The New “CARES Act” in Plain English- Simplifying the Latest Federal Benefits in Response to the COVID-19 Crisis


While the Coronavirus/COVID-19 continues to wreak havoc on the health and welfare of individuals throughout the world, triggering shelter-in-place orders and disruptions to normal supply chains and service client relationships, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was passed by Congress, and signed by President Trump on March 27, 2020, in order to provide important financial benefits to seven primary groups: 1) individuals, 2) small businesses, 3) mid-size and larger companies, 4) hospitals and public health facilities, 5) children and families, through federal safety net programs, 6) state and local governments, and7) providers of educational services.

FMG’s executive summary highlights the key provisions of the CARES Act, allowing you to investigate the provisions that may be of value to you or your company. Because many of these provisions require an analysis of your situation, including relevant risks, benefits, and obligations, we stand prepared to provide you with individualized guidance in seeking benefits to which you may qualify in this potential time of need. We can also provide references to other professionals, such as professional tax advisors, should you not already have someone meeting those needs for you. In this regard, FMG is offering a variety of resources including the following:
FMG’s Coronavirus Task Force – Our multi-disciplinary team of attorneys continues to provide up-to-the-minute information, strategic advice, and practical solutions for our clients and potential clients. You can find out more about the team by clicking here or emailing the team at We are endeavoring to respond to all questions submitted to this email address by a professional skilled in your area of concern.  

FMG‘s Coronavirus Resource Center – We also have established a Coronavirus Resource Center you can access on our website, click here. In one place, you can review summaries of court operations in all jurisdictions that FMG services and also review blogs and other educational information that will be helpful to you.

Daily Webinars – Our team also has scheduled multiple daily webinars on topics such as the new CARES act, and subject-specific topics including employment, insurance coverage, cybersecurity, tort liability, and California-specific employment and cyber issues. Webinars are free of charge and open to anyone who would like to attend. To review topics and register, click here.

I.     SBA Financial and Support Services

Through the Small Business Administration, specific benefits are provided to small businesses and entrepreneurs in four primary areas:
Financial Capital to Help Businesses Retain Their Employees
The Paycheck Protection Program (“PPP”)
A Limited Cash Infusion to Help Meet Current Cash-Flow Needs
The Emergency Economic Grant Program (“EEGP”)
Deferral/Management of Existing Small Business Association (“SBA”) Loans
The Small Business Debt Relief Program (“DRP”)
Counseling Services to Help Address Current Economic Uncertainties
The Resource Partner Program (“RPP”)
Each of these Programs is further explained below, with additional and more detailed information available at
A.    The Paycheck Protection Program
The PPP will provide cash-flow assistance from federally guaranteed loans (with no SBA fees) to employers who maintain their payroll during this emergency. The Program generally involves the following rights and benefits:
Loans can be sought for up to 250% of the average monthly payroll costs over the last year (maximum $10 million) for COVID-19 caused harm between February 15 to June 30, 2020 – special retroactive provision to February allows for laid off workers to be brought back now
The Loan can be for a maximum of 10 years, at a maximum of 4% interest.
6-month payment deferral, with a deferral possibility up to a year for ongoing obligations
Loans may be fully or partially forgiven. Generally speaking, as long as employers continue paying employees at normal levels during the 8 weeks following the origination of the loan, the amount they spend on payroll costs (excluding costs for any compensation above $100,000 annually), mortgage interest, rent payments and utility payments can be combined, and that portion of the loan can be forgiven. 
The loan forgiveness cannot exceed the principal balance of the loan, the  amount of the loan forgiveness will be reduced if the average number of full-time equivalent (FTE) employees during the 8-week forgiveness period is less than the average number of FTE employees during the same periods in 2019.
Applies to traditional small businesses, IRS 501(c)(3) entities, and other businesses having less than 500 employees (“affiliation” rules do not apply)
The loans are subject to additional limitations and restrictions that can be found on the website above and from the SBA.
B.    The Emergency Economic Grant Program
The EEGP provides eligible companies affected by COVID-19 losses with up to $10,000 as an emergency grant (not a loan), which must be used for:
Providing sick leave to employees unable to work due to COVID-19;
Maintaining payroll to retain employees during business interruption;
Meeting increased costs to obtain materials unavailable from the applicant’s original source due to supply chain interruptions; or
Repaying obligations that cannot be met due to revenue losses.
To obtain the grant, the company must apply for an SBA Economic Injury Disaster Loan (EIDL) and request an advance against the loan funds which will be made available 3 days later, and is available whether or not the EIDL is approved.
C.    Small Business Debt Relief Program
The DRP provides immediate relief to small businesses with non-disaster SBA, with the SBA covered all loan payments for 6 months. This relief will also be available to new borrowers who take out loans within 6 months of the CARES Act becoming law.
D.    Counseling and Training
Local Small Business Development Centers (SBDC), Women’s Business Center (WBC), and SCORE mentorship chapters (and related entities) will receive additional funds to expand their services.  Counseling is free; training may have a limited cost. 

