Coronavirus Aid Relief, & Economic Security Act (CARES) Impact on the Hospitality Industry: FAQ

Many areas of the travel industry have been shut down as government officials have issued stay at home orders to minimize the spread of the COVID-19 virus. While these stay at home orders are meant to protect the health of millions of Americans, they have had a crippling effect on small businesses throughout the country.

On April 1st, 2020 the CARES Act went into effect to help alleviate some of the economic hardships experienced because of the nation wide quarantine. Here are some of the frequently asked questions (FAQs):

What is the CARES Act and how does it impact your business?

To alleviate the economic impact of the COVID-19 pandemic on both individuals and small businesses in the United States, on March 27th, 2020 congress passed the "Coronavirus Aid, Relief, & Economic Security Act (CARES ACT). This legislation provides the following assistance to small businesses and employees:

• Paycheck Protection Program
• Expanded US Small Business Administration "Economic Injury Disaster Loan" Program
• Business Tax Breaks & Provisions
• Families First Coronavirus Response Act (FFCRA)
• Emergency Paid Sick Leave Act (EPSL)
• Emergency Family and Medical Leave Expansion Act (EFMLA)

What is the Paycheck Protection Program?

The government has set aside $349 billion in government-backed loans to help small businesses maintain their payrolls through June 30, 2020. Funds can be used to pay interest on mortgages, rent, and utilities. Businesses can apply to borrow up to 2.5 times their average monthly payroll costs, with a cap of $10 million. Interest rates on the loans are capped at 1%, and depending on how much a business borrows, some or even all of the loan may be forgiven.

Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months.

Forgiveness of the funds is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced or denied if a business decreases its number of full time employees, or decreases the wages/salaries paid to full time employees by more than 25%. If businesses have already laid off employees or decreased salaries between February 15, 2020 and April 26, 2020, they will be given until June 30, 2020 to restore their full time employee headcount and salary levels to be eligible for loan forgiveness.

Which Businesses Are Eligible For Paycheck Protection Program?

This program is designed for businesses with fewer than 500 employees. This includes every type of employee (full, flex, part time, contractors, etc). Those who are self employed, or sole proprietors can also apply. To be eligible, businesses also have to have been in business on or before February 15, 2020.

To better assist small business owners, many regulations and restrictions to qualify for the Paycheck Protection Program have been relaxed. The loans do not require collateral or personal guarantee, and applicants will not be asked about previous credit denials. Neither the government nor lenders will charge small businesses any fees.

How Do I Figure Out How Much My Business Can Borrow?

As mentioned earlier, the Paycheck Protection Program will allow businesses to borrow up to 2.5 times their average monthly payroll costs, capping at $10 million. To determine your monthly payroll costs, the program requires you to add up all payroll costs from the past year and then divide by 12. Keep in mind, wages of part time employees and any contractors are included in the payroll calculation. Once you know your annual payroll costs, multiply that average monthly payroll number by 2.5, and that is the maximum amount you are eligible to apply for.

One exception to keep in mind when it comes to payroll, any wages beyond $100,000 per employee are excluded, as are payroll taxes, income taxes, and compensation for any workers who live outside the United States.

When Can You Apply?

Starting April 3, 2020, small businesses and sole proprietorship can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. The Small Business Administration encourages businesses to apply as quickly as possible as they expect many businesses to apply, and there is a funding cap in place. To ensure you get the help that you need, apply as early as possible.

How Do You Apply?

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. You can check with your bank to see if they are a qualified SBA 7(a) lender, or find a SBA 7(a) lender near you at the SBA locator website here:

Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. All loans will have the same terms regardless of lender or borrower. You can find Paycheck Protection Program application form here:

While application guidelines are still being finalized, business owners will likely need to have proof of how long their companies have been in operation, where their businesses are located, and documentation showing payroll expenses and revenue.

Paycheck Protection Sources
PPP Fact Sheet Assistance for small businesses

What is the Small Business Administration's (SBA) Economic Injury Disaster Loan Program Expansion?

According to the CARES Act, small businesses in all states and US territories are eligible to apply for a disaster loan. Businesses may also receive up to a $10,000 advance on the loan.

The CARES Act also introduces expansion of the Small Business Administration's "Economic Injury Disaster Loan Program". Normally, the Economic Injury Disaster Loan Program has offered disaster relief assistance to businesses in specific areas where federally declared disasters have occurred. The idea behind this program's expansion in the CARES Act is to provide financial support to businesses experiencing reduced revenue due to the coronavirus pandemic.

The maximum loan amount is $2 million, and loans are offered at an interest rate of 3.75% for businesses, 2.75% for non profit organizations. Applications for an Economic Injury Disaster Loan due to COVID 19 can be found here:

What are the Business Tax Breaks in the CARES Act?

