CARES Act Includes Key Labor and Employment Provisions

Practical Law Legal Update w-024-6922 (Approx. 11 pages)

CARES Act Includes Key Labor and Employment Provisions

by Practical Law Labor & Employment

Expanded Unemployment Insurance Benefits

As a key component of the CARES Act, the Relief for Workers Affected by the Coronavirus Act (Relief for Workers Act) expands unemployment assistance due to the COVID-19 outbreak, in addition to the increased unemployment benefits made available under the FFCRA. States must immediately incorporate the specified requirements specified in the Relief for Workers Act to receive federal funding for these increased benefits.

Under the CARES Act, these benefits include:

Pandemic Unemployment Assistance (PUA) Program (Sec. 2102). This temporary PUA program through December 31, 2020 provides payment to workers who are unemployed or unable to work due to COVID-19 up to 39 weeks of unemployment benefits. For more information, see Pandemic Unemployment Assistance.
Federal Pandemic Unemployment Compensation (PUC) (Sec. 2104). Both individuals who regularly qualify for unemployment benefits and those who qualify for PUA can receive an additional $600 per week for up to four months until July 31, 2020. Employees are entitled to this amount even if that amount brings them above their pre-unemployment earnings level.
Pandemic Emergency Compensation Program (Emergency Compensation) (Sec. 2107). Emergency Compensation provides federal funding for up to 13 weeks of additional unemployment benefits per year through December 31, 2020 for individuals who:
- have exhausted all other benefits;
- have no right to regular compensation; and
- are able, available, and actively seeking work.
States must provide flexibility to adjust the requirements as appropriate when individuals are unable to search for work because of COVID-19. In most states where the maximum amount of unemployment benefits is 26 weeks, this means eligible individuals can qualify for a total of 39 weeks of unemployment benefits at a weekly rate of $600 during the extended 13-week period.
Funding to Pay One-Week Waiting Period (Sec. 2105). If a state waives the traditional one-week waiting period and pay recipients as soon as they become unemployed, the federal government will fund the cost of that first week of payments through December 31, 2020. Most states have already waived their one-week waiting periods based on their emergency rules and to qualify for the increased funding of unemployment benefits under the FFCRA. For information on state laws and directives responding to COVID-19, see Practice Note, COVID-19: Employment Law and Developments Tracker.
Reimbursement to Nonprofits, Government Agencies, and Indian Tribes (Sec. 2103). Federal funds are being allocated to reimbursement for half of the costs nonprofits, government agencies, and Indian tribes incur by paying unemployment benefits through the end of the year.
Funding for Short-Time Compensation Programs (Secs. 2108 to 2110). Additional funding is available to states that have or will implement certain workshare programs for employees. For more information, see Short-Time Compensation Programs.

Section 3603 of the CARES Act also requires each state to make unemployment insurance applications available in person, over the phone, and online.

Pandemic Unemployment Assistance Program

For unemployment or inability to work caused by COVID-19, the CARES Act provides Pandemic Unemployment Assistance (PUA) benefits to covered individuals who are ineligible for regular compensation or extended benefits, including those individuals who have exhausted all rights to other unemployment compensation or extended benefits.

Covered individuals may receive both:

PUA benefits for full or partial weeks of unemployment or inability to work caused by COVID-19 starting retroactively on January 27, 2020 and ending on December 31, 2020, generally up to a maximum of 39 weeks.
PUC, an additional $600 weekly benefit through July 31, 2020.

The amount of PUA benefits is typically the weekly unemployment benefit amount the covered individual is entitled to under federal or state law. The maximum of 39 weeks includes any weeks for which the covered individual received regular unemployment benefits under federal or state law.

State agencies can make the PUA and PUC payments simultaneously or separately, if both payments are made on a weekly basis.

Covered Individuals

Covered individuals must provide self-certification that they are otherwise able to work and available to work within the meaning of applicable state law, except that they are fully or partially unemployed, or unable to work, because they:

Have been diagnosed with COVID-19.
Are experiencing COVID-19 symptoms and seeking a medical diagnosis.
Have a household member diagnosed with COVID-19.
Are providing care for their family or household member who has been diagnosed with COVID-19.
Have primary caregiving responsibility for a child or other person in the household who is unable to attend school or another facility that is closed as a direct result of COVID-19, and the school or facility care is required for the individual to work.
Are unable to reach their place of employment because of a quarantine imposed as a direct result of the COVID-19 public health emergency.
Are unable to reach their place of employment because they have been advised by a health care worker to self-quarantine due to COVID-19 related concerns.
Have their place of employment closed as a direct result of COVID-19 public health emergency.
Were scheduled to begin work but no longer have a job or are unable to reach the job as a direct result of COVID-19.
Have become the breadwinner or major support for a household because the head of household has died as a direct result of COVID-19.
Are forced to quit their job as a direct result of COVID-19.
Meets additional criteria established by the Secretary of Labor.

