pandemic potential, through December 31, 2020. This FMLA expansion does not extend benefits for those not working because of site closures or other reasons not covered by FMLA.
- Employers with fewer than 25 employees do not have to restore employees to their previous position, if:
- Leave is taken under this section;
- The position held by the employee when the leave commenced does not exist due to economic conditions or other changes in operation of the employer that affect employment and are caused by a public health emergency during the period of leave;
- The employer makes reasonable efforts to restore the employee to an equivalent position, with equivalent pay, benefits, or other terms and conditions of employment;
- If reasonable efforts to restore the employee to the position fail, the employer makes reasonable efforts to contact the employee if an equivalent position becomes available.
An employer may not:
- Discriminate against an employee for using paid sick leave, filing a complaint, or testify in an action under the law.
- FMLA’s existing prohibition against retaliation applies with respect to employees who take long-term family leave.
The Labor Department would be authorized to issue regulations to:
- Exclude certain health-care providers and emergency responders from paid leave benefits
- Small businesses with fewer than 50 employees may be eligible for hardship exemption from the Secretary of Labor, if the Labor Department determines that providing paid leave would jeopardize the viability of the business as a going concern. Information on how to petition the Secretary of Labor for this exemption is forthcoming. It is unclear at this time how lenient the Department of Labor will be in granting the exemption.
Emergency Paid Sick Leave Act (“EPSLA”): Private sector employers with fewer than 500 workers, and government entities, must provide employees, regardless of how long they have been with the employer, with paid sick time off to:
- Obtain a medical diagnosis or care for coronavirus.
- Provide care for a family member who has been diagnosed or is in quarantine.
- Provide care for a child whose school or day care has closed due to coronavirus.
- Employees experiencing any other substantially similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretary of the Treasury and Secretary of Labor.
Calculating paid sick leave:
- Paid sick leave is calculated based on the employee’s required compensation and the number of hours the employee would otherwise be normally scheduled to work, except the amount of paid sick leave cannot exceed:
- $511.00 per day and $5,110.00 in the aggregate if the employee uses the sick time for their own need.
- $200.00 per day and $2,000.00 in the aggregate if the employee uses the sick days to care for someone else.
- For employees caring for a family member, the required compensation is calculated as two-thirds of the amount of their regular pay.
All employees, both full-time and part-time, are eligible for short-term paid sick leave. Full-time employees receive 80 hours (10 days) of sick leave under the new emergency leave program and part-time workers would be granted time off equivalent to their scheduled or normal work hours in a two-week period. Paid sick time does not carry over from year to year. Paid sick time under this Act will cease beginning with the employee’s next scheduled work shift immediately following the termination of the need for paid sick time. Employers are not required to reimburse employees for paid sick time not used by the employee when the employee leaves the job.
- Employers of healthcare providers or emergency responders have the option to exclude their employees from both short-term and long-term paid leave requirements under the Act.
- After the first workday an employee receives paid sick time, an employer may require the employee to follow a reasonable notice procedure to continue receiving such paid sick time. “Reasonable notice” is not defined in the Act.
- Workers would have to be paid at least their normal wage or the federal, state, or local minimum wage, whichever is greater. They would be paid, however, at two-thirds of their regular earning for providing care to a family member.
- Employers with similar existing paid leave policies are required to provide workers with the emergency paid sick time. An employer cannot require a worker to use any other available paid leave before using the sick time.
- Employers would be required to post a notice informing employees of their rights to emergency paid sick leave. The Secretary of Labor is expected to release a model poster no later than March 25, 2020.
Employers would be prohibited from:
- Requiring a worker to find a replacement to cover their hours during time off.
- Discharging or discriminating against workers for requesting paid sick leave or filing a complaint against the employer.
Penalties, Collective Bargaining, and Exempt Businesses:
- An employer could be subject to civil penalties for a violation of paid sick leave requirements.
- The emergency paid sick leave provided by the Family First Coronavirus Response Act is in addition to sick leave available to employees under the employer’s existing policies. An employer cannot change the current paid leave policy after enactment to avoid the paid sick leave provision. An employer cannot require its employees to utilize existing policies in lieu of the EPSLA benefits.
- Workers under a multiemployer collective bargaining agreement and whose employers pay into a pension plan would have access to paid emergency leave.
- The Secretary of Labor has the authority to issue regulations to exempt small businesses with fewer than 50 employees from these requirements when the imposition would jeopardize the viability of the business as a going concern. Information on how to petition the Secretary of Labor for this exemption is forthcoming. It is unclear at this time how lenient the Department of Labor will be in granting the exemption.
Further information from the Secretary of Labor:
- Within 7 days of enactment, no later than March 25, 2020, the Secretary of Labor will provide a model notice that employers can post explaining the requirements of the law.
- Within 15 days of enactment, no later than April 2, 2020, the Secretary of Labor will issue guidelines on how to calculate wages of part-time workers under different circumstances.
- The Secretary of Labor is also given authority to issue regulations to ensure consistency between the FMLA section of the Act and the Tax Credit section.
- An employer who fails to provide required sick leave, or engages in discrimination (including retaliation), faces enforcement actions under the Fair Labor Standards Act (FLSA). An enforcement action can be brought by a single employee, as a collective action, or by the Secretary of Labor.
- Penalties for violations include payment of unpaid wages plus an equal amount as liquidated damages, and even equitable relief (e.g., reinstatement), injunctive relief, and criminal prosecution for willful violations. Attorneys’ fees and costs can be awarded.
- An employer who fails to provide long-term family leave faces enforcement provisions of the FMLA.