Another benefit to small businesses outlined in the CARES Act is the implementation of new tax breaks and provisions. These include employee retention credits and deferred payroll taxes. For the employee retention credit, employers whose operations were fully or partially suspended due to a shutdown order, or whose gross revenue declined by more than 50% when compared to the same quarter of the previous year, are eligible for a refundable tax credit. This tax credit will apply to wages paid to workers during the pandemic, covering March 13, 2020 to December 31, 2020. The tax credit is capped at $10,000.

For deferred employer payroll taxes, any employer that does not receive forgiveness on a Paycheck Protection Program loan will have the ability to delay payment of payroll taxes (including employer Social Security taxes). This payroll tax deferment also applies to those that are self employed. If a business/employer is granted the ability to defer payroll taxes under this program, the deferred tax payments are required to be paid back over a two year period. 50% must be paid by December 31, 2021, with the remaining 50% being paid by December 31, 2022.

Sources
FAQs Employee Retention Credit Under the Cares Act


What Is the Families First Coronavirus Response Act (FFCRA) and how does it affect my business?

The FFCRA act requires private sector and select public sector employers with fewer than 500 employees to provide their employees with additional Emergency Paid Sick Leave (EPSL) and expanded family and medical leave (EFMLA) for specified reasons related to COVID-19.

The provisions and requirements of this law are temporary and apply from April 1, 2020 through December 31, 2020.

The Families First Coronavirus Response Act (FFCRA) includes the new Emergency Paid Sick Leave Act (EPSL) and Emergency Family and Medical Leave Expansion Act (EFMLA) and affects OSHA, FMLA, ADA, Workers Compensation, and other employment laws for businesses with more than 50 employees.

Businesses with 50 or fewer employees may receive a small business exemption from these provisions if compliance will jeopardize the viability of the business as a going concern. Businesses will be required to document why their business meets the criteria set forth by the Department of Labor. A small business may claim this exemption if an authorized officer of the business has determined that:

• The provision of paid sick leave or expanded family and medical leave would result in the small business's expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
• The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
• There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.

Click Here for more information

What Is the Emergency Paid Sick Leave Act (EPSL) and how does it affect my business?

The EPSL Act requires businesses with 500 or fewer employees to provide up to two weeks (80 hours, or a part-time employee's two-week equivalent) of paid sick leave based on the higher of their regular rate of pay, or the applicable state or Federal minimum wage.

This is in addition to any vacation time or sick leave already offered by the business. Businesses can not use the EPSL Act to replace sick leave or vacation programs regularly offered to their employees prior to the coronavirus outbreak.


How Much and When Does My Business Pay for this Emergency Paid Sick Leave (EPSL)?

Under the EPSL Act an employee is entitled to take two weeks (or 80 hours) of sick leave pay if the employee is unable to work, including telework, due to sickness from COVID 19. This additional two weeks or 80 hours of sick leave pay has the following guidelines and restrictions:

• If the employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19, the business should pay 100% of the employee's existing wage up to $511 daily and $5,110 total.
• If the employee has been advised by a health care provider to self-quarantine related to COVID-19, the business should pay 100% of the employee's existing wage up to $511 daily and $5,110 total.
• If the employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis, the business should pay 100% of the employee's existing wage up to $511 daily and $5,110 total.
• If the employee is caring for an individual subject to an order described in (1) or self-quarantine as described in (2), the business should pay 2/3 of the employee's existing wage up to $511 daily and $5,110 total.
• If the employee is caring for his or her child whose school or place of care is closed (or child care provider is unavailable) due to COVID-19 related reasons, the business should pay 2/3 of the employee's existing wage up to $511 daily and $5,110 total
• If the employee is experiencing any other substantially-similar condition specified by the U.S. Department of Health and Human Services, the business should pay 2/3 of the employee's existing wage up to $511 daily and $5,110 total.

To take immediate advantage of the paid leave required by the Emergency Paid Sick Leave (EPSL) Act, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released soon.

For more information from the IRS, click here

What Is the Emergency Family and Medical Leave Expansion Act (EFMLA) and how does it affect my business?

The EFMLA act allows employees caring for a child whose school or place of care is closed (or child care provider is unavailable) due to COVID-19 related reasons to receive up to 12 weeks of paid sick leave and expanded family and medical leave paid at 2/3 of their existing wage up to $200 daily and $12,000 total.

Employees have to have been employed for at least 30 days prior to their leave request to be eligible for EFMLA.

Sources
COVID-19 Employer FAQ
Employers Rights
Treasury, IRS and Labor announce plan to implement Coronavirus-related paid leave for workers and tax credits for small and midsize businesses to swiftly recover the cost of providing Coronavirus-related leave


How do EFMLA and EPSL relate to each other, especially in regard to caring for children?

The emergency FMLA (EFMLA) and emergency paid sick leave (EPSL) both cover caring for children whose school or place of care is closed due to COVID-19 precautions, though EFMLA has a broader restriction that the child be under 18 years old. The paid sick leaves can run concurrently with the first 10 days of EFMLA being unpaid, which will, in many cases, coincide with the 80 hours of pay (at 2/3 the regular rate) under EPSL for full-time employees.