Covered individuals include those who meet the above criteria and who are not otherwise eligible for state unemployment benefits, such as:

Self-employed workers.
Independent contractors.
Those seeking part-time employment.
Those without a sufficient work history.
Those who would not otherwise qualify for regular unemployment benefits under state or federal law.

Individuals ineligible to receive PUC benefits include those who are:

Receiving paid sick leave or other paid leave benefits; or
Able to telework with pay.

Short-Time Compensation Programs

The CARES Act provides funding to states that currently have or choose to implement a Short-Time Compensation (STC) program, generally called a workshare or work sharing program. Under workshare programs, employers experiencing a temporary reduction in business agree to reduce the average hours of current employees rather than conduct layoffs or furloughs. In return, those employees receive pro-rated unemployment benefits, known as STC benefits.

Under Section 2108, the federal government will reimburse states 100% of the STC paid under a state's existing STC program through December 31, 2020. New STC programs established under state law before December 31, 2020 will also receive full funding.

Section 2109 provides federal funding to states that begin STC plans if they enter into an agreement with the federal government. Under these agreements, states receive funding for 50% of the STC paid through December 31, 2020 and employers participating in those STC programs must pay to the state 50 percent of the STC paid by the state to the employee. If a participating state enacts a STC law that complies with federal law, the state would be disqualified from receiving funding under Section 2109 and would be eligible for full reimbursements under Section 2108.

States do not receive federal reimbursement for any STC benefits paid to seasonal, temporary, or intermittent employees. The maximum amount of STC benefits payable to an individual is limited to 26 times the amount of regular compensation payable under the state's unemployment benefits program.

Section 2110 of the CARE Act allocates $100 million in grants to states for their implementation and administration of STC programs.

Clarifying FFCRA Paid Leave Provisions

The CARES Act clarifies certain aspects of the FFCRA's two paid leave provisions that apply to employers with fewer than 500 employees and most government employers:

The Emergency Family and Medical Leave Expansion Act (Emergency FMLA).
The Emergency Paid Sick Leave Act (Emergency PSL Act).

For more information on the FFCRA, see Legal Updates, Families First Coronavirus Response Act Mandates Paid Sick and Expanded FMLA Leave for Many Employees and COVID-19 Legislation Includes Group Health Plan Coverage Requirements.

Rehired Employees Eligible for Emergency FMLA

In amending the FFCRA, Section 3605 clarifies that employees do not need to wait another 30 days on rehire before being eligible for Emergency FMLA if they:

Were laid off on or after March 1, 2020.
Worked for their employer for at least 30 of the last 60 calendar days before the employee's layoff.

Advance Refunding of Credits

Section 3606 amends the FFCRA by allowing an employer or self-employed individual to obtain an advance of the payroll tax credits provided under the FFCRA for payment of mandated Emergency FMLA or PSL leave based on the Secretary of Treasury's instructions. The Secretary of Treasury will waive any penalty for failure to make the required payroll tax deposits, when doing so is in anticipation of receiving a payroll tax credit under the FFCRA.

FFCRA Paid Leave Caps

Sections 3601 and 3602 essentially reiterate the FFCRA's per employee paid leave cap requirements as:

For Emergency FMLA, $200 per day or $10,000 in total.
For Emergency PSL Act:
- $511 per day and $5,110 in total for an employee who is quarantined under a government order or advice of health care provider, or experiencing COVID-19 symptoms and seeking a medical diagnosis.
- $200 per day and $2,000 in total for an employee to care for another individual under quarantine or a child under 18 whose school or child care provider is closed or unavailable because of COVID-19, or if the employee is experiencing a substantially similar condition.

