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Overview of COVID-19 Legislation
Congress has thus far enacted four measures to address the economic and public health impacts of the COVID-19 crisis:
Here is a brief overview of how the bills – especially FFCRA and CARES – address the various concerns of contractors and the union construction and maintenance industry.
Paid Sick and Family Leave Provision
The FFCRA includes a significant expansion of paid sick leave and family leave under the FMLA, which establishes:
Additionally, the CARES Act amends Section 5102 of the Emergency Paid Sick Leave Act (Division E of the FFCRA) to limit the required employer contribution for paid sick leave. For employees unable to work because of government-sanctioned quarantine orders, medical professional-induced self-quarantine, or COVID-19 symptoms, employers must pay up to $511 per day and $5,110 in the aggregate in sick leave. For employees missing work to care for a family member impacted by COVID-19 or the previously designated quarantine, employers must provide up to $200 per day and $2,000 in the aggregate in sick leave.
DOL Leave Guidance and FAQs:
Tax Credit Provisions
The FFCRA provides a refundable tax credits to employers to cover wages paid to employees while they are taking time off under the bill's sick leave and family leave programs. It also included new tax credits for employers of fewer than 500 individuals to cover the costs associated with providing such leave to their workers.
IRS Leave Tax Credit Guidance and FAQs:
The CARES Act also includes various tax provisions:
IRS Employee Retention Credit Guidance and FAQs
Small Business Loan Provisions
The CARES Act provides $377 billion in zero-interest loans to subsidize small businesses, which are firms employing up to 500 employees. Meanwhile, $350 billion of the small business assistance funds create the Paycheck Protection Program (PPP). The PPP allows eligible firms to access zero-interest loans of up to $10 million to maintain workforces and operations, including paid sick leave. Small businesses can forgo eight weeks of payroll cost repayment if they retain workers at current salaries.
SBA and Treasury Guidance for the PPP:
The legislation also allocates $17 billion to alleviate six months of principal, interest, and fee payments for businesses with existing SBA 7(a), 504, or microloans. New SBA borrowers can also utilize this benefit. The measure facilitates bank lending to small businesses by allowing extensions for existing loans. Additionally, eligible firms can also utilize PPP funds, but SBA loan repayment relief cannot fund PPP payments.
The legislation provides $10 billion to fund Economic Injury Disaster Loans (EIDL) loans of $10,000 for eligible small businesses withing three days of application. To qualify, firms must have been operating on January 31, 2020. The maximum principal for EIDL loans is $2 million, with interest rates up to 3.75% for companies and up to 2.75% for nonprofits. Borrowers can defer principal and interest for up to 4 years. Small businesses can utilize EIDL loan funds to provide paid sick leave to employees, maintain payroll, meet increased production costs due to supply chain disruptions, and to pay debts, rent and mortgage obligations. This funding source is available to small businesses, tribal businesses, private nonprofits, sole proprietors, and independent contractors.
SBA Application for the EIDL Loans:
The Federal Reserve's Main Street Lending Program
On Thursday, April 9, the Federal Reserve announced a bevy of emergency measures that created or expanded nine programs to provide up to $2.3 trillion in loans to support the economy during the Coronavirus pandemic. Principal among these is the Main Street Lending Program, which establishes two different lending facilities, one for new loans and one for existing loans. Firms can only utilize one of the two facilities. These facilities are called the Main Street New Loan Facility (MSNLF) and the Main Street Expanded Loan Facility (MSELF).
The Main Street Lending Program creates borrowing opportunities for small and mid-sized businesses by offering 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion. These loans must mature in four years, and creditors must use the adjustable Secured Overnight Financing Rate plus 2.5 to 4 percentage points, with an upfront origination fee of 1 percentage point, to determine the interest rate. Loans can be paid off early without a penalty and can be deferred for one year. Borrowers must commit to making reasonable efforts to maintain payroll and retain workers and face the executive compensation, stock buyback, and dividend restrictions that apply to direct loan programs under the CARES Act.
The maximum loan through the MSNLF is $25 million or an amount that, when added to the borrower's existing outstanding and committed but undrawn debt, doesn't exceed four times the borrower's 2019 earnings before amortization, depreciation, interest, and taxes. The maximum loan through the MSELF is $150 million; or 30% of the borrower's existing outstanding and committed but undrawn bank debt; or an amount that, when added to the borrower's existing outstanding and committed but undrawn debt, doesn't exceed six times the borrower's 2019 earnings before amortization, depreciation, interest, and taxes. PPP participation does not preclude Main Street Loan Program utilization.
On April 30, the Federal Reserve expanded eligibility for the Main Street Loan Program by allowing businesses with up to 15,000 employees or up to $5 billion in annual revenue to use the program. The minimum loan size for the MSNLF was lowered from $1 million to $500,000.
Additionally, the Federal Reserve created the Main Street Priority Loan Facility (MSPLF) to provide increased risk-sharing by lenders for borrowers with greater leverage. Lenders would retain a 15 percent share on loans that, when added to existing debt, do not exceed six times a borrower's income, adjusted for depreciation, interest payments, and taxes, and other appropriate adjustments through the MSPLF.
The table below provides a succinct outline of the three loan options below:
Updated Federal Reserve Term Sheets:
Federal Reserve Main Street Program FAQ:
Federal Reserve Press Release with Eligibility Chart: