President Trump has signed the Coronavirus Aid, Relief and Economic Security (CARES) Act which, at over $2 trillion dollars, is the largest stimulus package enacted to date in response to the ongoing COVID-19 crisis.

The primary purpose of CARES is to help stabilize the economy by helping to ensure that many of the millions of employees who have lost their jobs as a result of COVID-19 can continue to receive income, at least for the short term.

Key provisions for employers include:

  1. Provisions to help employers meet their obligations to provide paid family and sick leave benefits under the recently enacted Families First Coronavirus Response Act (FFCRA);
  2. A tax credit (50 percent) for qualified wages paid during the current stay-at-home period.
  3. Additional unemployment benefits for affected workers; and
  4. Forgivable and non-forgivable loans for qualified employers. Importantly, the Small Business Administration (SBA) will be issuing regulations sometime between April 11-26, which we hope will be instrumental in understanding eligibility requirements for the loans contained in the Act.

Paid Family Leave

The Families First Coronavirus Response Act (FFCRA) which was enacted on March 18, 2020, goes into effect on April 1, 2020. The first of a series of client updates on provisions of FFCRA important to employers is available here.

CARES (a separate bill) provided additional guidance to employers regarding employees’ entitlement to paid leave under FFCRA. In short, most private employers with fewer than 500 employees must provide up to 10 weeks paid family leave and 10 days of paid sick leave benefits to eligible employees affected by COVID-19. (See also the DOL’s FAQs for further information).

Additionally:

  • The 10 days of paid sick leave benefits are paid at the rate of either a) the employee’s regular rate of pay, up to a maximum of $511 per day; or b) two-thirds of the employee’s regular rate of pay, up to a maximum of $200 per day. Employees are compensated at the higher rate if they are out of work due to their own health condition and are compensated at the lower rate if they are out of work for any other qualifying reason.
  • Employees may take an additional 12 weeks of emergency family leave (the first two weeks of which are unpaid) to care for a child whose school or care center is closed due to COVID-19 and the employee is unable to telecommute. The 10 weeks of paid leave are compensated at two-thirds of the employee’s regular rate of pay, up to a maximum of $200 per day.
  • The paid family leave entitlement is part of the employee’s FMLA entitlement, not in addition to it.

Importantly, because many employers will rehire employees if they qualify for the loans described below, CARES makes clear that rehired employees qualify for the FFCRA paid family leave benefit if the worker was laid off by on or after March 1, 2020, and had worked for the employer for at least 30 of the last 60 calendar days prior to the layoff.

FFCRA provided a refundable tax credit in the amount of the payments made for paid family leave, plus the cost of continuing to provide health insurance for employees on the paid FFCRA leave. More information is available here.

CARES makes it clear that employers may retain, as their FFCRA credit, otherwise owed payroll taxes up to an amount equal to the cost they incurred in providing FFCRA leave, up to the caps. If that is not sufficient to cover the costs, employers may seek an expedited advance from the IRS. The IRS has not yet published the required claim form.

Additional Tax Credits for Wages

For those businesses whose operations were disrupted by COVID-19 due to a total or partial shutdown order or if gross receipts fell by 50 percent or more when compared to the same quarter in the previous year, employers may be eligible for a 50 percent refundable payroll tax credit on the first $10,000 of qualified wages and health benefits paid to each employee between March 13, 2020, and December 31, 2020.

The size of the tax credit depends on the size of the employer’s workforce. Companies with more than 100 employees may claim the credit for employees who are on the payroll but not currently working due to the pandemic. Companies with fewer employees may claim the credit for all employee wages, regardless of whether the employer is fully operating or shut down (partially or fully).

Importantly, a company may not get both a Paycheck Protection (PPP) loan and the tax credits described here. Further, any deferral of payroll taxes provided for in the Act will be impacted by any PPP loan.

