On Friday, the President signed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, a $2.2 trillion stimulus package designed to provide financial relief across many sectors of the economy. This latest emergency COVID-19 legislation allocates $350 billion for small business loans for the purpose of meeting payroll costs (Paycheck Protection Program).
A key feature of the CARES Act’s Paycheck Protection Program (“PPP”) is loan forgiveness. Under the program, eligible employers may obtain loans to cover payroll costs, but must commit to maintaining an average monthly number of full-time equivalent employees equal to or above the average monthly number of employees over the prior one-year period. The forgiveness amount will be reduced, however, if the number of employees is reduced. Likewise, the forgiveness amount will fall if wages are reduced by more than 25%.
Small businesses seeking to participate in the Paycheck Protection Program should check with their local U.S. Small Business Administration office, a directory of which can be found here. Businesses will also want to consult with their bank or business lenders.
The PPP is limited to employers with 500 or less employees. Employers near this threshold, who are interested in the Paycheck Protection Program, will want to consider the impact of invoking the Integrated Enterprise or other exemption under the recently passed Families First Coronavirus Response Act (“FFCRA”). For more information on the FFCRA, please see our recent posts here and here.
Additional information on relief for small businesses related to the COVID-19 pandemic can be found at the U.S. Small Business Administration guidance and loan resources webpage.
We will be updating our blog as more information becomes available. You can also find information for other COVID-19 employment issues at the SHLC Coronavirus Pandemic Employer Resources page, at https://suttonhague.com/coronavirus/. We also have downloadable webinars COVID-19 employment law issues at our Calnevalaw.com website.