What Does the CARES Act Mean for American Workers?

The Paycheck Protection Program offers aid to employees. Here is what U.S. workers need to know to take advantage of this aid and how.
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With the coronavirus crisis burgeoning in the U.S. and around the world, Uncle Sam has stepped in to help American workers displaced by the pandemic.

That aid comes in the form of a $2.2 trillion stimulus package passed by the Senate and signed into law by the president on March 27, 2020.

While the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provide widespread financial relief across the U.S. economy, it’s focused on laid-off or sidelined workers are generating most of the buzz around the country.

Specifically, Title II of the CARES Act offers financial relief for U.S. workers negatively impacted by coronavirus crisis, also known as COVID-19, mainly by protecting worker pay, boosting unemployment benefits and broadening benefits eligibility.

Let’s take the Act’s specific statutes one at a time.

The Paycheck Protection Program 

To stem layoffs and keep money in the pocket of Main Street American workers, the CARES Act includes a Paycheck Protection Program component that addresses the need for employers to keep meeting payroll without having to layoff or sideline employees during the COVID-19 crisis.

That would benefit workers by keeping them on their employer’s payroll and buy companies time until the coronavirus crisis abates.

Here’s how the program works. The Act changes existing language in the Small Business Act to generate Paycheck Protection Plan for U.S. companies that qualify for financial assistance.

To qualify, the employer must have fewer than 500 employees on the payroll or otherwise meet existing Small Business Administration standards for the company’s specific industry.

The PPP does carve out exceptions for certain industries to qualify for benefits. For example, a food services company with more than 500 staffers can qualify for federal government aid if its workforce is spread out beyond a single location.

Qualifying companies can tap federal government resources to take out a loan that is 2.5 times its current payroll costs over a specific time frame. The cash must be used to meet regular payroll obligations and other business-related expenses for the eight weeks laid out in the CARES Act.

Overall, the Paycheck Protection Program has $349 billion in total funding for qualified companies. Eligible employers will be limited to low-interest loans up to $10 million. No collateral will be required and loan repayments can be deferred or even forgiven completely as long as the loan money is used for payroll-related purposes.

According to the Act, the definition of payroll eligibility includes:

  • Salary, wage, commission, or similar compensation
  • Payment of cash tip or equivalent
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Payment required for the provisions of group health care benefits, including insurance premiums
  • Payment of any retirement benefit; or payment of state or local tax assessed on the compensation of employees

Under the CARES Act, payroll costs that don’t meet government criteria include:

  • Compensation of an individual employee above an annual salary of $100,000
  • Taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period
  • Compensation of an employee whose principal place of residence is outside of the U.S.
  • Qualified sick leave or family leave wages for which a tax credit is allowed under the Families First Coronavirus Response Act

The Paycheck Protection Program is already experiencing some rollout problems.

U.S. Treasury Secretary Steven Mnuchin had stated the loans would be available through U.S. banks and credit unions on April 3. Many banks, however, have balked at the short turnaround time and aren’t offering the loans until the federal government provides further guidance.

If you’re a business owner look for paycheck help through the PPP, your best move is to work with your existing financial institution and have your application filled out and ready to go when loan funds are disbursed.

New Unemployment Programs

The CARES Act also comes with two new unemployment insurance components:

  • The Federal Pandemic Unemployment Compensation (FPUC) program. This statute allows eligible American workers who collect unemployment compensation from their state of residence to receive an additional $600 a week from the federal government. That $600 stipend ends on July 31, 2020, so workers who are considering applying for unemployment benefits are advised to do so as soon as possible.
  • The Pandemic Emergency Unemployment Compensation (PEUC) program. American workers who have already exhausted their unemployment compensation can now receive an extra 13 weeks of unemployment benefits.

Consequently, workers impacted by the COVID-19 crisis can receive extended cash benefits while they are out of work. Typically, state unemployment programs provide benefits to workers over a 13-week timetable.

Unemployed career professionals who receive the extra $600 should know the money could impact benefits received via other government aid programs, especially means-tested programs like the Supplemental Nutrition Assistance Program. Recipients should check with their state’s unemployment office to see how benefits from other government financial relief programs are impacted by cash provided through the CARES Act.

Short-Time Compensation Expansion. Some U.S. states already have short-time compensation programs in place that allow for workers to not be laid off completely but have their hours curbed for a short time (in this case, until the COVID-19 crisis is over.) This allows employees to work at least part-time and still generate an income rather than be laid off.

Under the CARES Act, the federal government will step in with the financial and regulatory resources for states that don’t have so-called “work-sharing” plans to establish them for the duration of the coronavirus crisis.

New Rules on Unemployment Eligibility

The federal government has tweaked its unemployment eligibility criteria via the CARES Act.

Who Is Eligible– Now, workers are eligible for the additional unemployment insurance under these guidelines:

  • The worker is ineligible for any other state or federal unemployment benefits.
  • The worker is unemployed, partially unemployed, or cannot work due to COVID-19-related reasons (i.e., either they have the coronavirus, someone in their family/household has the coronavirus, or the worker cannot reach his or her place of employment due to state COVID-19-related restrictions.)
  • The worker cannot work remotely or is ineligible for paid leave.
  • The worker is self-employed, an independent contractor, a gig economy worker, or simply doesn’t have enough of a work history to qualify for unemployment. 
  • The worker was set to begin employment with a new firm, does not have another job, and/or is unable to reach his or her new work due to COVID-19-related lockdown.
  • The worker is the breadwinner in his or her household resulting from the death of the previous head of the household.
  • The worker’s company has closed as a result of the impact of the coronavirus crisis.

Who Is Not Eligible– The following class of U.S. career professionals is not eligible for unemployment benefits linked to the CARES Act.

  • Employees whose company is up and running and operating in a “work from home” mode.
  • Employees who are already receiving benefits from their current employer under that company’s unemployment plans and policies. 
  • Americans who are new to the workforce, and are looking for a job but cannot find a job.

The Takeaway on the CARES Act

The CARES Act stimulus package may not be a one-off.

Already, Congress and the White House are jawboning about new financial assistance programs that would aid specific industries and provide further relief for U.S. employers and employees.

With the COVID-19 crisis still rising, with “peak” cases weeks away in most of the country, expect more legislation and more financial aid coming to prop up the U.S. economy – and the U.S. workforce- at its greatest time of need.