Unemployment Benefits

CARES provides up to 39 weeks of unemployment benefits to people not otherwise eligible or regular unemployment compensation (including independent contractors and self-employed/gig economy individuals). In addition, for those employees who would otherwise qualify for unemployment benefits under their state laws, CARES provides an emergency increase of $600 per week above what is provided by the state. Those benefits expire July 31, 2020.

Finally, CARES provides 13 weeks of emergency benefits for those employees who remain unemployed after they have exhausted their state benefits. For more on the CARES unemployment provisions, see our advisory here.

SBA Loans

The availability for the loans provided in CARES is among the most important question for small businesses. However, there are significant inconsistencies and ambiguities that we hope will be corrected or clarified in the regulations, which under the Act must be issued within 15 days (30 days for the provisions of the Paycheck Protection loan forgiveness section). Below is a summary of what we know about the program. We urge you to discuss any specific questions with counsel.

Payroll Protection Provisions

In general, the Payroll Protection Provisions (PPP) provides that companies may obtain a loan equal to the lesser of

  • $10 million; or
  • 2.5 x the average monthly payroll costs measured over the 12 months preceding the loan origination date. (There is a separate calculation for seasonal businesses.)

“Payroll” includes salaries, commissions, tips, certain employee benefits (including health and retirement benefits), state and local taxes and certain types of compensation to sole proprietors or independent contractors.

Generally, only employers with 500 employees or fewer are eligible. But some larger employers may be eligible under the SBA rules. A list of the codes that may allow larger employers to qualify is found here. Notably, restaurants and hotels that employ fewer than 500 employees per physical location also are eligible if they operate under the North American Industry Classification System (NAICS) code 72.

This code covers the Accommodation and Food Services sector that provides customers with lodging and/or preparing meals, snacks, and beverages for immediate consumption, but it excludes theaters and recreation or entertainment facilities providing food and beverage services, among others.

Approved Expenses and Loan Forgiveness

Proceeds from the loans may be used for payroll costs, group healthcare benefits, insurance premiums and interest (but not principal) on mortgages or other secured debt incurred prior to February 15, 2020, rent on any lease in force prior to February 15, 2020, and utility payments. Companies can rehire previously laid off employees; they will not be penalized in the loan amount for having reduced payroll before the beginning of the loan period.

CARES provides that the loan may be forgiven for eight weeks of operating expenses incurred for any of the approved uses, except for payroll, for which there is a cap on any salaries or wages paid to an individual over $100,000, prorated for the covered period. Interest accrued on the amount of the loan forgiven is paid by the SBA.

The amount that can be forgiven will be reduced if there is a reduction in FTEs or a reduction in salary or wages for such FTEs unless the FTEs and salary or wages are returned to the February 15, 2020, level by June 30, 2020.

SBA PPP Lenders

Loans can be obtained from SBA-approved lenders. We do not believe that such lenders are taking PPP applications yet, pending the promised regulations. But companies should contact their small business lenders to discuss the process.

A list of most active lenders is available here.

Economic Disaster Loan Program Expanded

CARES also expands the SBA’s Economic Disaster Loan program (EIDL) by providing up to $2 million, with an emergency advance of up to $10,000 to be disbursed within three days of the SBA’s receipt of the application.

These loans are generally available only to small employers (fewer than 500 employees) and unlike the PPP qualifying rules, applicants must include their affiliates (businesses under common control) towards their total employee count. Again, sole proprietors and independent contractors may also apply. The funds from an EIDL loan may be used for working capital and operating expenses which would have been met had the disaster not occurred.

There is no forgiveness available for an EIDL loan.

Midsized Companies

There may also be loans available for midsize companies – those that employee between 500 and 10,000 employees. The scope of this provision is particularly unclear as the Act simply states the SBA will “endeavor” to implement such a program.

We anticipate further guidance once the Department publishes regulations.

Employee Benefit Plans

Please see our advisory on the provisions of CARES that impact employer benefit plans here.



The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.

DWT will continue to provide up-to-date insights and virtual events regarding COVID-19 concerns. Our most recent insights, as well as information about recorded and upcoming virtual events, are available at www.dwt.com/COVID-19.