There is a separate goal to create a “joint platform” to help consolidate information and resources related to COVID-19 questions and concerns. Additional resources include the SBA ( and the Minority Business Development Agency’s Business Centers (MBDCs – not every state/local jurisdiction has one).
II.    Additional Assistance for Mid-Size Firms.
For midsize companies (between 500 and 10,000 employees), who often would not qualify for assistance from the SBA, and would also not qualify for the PPP, the CARES Act also provides important areas of relief if certain conditions and criteria are met. 

Direct loans will be available under the Emergency Relief and Taxpayer (“ERT”) portion of the Act, upon a “good-faith certification” that the company will comply with requirements, such as:
The intent to restore at least 90% of the company’s workforce, as it existed as of February 1, 2020, including compensation and benefits as they existed on that date. This restoration must be accomplished within 4 months after Health and Human Services declares an end to the COVID-19 health emergency;
A promise not to outsource jobs for the length of the loan (which cannot exceed 5 years), and for 2 years after the loan repayment date;
A representation that it will not “abrogate” an existing collective bargaining agreement for the term of the loan, and for 2 years after the loan repayment date.
The employer will remain “neutral in any union organizing effort for the term of the loan.”
For companies interested in such loans, the Act states that principal and interest payment obligations can be stayed for up to 6 months, with an interest rate no higher than 2% annually
The importance of the accuracy of the required certifications cannot be understated.  The knowing submission of a false statement in support of the loan request may expose the company and its directors and officers to civil and criminal liability under the False Claims Act and other federal laws.
III.    Employee Retention Tax Credit
A tax incentive is provided for eligible employers who retain their employees despite the COVID-19 crisis. An employer is eligible if (1) its operations are fully or partially suspended by a government order relating to COVID-19, or (2) gross receipts during a calendar quarter are 50% less than the gross receipts for the same quarter in 2019. For eligible employers, the tax credit is calculated by multiplying 6.2% (the employers’ Social Security tax percentage) by the qualified quarterly wages paid to each employee after March 12, 2020 and before January 1, 2021 (which cannot exceed $10,000 for all quarters), which is then subject to the following provisions:
For employers with more than 100 employees in 2019, the qualified wages are limited to only those wages paid by the employer during the period of time when the business was shut down, and only to those employees who are not providing services.
For employers with 100 or less employees in 2019,  the qualified wages include both the period of time the business was shut down, and the period of time suffered the requisite 50% decline in business, and applies whether or not the employee was provided services.
This tax credit may be reduced or eliminated if the employer is already receiving tax credits under certain other programs.
IV.    Expansion of Unemployment Benefits
The ACT provides for an estimated $260 billion in expanded unemployment insurance benefits to unemployed/underemployed workers impacted by COVID-19. Primary benefits include:
Extends an additional 13 weeks of eligibility for benefits; 
Makes unemployment compensation available for those who would not otherwise be eligible for unemployment benefits, including those with limited work histories or those who have exhausted their state unemployment compensation benefits. 
Eligible or “covered individuals” include anyone providing a self-certification that they are otherwise able and available to work, and now includes individuals who are self-employed, are seeking part-time employment, or who do not otherwise have a sufficient work history, as long as they are not (a) working remotely for pay, or are on paid sick leave or paid family medical leave (FMLA or similar statutes). If the individual falls within these guidelines, they must also show that they are unemployed/underemployed because of at least one of the following circumstances: 
The individual has been diagnosed with COVID-19, or is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
A member of the individual’s household has been diagnosed with COVID-19; 
The individual is providing care for a family member or household member who has been diagnosed with COVID-19; 
The individual is the primary caregiver for another person in the household who is unable to attend school or another facility as a direct result of COVID-19 and such school or facility care is required for the individual to work; 
The individual is unable to reach their place of employment because of a quarantine imposed as a direct result of COVID-19; 
The individual is unable to reach their place of employment because a health care provider has advised the individual to self-quarantine due to COVID-19 concerns; 
The individual was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of COVID-19; 
The individual has become the breadwinner or major support for a household because the head of household has died as a direct result of COVID-19; 
The individual is forced to quit their job as a direct result of COVID-19; or 
The individual’s place of employment is closed as a direct result of COVID-19. 
For an individual meeting all of these standards and requirements, they may then be entitled to seek up to:
An additional $600 payment per week for the first four months (ending on or before July 31, 2020), in addition to the amount that may be additionally owed under any state law, and an additional 13 weeks of unemployment benefits if they remain unemployed after their state unemployment benefits are exhausted (ending on or before December 31, 2020); but
Total assistance shall not exceed 39 weeks, unless otherwise extended
The Secretary of Labor is empowered to issue operating instructions or other guidance necessary to implement these provisions, with States also specifically authorized to waive the normal first week benefit waiting period, so that eligible individuals can immediately seek benefits.
V.    Special Limits on Executive Compensation 
As a condition of receiving emergency financing from the Secretary of the Treasury under CARES, certain airline industry companies (airline, air cargo, and ancillary airline service industries, including those essential to national security) must agree to limit their executive compensation. For the company to remain eligible for financial support services, no officer or employee whose 2019 compensation exceeded $425,000 (excluding certain collectively bargained employees) may not (i) receive compensation greater than the amount received in 2019 over a 12-month period, or (ii) receive severance pay or benefits upon termination which exceed two times the total compensation received in 2019. 

