The CARES Act: A Summary of the Federal Stimulus Package For Employers

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On Friday, March 27, 2020, Congress passed and the President signed the Coronavirus Aid, Relief, and Economic Security Act (the “Act”), a $2.2 trillion, bipartisan emergency relief package that provides economic assistance and health care support to individuals, families and businesses affected by COVID-19.

Of particular interest to small businesses, the Act provides for federally guaranteed loans to eligible employers under the Paycheck Protection Program (“PPP”). In addition, the Act includes a section entitled the Relief for Workers Affected by Coronavirus Act (the “RWACA”), which provides additional federal funding for expanded unemployment benefits for states that execute agreements with the federal government relating to this program . Although the Act includes other support for businesses and individuals related to the COVID-19 crisis, this alert is limited to addressing key questions for the Paycheck Protection Program and unemployment provisions under the Act.


Which employers are eligible for PPP loans?
Employers (for-profit and nonprofit organizations) with 500 or less employees
Sole proprietors and independent contractors
Other entities deemed “small businesses” under the Small Business Administration (“SBA”) standards, as well as certain businesses in the restaurant and hotel industry with not more than 500 employees per physical location

Loan Amount
How is the size of a PPP loan determined? 
The loan will be the lesser of: $10 million OR a company’s average monthly payroll costs during the 1-year period before the date on which the loan is made, multiplied by 2.5 (plus any loans under the Small Business Act after January 31, 2020 to be refinanced under the covered loan).
A different method for calculating the loan amounts will be used for businesses that were not in business between February 15, 2019 to June 30, 2019, and for businesses that took out Economic Injury Disaster Loans between February 15, 2020 and June 30, 2020.

Use of the Loans
Are there restrictions on the use of PPP loans?
Yes, the loans may be used only for the following business expenses:

  • Payroll Costs, which in addition to salary, wages, commissions and tips, also include retirement benefits, certain employer-provided benefits, severance payments, state and local taxes paid on employee compensation, and other compensation paid to employees and independent contractors
  • Rent (including rent under a lease agreement)
  • Utilities
  • Interest on mortgage payments
  • Insurance premiums
  • Interest on other debt obligations incurred before February 15, 2020

Further, the following costs are NOT covered business expenses for which the loan proceeds can be utilized:

  • Employee/owners’ compensation in excess of $100,000
  • Compensation for employees whose principal residence is outside of the U.S.
  • Qualified sick and family leave benefits under the Families First Coronavirus Response Act (“FFCRA”)(reimbursement for FFCRA expenses must be made through the payroll tax credit process).

Securing a Loan/Loan Deadline
Which entities are issuing PPP loans?
Loans will be available immediately through SBA-certified lenders, which include banks, credit unions, and other financial institutions.  The deadline to apply for PPP loans is June 30, 2020.

Loan Forgiveness
What costs will be forgiven for these loans?

  • Payroll costs (as defined above)
  • Rent
  • Interest paid on mortgages
  • Utility payments

The maximum amount of loan forgiveness is the sum of qualifying expenses for the eight-week period after origination of the PPP loan.
Also note:

  • Forgiveness Amount Is Decreased for Terminations: The loan amount that is forgiven will be decreased by the reduction in the number of full-time employees per month during the covered period as compared to either (i) the average number of full-time equivalent employees per month from February 15, 2019 to June 30, 2019 or (ii) the average number of full-time equivalent employees per month from January 1, 2020 to February 29, 2020.
  • Forgiveness Amount Is Decreased for Salary Reductions: The loan amount that is forgiven will be reduced by any reduction in salary or wages in excess of 25% (as compared to the last full quarter an employee was employed before February 15, 2020).
  • Important Caveat: However, if an employer terminated or reduced the salary of a full-time employee between February 15, 2020 and April 26, 2020, the employer may obtain loan forgiveness if it rehires the employee or, in the case of a salary reduction, restores the full salary to the employee by June 30, 2020.

Loan Terms
If a PPP loan is not forgiven, then what happens?

  • For any amounts not forgiven, the maximum term for repayment is 10 years and the maximum interest rate is 4 percent. There is no penalty for prepayment of covered loans.