Employer Tax Credits: The measure would provide payroll tax credits to employers to cover wages paid to employees while they are taking time off under the Act’s sick leave and family leave programs.
- The payroll tax, which funds Social Security, is a 6.2% levy on wages imposed on both employers and employees. Employees’ share would not be affected by the Act.
- The sick leave credit for each employee would be for wages of as much as $511.00 per day while the employee is receiving paid sick leave to care for themselves, or $200.00 if the sick leave is to care for a family member or child if their school is closed. The limit would be the excess of 10 days over the aggregate number of days taken into account for all preceding calendar quarters.
- The family leave credit for each employee would be for wages of as much as $200.00 per day while the employee is receiving paid leave, or an aggregate of $10,000.00.
- The credit would be refundable if it exceeded the amount the employer owed in payroll tax.
- Employers could not receive the credit if they are also receiving a credit for paid family and medical leave established by the 2017 tax overhaul (Public Law 115-97). They would have to include the credit in their gross income.
- State and local governments could not receive the credit.
- The credit would be in effect for wages through the end of 2020.
- The Treasury Department would have to issue regulations or guidance to ensure employers do not manipulate the credit, to minimize compliance and record-keeping burdens, to waive penalties for underpayments in anticipation of the credit, and to establish a process to recapture credits when there is an adjustment.
- The measure would authorize the transfer of amounts equal to the credit, as well as lost revenue from wages that are exempt from payroll tax, to the Social Security and disability insurance trust funds from the general fund.
Self-Employed Tax Credit: The measure would provide a similar refundable credit against self-employment tax. It would cover:
- 100% of self-employed individuals’ sick-leave equivalent or 67% if they were taking care of a sick family member or child if their school was closed.
- Their sick-leave equivalent amount would be the lesser of their average daily self-employment income, or $511.00 per day if caring for themselves or $200.00 if caring for a family member. It would be available for 10 days over the number of days taken into account in preceding years.
- Self-employed individuals could receive a family leave credit for as many as 50 days for the lesser of $200.00 or their average daily self-employment income
- Self-employed individuals would have to submit documentation, as required by the Treasury Department.
- The measure would establish alternate requirements for self-employed individuals who also receive sick-leave pay from an employer. It also establishes rules for the credit to be provided in U.S. territories.
Emergency Unemployment Insurance Stabilization and Access Act: The measure provides $1 billion for emergency transfers to states in fiscal 2020 to process and pay unemployment benefits.
- Each state would receive a proportional amount based on the share of federal unemployment taxes paid by its employers.
- States would receive half of their allocation within 60 days of the Act’s enactment if they certify that they meet certain requirements, such as ensuring that workers can apply for benefits online or by phone.
- States would receive the remaining funds if their unemployment claims increased by at least 10% over the same quarter in the previous year. They would have to waive certain eligibility rules for claimants and charges for employers affected by COVID-19.
- States could modify certain unemployment policies, including rules related to job searches and initial payment waiting periods, on an emergency temporary basis to address the effects of COVID-19.
The Labor Department announced guidance March 12, 2020 to clarify that states can make other changes to their unemployment policies to cover affected workers. For instance, current law allows states to pay benefits when workers are quarantined, or when they leave their jobs due to a risk of exposure or to care for a family member, the department said.
Extended Benefits: Eligible laid-off workers can receive regular unemployment benefits for as long as 26 weeks in most states.
- After exhausting those benefits, individuals in states with rising unemployment can qualify for an additional 13 weeks of benefits—or 20 weeks in some states—through the Extended Benefits (“EB”) program
- The Act waives a state matching requirement and provides full federal funding for the EB program for the rest of 2020. To qualify, states would need to experience a 10% spike in unemployment claims over the past year and qualify for a full emergency funding transfer under the measure.
Interest-Free Loans: The Act waives interest payments that states owe for the rest of 2020 on federal advances to their unemployment accounts.
Health Provisions: Private health plans are required to provide coverage for COVID-19 diagnostic testing, including cost of the provider, urgent care center, and emergency room visits to receive testing. Coverage must be provided at no cost to the consumer. Individuals enrolled in TRICARE, covered veterans, and federal workers have coverage for COVID-19 testing without cost-sharing. American Indians and Alaska Natives also will not experience cost-sharing for COVID-19 testing, including those referred for care away from an Indian Health Service or tribal health care facility. Medicaid must provide testing at no cost to the beneficiary, including the cost of the provider.
- Texas Health & Human Services
- For up-to-date advice on COVID-19 resources, testing, and other Texas government advice, visit: https://www.dshs.texas.gov/coronavirus/default.aspx#ifsick
- Texas Workforce Commission
- Employees whose employment has been affected by COVID-19 can apply for benefits with the TWC. https://twc.texas.gov/news/unemployment-news#ifYourEmploymentHasBeenAffectedByTheCoronavirusCOVID1
- TWC has resources for employers at: https://twc.texas.gov/news/COVID-19-resources-employers
- SBA Disaster Loans
- Your business may be eligible for disaster loan assistance, if you are in an affected area. To check if you qualify, visit: https://disasterloan.sba.gov/ela/Declarations. Please keep in mind that this list is continuously updated and if your area is not on the list currently, it may be in the future.
- The following Texas counties are currently eligible:
- Andres, Cochran, Deaf Smith, El Paso, Gaines, Hartley, Loving, Oldham, Winkler, and Yoakum
- The Greater Houston Partnership has safety guidelines for the workplace and employers at: https://www.houston.org/coronavirus