Additionally, an officer or employee who received total compensation in 2019 exceeding $3,000,000 may not receive compensation greater than $2,000,000, plus 50 percent of the amount greater than $3,000,000 received in 2019. 
VI.    Retirement Funds
For qualifying individuals adversely affected by COVID-19, the CARES Act makes it easier—and less financially burdensome—to access early distributions or loans from their retirement funds.  A qualifying individual includes:
An individual diagnosed with SRS-COV-2 or COVID-19 by a test approved by the CDC,
An individual whose spouse/dependent is diagnosed with one of these diseases, or
Who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, or having work hours reduced, or being unable to work due to lack of childcare.
Qualifying individuals may then:
Withdraw up to $100,000, without an early withdrawal (10%) penalty, from an IRA or 401k, and income taxes on the withdrawn amount can be avoided if it is repaid within 3 years; or
Obtain a nontaxable loan from the IRA/401k, within 180 days of CARE’s enactment, up to $100,000.
In addition, the required minimum distributions from retirement accounts normally imposed on individuals beginning at age 72 have been waived. 
VII.     ERISA Plans 
For qualified employer plans governed by ERISA, the CARES Act changes the rules for certain disclosure obligations, distributions, and contributions. These include:
Deadlines for benefit plans and their sponsors to file required submissions, and/or take certain actions, can now be extended for up to 1 year
The contribution date(s) for single-employer defined benefit plan contributions otherwise owed in 2020 are extended to January 1, 2021.
VIII.    General Labor Provisions
A.    FMLAA and EPSLA Additional Provisions
The CARES Act makes clear that the caps within the Emergency Paid Sick Leave Act (EPSLA) and the Federal and Medical Leave Amendment Act (FMLAA) are per employee. As a result:
Under FMLAA, an employer shall not pay more than $200 per day, and $10,000 in the aggregate, for each eligible employee; and
Under EPSLA, an employee shall not pay more than (i) $511 per day, and $5,110 in aggregate, for each eligible employee for reasons 1-3 of EPSLA; and (ii) $200 per day, and $2,000 in aggregate, for each eligible employee for reasons 4-6 of EPSLA 
For rehired employees, ESPLA applies to an individual who was laid off by the employer on or after March 1,2020, and after the employee had worked for the employer for not less than 30 of the last 60 calendar days prior to his/her layoff and rehiring dates.
B.    Federal Contractor Special Protections
The CARES Act also included specific relief for federal contractors whose employees (1) cannot perform work on a “site that has been approved by the Federal Government ” during the COVID-19 public health emergency due to facility closures or other restrictions and (2) cannot telework because their job duties cannot be performed remotely. 

The Act authorizes federal agencies to use any available funds to modify affected contracts – without separate or consideration from the contractors – to reimburse the contractors for paid leave, including sick leave, that a contractor provides to its employees or subcontractors in order to keep them in a ready and available state.  The authorized reimbursements may cover an average of 40 hours per week, “at the minimum applicable contract billing rates.”  The maximum reimbursement must be reduced, however, by the amount of any credit the contractor is allowed pursuant to Division G (“Tax Credits for Paid Sick and Paid Family and Medical Leave”) of the recently enacted Families First Coronavirus Response Act, and by any other applicable credits that the contractor is allowed under the CARES Act. 
C.    Additional Tax Credit Against Tax Deposits
Employers are also entitled to receive a special tax credit that can be applied, in accordance with forms and instructions available from the Secretary of Labor, against required tax deposits, with any penalties waived under the Internal Revenue Code related to the use of the credit against such amounts. 
**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you. We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests. We cannot respond to all unsolicited requests for representation. If you need legal advice, please contact an attorney and enter into a valid, written attorney- client relationship. See also our terms of service for this website.**