For more details regarding covered expenses and loan forgiveness, and to apply for a loan under the Act, businesses should contact their accountants. Further, for more extensive information for small businesses on the CARES Act, see:


The “key takeaways” of the RWACA, for states that “opt in” are:

  • Unemployment benefits will now be available to individuals who may not have otherwise qualified, including individuals who are unemployed, partially unemployed, or who are unable to work because of a variety of COVID-19 related reasons.
  • The maximum unemployment benefits period has been extended to 39 weeks for periods of unemployment through December 31, 2020.
  • In addition to regular unemployment compensation amounts, as provided by the states, qualifying individuals would be entitled to an additional weekly payment of $600 for periods of unemployment through July 31, 2020.

We understand that many employers are trying to help guide their employees who are asking unemployment questions.  Employers cannot guarantee receipt of unemployment benefits, since employees’ situations will be individually assessed at the state level, but the following questions and answers should help address some questions on the RWACA:

What are the specific COVID-19 related reasons that now trigger unemployment eligibility?
The unemployment benefits are available to employees who are otherwise able to work and available for work as defined by state law, but are unemployed, partially unemployed or unable or unavailable to work because the individual:

  1. has been diagnosed with COVID–19;
  2. is experiencing symptoms of COVID–19 and seeking a medical diagnosis;
  3. has a member of their household who has been diagnosed with COVID-19;
  4. is providing care for a family member or a member of the individual’s household who has been diagnosed with COVID–19;
  5. has a child or other person in the household for whom the individual has primary caregiving responsibility, that child or person is unable to attend school or another facility that is closed as a direct result of the COVID–19 public health emergency, and the person’s attendance at such school or facility care is required for the individual to work;
  6. is unable to reach the place of employment because of a quarantine imposed as a direct result of the COVID–19 public health emergency;
  7. is unable to reach the place of employment because the individual has been advised by a health care provider to self-quarantine due to concerns related to COVID–19;
  8. was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of the COVID–19 public health emergency;
  9. has become the breadwinner or major support for a household because the head of the household has died as a direct result of COVID–19;
  10. has to quit his or her job as a direct result of COVID–19;
  11. their place of employment is closed as a direct result of the COVID–19 public health emergency;
  12. meets any additional criteria established by the Secretary of Labor for unemployment assistance under RWACA; or
  13. is self-employed, is seeking part-time employment, does not have sufficient work history, or otherwise would not qualify for regular unemployment or extended benefits under State or Federal law or pandemic emergency unemployment compensation and meets the requirements above.

Can an employee who is already receiving paid sick leave or other paid leave benefits also receive unemployment if he/she meets the qualifications above?
No. Although some categories of eligibility for unemployment are similar to qualifying conditions for some paid sick leave laws (including the recently enacted FFCRA), the RWACA expressly excludes from eligibility any individual receiving paid sick leave or other paid leave.

What if an employee meets an eligibility requirement above but can telework?
The employee will not be eligible for unemployment insurance.

It appears that independent contractors can seek unemployment benefits now. Is that correct?
Yes. The RWACA includes self-employed individuals if they cannot work as a result of a qualifying COVID-19 related reason. However, the law does not address whether business owners are eligible for unemployment.

What about individuals who were only recently hired and would not otherwise qualify for unemployment? If they cannot work because of a qualifying COVID-19 related reason, would they qualify for unemployment?
Yes. An individual may be eligible for unemployment benefits under the RWACA if he or she is unemployed or partially unemployed because of a qualifying COVID-19 related reason and are otherwise ineligible for unemployment compensation because of a lack of work history. The law also applies to new hires or an “individual [who] was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of the COVID–19 public health emergency.”

How do the enhanced RWACA benefits work?
Individuals would apply for unemployment through the state. The key enhancements are: (a) those who qualify for unemployment may receive such benefits for up to 39 weeks and (b) from the point at which the employee’s state opts into the federal program through July 31, 2020, such unemployment benefits will include both regular unemployment compensation under state law plus an additional $600 per week .

When does this law take effect?
The law takes effect as soon as states opt into the enhanced benefits program. Additionally, unemployment benefits (other than the additional $600 benefit discussed above) will be available for qualifying individuals who were not otherwise eligible for benefits for any prior period of unemployment since January 27, 2020. Any enhanced benefits under this law end on December 31, 2020.

What about individuals who were already unemployed for non-COVID-19 related reasons?
These individuals should also benefit from the enhanced benefits, meaning their unemployment should be extended up to 39 weeks and they should qualify for the $600 additional weekly benefit.

If you have any questions relating to this notification poster, or any other COVID-19 issue, please contact NFC’s COVID-19 Response Team as we are closely monitoring the rapidly changing legal landscape relating to this global pandemic. Please feel free to reach out to the NFC Attorney you typically work with or contact us directly for any information or concerns.


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