CBA Stability and Neutrality Towards Unions Required to Receive Mid-Sized Business Loans

Under Emergency Relief and Taxpayer Protections (Section 4003), the federal government is authorized to implement a program to make loans to mid-sized businesses with 500 to 10,000 employees. To receive a loan under this program, the business must make a good-faith certification it will comply with several requirements, including:

Not to abrogate existing CBAs for both the term of the loan and for two years after completing loan repayment.
To remain neutral in any union organizing effort for the term of the loan.

The CARES Act does not explain what "abrogate existing collective bargaining agreements" means, leaving a great deal of uncertainty about the extent to which businesses must waive contractual or statutory rights to receive loans. For example, it is not clear what degree of repeal, revision, or breach might constitute an abrogation and whether employers must waive any applicable contractual and statutory rights to:

Modify employment terms and conditions with little or no further bargaining.
Implement their final proposals after negotiating to impasse to replace an expired CBA.

(See, for example, Practice Notes, Collective Bargaining Under the National Labor Relations Act: Bargaining to Impasse, Bargaining About an Expiring CBA, and The End of Bargaining Obligations; and Railway Labor Act: Overview: Negotiating Procedures for Amending a Collective Bargaining Agreement.)

Likewise, the CARES Act does not define "remain neutral," leaving a great deal of uncertainty about the extent to which businesses must waive statutory and property rights to receive loans. "Neutrality" in labor relations may be interpreted broadly. For example, while organizing employees, unions often ask employers to enter "neutrality agreements" requiring the employers to, among other things:

Waive statutory rights to voice their opinions or to provide employees information about the union, collective bargaining, or their statutory rights.
Agree to recognize a union based on a check of signed union authorization cards rather than the results of secret ballot election, or to waive challenges or objections in election petition proceedings.
Permit unions to use company property and time to deliver "captive audience" speeches and information about the unions to employees.

(For more information, see Practice Note, Responding to Union Organizing Campaigns: Neutrality and Card-Check Agreements and Employer Communications Before an NLRB Election; see also Mulhall v. UNITE HERE Local 355, 667 F. 3d 121 (11th Cir. 2012).)

It is also not clear who or what agency determines whether a loan recipient has breached the CBA abrogation or neutrality certifications, and what criteria and procedures are used to make those determinations.

Protection of CBAs

Section 4025 prohibits the federal government to condition issuing loan or loan guarantees to an air carrier or eligible business covered under the Railway Labor Act (RLA) or the National Labor Relations Act (NLRA) on their implementation of measures to enter into negotiations with the certified bargaining representative of the business's employees regarding pay or other terms and conditions of employment. This provision is effective from the date the loan or loan guarantee is first issued and ends one year after the loan or loan guarantee is no longer outstanding.

Similarly, Section 4115 prohibits the federal government to condition providing financial assistance to air carriers or contractors covered under the RLA or the NLRA on their implementation of measures to enter into negotiations with the certified bargaining representative of the business's employees regarding pay or other terms and conditions of employment. This provision is effective from the date of the financial assistance is first issued and ends on September 30, 2020.

The CARES Act does not explain what "implementation of measures to enter into negotiations" means or how these provisions are intended to protect CBAs.

Paycheck Protection Program for Small Businesses

Under Section 1102, the CARES Act expands on the Small Business Administration (SBA) 7(a) loan program by creating the Paycheck Protection Program to provide eligible employers with partially forgivable small business loans to cover certain payroll costs, employer group health costs, and other employer incurred costs for eight weeks after the loan original date. The FFCRA required Emergency PSL and FMLA payments are expressly excluded as covered payroll costs because of tax credit process already provided to employers under the FFCRA. The covered period for loans is February 15, 2020 through June 30, 2020.

Advance Payments Under SBA Emergency Economic Injury Disaster Loans

Section 1110 allows eligible employers to use advance payments under the SBA Emergency Economic Injury Disaster Loans grants for various purposes, including to provide paid sick leave to employees unable to work due to the direct effect of the COVID-19.

Reimbursement of Federal Contractor's Paid Leave Costs

Under Section 3610, the federal government may reimburse through September 30, 2020 the cost of paid leave, including paid sick leave, that federal contractors provide to their employees or subcontractors who are both:

Unable to work due to the closure of a federally-owned or federally-leased site.
Cannot telework because their job duties cannot be performed remotely during the COVID-19 public health emergency.

The amount of the reimbursement must not be duplicative of any tax credits the contractor uses to cover the cost of the leave.

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