FFCRA and CARES Act Update For Labor Unions Philadelphia Labor Law

FFCRA and CARES Act Update for Labor Unions

On March 18, 2020, the U.S. Congress passed the Families First Coronavirus Response Act (“FFCRA”). The law includes numerous emergency measures to combat the ongoing COVID-19 pandemic, including establishing paid sick leave and expanded family and medical leave where certain conditions are met, and it allows the employer to seek reimbursement for these expenses through future payroll tax credits.

On March 27, 2020, the U.S. Congress adopted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The President signed the CARES Act into law the same day. The law includes measures designed to reduce the damage to the U.S. economy caused by COVID-19, including payments to certain individuals and families, expanded unemployment insurance benefits and eligibility, small business loans and grants, emergency financial assistance to employers in certain industries that have been significantly impacted by the virus, and financial assistance to healthcare systems.

This alert addresses specific provisions of the FCCRA and CARES Act that may be applicable to a Labor Union acting as an employer. Union benefit funds and their employees may also qualify for the same relief under these Acts, and therefore employee benefit funds should consult their professionals about these provisions as well.

CARES ACT – SBA – DISASTER LOAN PROGRAM

The CARES Act provides for approximately $10 billion dollars for economic industry disaster loans, or “EIDLs.” EIDL was a pre-COVID-19 program for businesses that met certain criteria. The CARES Act expands access to these loans to private nonprofit entities, employee stock ownership plans, cooperatives, and Native American tribal businesses, as well as to sole proprietors and independent contractors. While the term “private nonprofit organizations” is not further defined in the CARES Act, it appears to include Tax Code Section 501(c)(5) labor organizations.

The loans can be up to $2,000,000 and are repayable at 2.75% interest over a period of as many as four years. Any eligible entity that has applied for an EIDL in response to COVID-19 may also request a maximum $10,000 advance on that loan. Critically, an applicant is not required to repay the advance even if it is ultimately denied an EIDL loan. However, an applicant must certify its eligibility when it applies.

The loan, and the advance, may be used for paid sick leave for employees, payroll costs, rent, and other obligations due to revenue loss because of the virus. Click here to access the SBA Application. A Union will be asked for its tax exemption letter as part of the application, so it should consult with its accountants, or its International Union if it is part of a group exemption, regarding this part of the request.

CARES ACT – FEDERAL PAYROLL TAX DEFERRAL

The CARES Act allows all Unions to delay paying the employer portion of the Social Security payroll tax that they would normally owe for wages paid to employees between March 27, 2020 and December 31, 2020. A Union must pay at least 50% of the total amount of the employer portion of the Social Security payroll tax it defers by December 31, 2021, and it must pay the balance by December 31, 2022.

A Union electing to defer paying taxes to the IRS must still file Form 941 on a quarterly basis to report the amount of payroll taxes it owes and is choosing to defer. Prior to filing, Unions should check the IRS website for more information.

CARES ACT – EMPLOYEE RETENTION CREDIT

The CARES Act includes an employee retention tax credit that may help eligible employers meet payroll obligations by providing them a refundable payroll tax credit against the employer’s share of Social Security payroll taxes. For each eligible quarter, the employer will receive a credit against its share of Social Security payroll taxes equal to fifty percent (50%) of the qualified wages paid to each eligible employee for that quarter. The amount of qualified wages considered is capped at the first $10,000 in wages paid to an eligible employee, including the value of health benefits, per calendar quarter. So, the credit can be as much as $5,000 per employee, per quarter.

Employers of all sizes, including tax-exempt organizations like 501(c)(5) labor organizations, may be eligible for the employee retention credit. Generally, for any Union with 100 or fewer full-time employees in 2019, all wages paid to employees qualify for the credit. To be eligible for the credit, the employer must have carried on a trade or business during 2020 and satisfy either or both of the following tests:

Business operations are fully or partially suspended due to orders from a governmental entity limiting commerce, travel, or group meetings due to COVID-19; or
Gross receipts declined by more than 50% when compared to the same quarter in the previous year.

The IRS has said that operations are partially suspended when a business or an organization cannot operate “at its normal capacity.” Therefore, the AFL-CIO has suggested that:

If you think your Union may be eligible for the employee retention tax credit because of full or partial suspension of its operations due to a government order, you should contact your accountant.

You should assemble information about programs and events that the Union has cancelled, postponed, or modified after an order in your state banning large gatherings or requiring residents to stay at home. You may also want to note activities like bargaining or other representational duties that have been affected by the closure of your members’ employers.

CARES ACT – SBA – PAYCHECK PROTECTION PROGRAM

Under the Paycheck Protection Program, qualified businesses with 500 or fewer employees are eligible for loans of up to $10 million through December 31, 2020. Unfortunately, the Paycheck Protection Program is only applicable to certain nonprofit entities, namely Tax Code Section 501(c)(3) (charitable) organizations, and Section 501(c)(19) (veteran) organizations. It is not applicable to Section 501(c)(4) (social welfare) organizations, Section 501(c)(5) (labor) organizations, Section 501(c)(6) (business league) organizations, or Section 527 (political) organizations. Accordingly, Unions are not eligible for the Paycheck Protection Program.

FFCRA – EMERGENCY PAID SICK LEAVE

The FFCRA, as amended by the CARES Act, provides that all qualified employers with less than 500 employees must provide employees two (2) weeks of paid sick leave for certain COVID-19-related issues. For example, employees subject to quarantine orders due to the virus, employees advised to self-quarantine by a health care provider because of virus-related concerns, and even employees caring for another individual subject to such conditions may qualify for paid sick leave. Employees may also qualify for this leave if they are experiencing COVID-19 symptoms and are seeking the advice of a healthcare provider. In addition, employees may qualify for this leave if they need to care for a child whose school or regular care provider is no longer open or providing services because of COVID-19. Depending on the reason for the leave, employees may be entitled to full or partial wages during this two-week period, up to statutory caps. Unions may be reimbursed for these expenses through credits against payroll taxes.

FFCRA – EMERGENCY FAMILY AND MEDICAL LEAVE EXPANSION

The FFCRA amended the Family Medical Leave Act (“FMLA”) to provide up to 12 weeks of leave for employees who have been employed for at least 30 days and who are unable to work or telework due to the closure of a child’s school or day care because of COVID-19. The first two weeks of this FMLA leave are unpaid, but an employee may be entitled to paid sick leave during the first two weeks, as discussed above. For the remainder of the emergency leave time, employees are entitled to 2/3 of their regular daily rate of pay, subject to statutory caps. Unions can be reimbursed for these costs through future payroll tax credits.

CONCLUSION

After, reviewing the above, a Union should seek advice from its accountant or financial advisor to ensure that it is eligible for the SBA-EIDL program, the IRS-Employee-Retention Credit or any other benefit offered under the FFCRA or CARES Act. Finally, it is important to remember that many of your members’ employers may be able to utilize the programs discussed above, and they should be encouraged to do so where it benefits your members.