Sources
COVID-19 Employer FAQ


How is my Business Supposed to pay for the sick leave and FMLA leave mandated by the Families First Coronavirus Response Act?

To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released soon.

The full announcement can be found here: Treasury, IRS, and Labor Announcement on FFCRA Implementation.

Sources
COVID-19 Employer FAQ


Does my Business Have to Provide EPSL or EFMLA if we lay off or furlough employees?

No. Employers who are closed — either due to lack of business or a state or local order — do not have to provide these leaves. Employees who are furloughed (temporarily not working but still on the payroll) are also not entitled to these benefits. In both of these cases, employees are eligible for unemployment insurance instead. However, businesses should ensure that they are not making furlough or layoff decisions based on an employee's request or potential need for leave, as this would likely be considered interference or retaliation (and grounds for a lawsuit).

Sources
COVID-19 Employer FAQ

What Else Will the CARES Act Do?

The CARES Act also provides some benefits that may not directly apply to your small business, but could affect it in a tangential way. The first of these is economic impact payments (rebates) that will be paid out to many US taxpayers.

US taxpayers that make less than $75,000 in adjusted gross income ($150,000 for joint filers) will receive checks for $1,200 per adult and $500 per qualifying child. Taxpayers that make $75,000 - $99,000 will still receive checks, but their payments will be for progressively smaller amounts. Taxpayers that earn more than $99,000 per year ($198,000 for joint filers) will not receive economic impact payments.

In addition to economic impact payments, the CARES Act also provides "Pandemic Unemployment Assistance". This extends unemployment assistance to those that may not normally qualify for unemployment benefits and includes those that are self employed, independent contractors, and gig workers. The CARE Act extends unemployment benefits through December 31, 2020, and also provides an additional $600 per week for unemployment through July 31, 2020. In short, under the CARES Act, more individuals will qualify for unemployment assistance than ever before.

While economic impact payments and extended unemployment benefits may not impact your small business directly, these could play a role in improving the overall economy by putting money back into the pockets of consumers (including your employees). This may aid recovery, or even have positive effects on small business owner's personal cash flow.

In Conclusion

In conclusion, the CARES Act has many different aspects that can both directly and indirectly affect small business owners in the lodging industry. It is good to keep in mind that some of these situations could change as time progresses. It is also important to realize that the CARES Act is a Federal program, and may be only one of many avenues to find assistance during this time. Additional support and/or funding may be available to you at the state level as well. It is worth checking in with your local state governor's office, finance department, unemployment office, and labor department for any state government programs that may be applicable to small businesses and/or the lodging industry.

Summary

• The CARES Act passed March 27th, 2020 and provides temporary financial assistance and relief to small businesses.
• Businesses with less than 500 employees in the hospitality industry can get low interest loans of 1% from the Small Business Administration (SBA) up to $10,000,000 dollars to cover expenses during the coronavirus pandemic.
• Businesses with less than 500 employees in the hospitality industry can get low interest disaster relief loans from the Small Business Administration (SBA) up to $2,000,000 dollars.
• Some, or even all of the loans may be forgiven if the small business uses the loans for approved expenses (mostly payroll).
• The Families First Coronavirus Response Act (FFCRA) includes the new Emergency Paid Sick Leave Act (EPSL) and Emergency Family and Medical Leave Expansion Act (EFMLA) and affects OSHA, FMLA, ADA, Workers Compensation and other employment laws for businesses greater than 50 employees.
• The Families First Coronavirus Response Act (FFCRA) requires employers to provide paid sick leave options in response to the COVID-19 virus and quarantine.
• The CARES Act is a federal relief program and many states may add additional regulations and relief incentives to businesses under 500 employees.

Other Articles and Resources

U.S. Department Of The Treasury CARES Act Assistance For Small Businesses FAQ's
U.S. TRAVEL SUMMARY OF THE CARES ACT (H.R. 748)
U.S. TRAVEL: The Coronavirus Relief Package Passed. How Do You Access Funding?
U.S. TRAVEL: A Guide to CARES Act Eligibility
FORBES: The CARES Act Has Passed: Here Are The Highlights
SBA: Coronavirus (COVID-19): Small Business Guidance & Loan Resources
FULL CARES ACT Bill
SUN LIFE: Employers Guide to COVID-19
SUN LIFE: COVID-19 Sun Life Webinar Recording March 25 2020
THINK HR: COVID-19 EMPLOYER FAQ
VENTRIS: Employer COVID-19 Questions and Answers
POSTER GUARD: Employee Rights Poster
DEPARTMENT OF LABOR: COVID-19 and the Workplace
SMBs Survival Guide: Best 8 Financial Tools to Combat COVID-19
A Guide to COVID-19 and Your Finances: What You Need to Know