401.521.4LAW (4529)
**Last updated April 2, 2020**
During days like these with so many unknowns and unreliable information floating around the internet, it can feel next to impossible to find solutions and resources available to small businesses. Munro-Delotto Law, LLC has compiled the following information in an effort to help small businesses find the resources they need to stay afloat in this period of uncertainty. As part of your Rhode Island and Connecticut communities, we’re here to help.
NOTE: This post discusses Connecticut state and federal assistance available to small businesses in the U.S. as well as new laws and changes in existing laws and regulations as they relate to sick leave, unemployment, and other topics related to small businesses.While this post discusses federal law, it is primarily geared toward Connecticut-based businesses. A post geared toward Rhode Island businesses is also posted on our “Blog” page.
Munro-Delotto Law, LLC is combining information from several sources, some with new and evolving laws, so we will do our best to summarize the laws accurately as applied to COVID-19. However, the information provided is for educational purposes only and does not substitute for competent legal advice. We reserve the right to modify, update, and do not warranty the information provided.
On March 16, 2019, the U.S. Small Business Association approved Connecticut Governor Lamont’s request for small business disaster relief. Small businesses can now apply for a low-interest loan of up to $2 million to help meet business-related expenses amid the COVID-19 outbreak.
Currently, the federal government is looking into a combination of loans, direct checks (individual economic stimulus package), and liquidity for small businesses. Deferment of IRS payments is also a possibility, where small businesses may be able to defer up to $10 million in taxes. For the most up to date information on this, check with your accountant or tax attorney. We are hopeful for more information to come, and will keep this page updated with the latest federal developments.
The Paycheck Protection Program (PPP) is a new loan program for small businesses. The program will be administered by the Small Business Administration (SBA), which will fully guarantee loans provided by approved lenders to eligible entities.
Eligibility: Small businesses (fewer than 500 employees) impacted by the pandemic and economic downturn to make payroll and cover other expenses.
Expense coverage period: From February 15 to June 30. Businesses must have been in operation, with employees, on February 15, 2020.
Maximum Loan Amount: PPP loans will be provided in amounts approximately equivalent to ten weeks of payroll costs. Loan amounts are determined based on 250% of average monthly payroll costs, taking into consideration average wages paid during a one-year period preceding the loan, up to a limit of $10 million. There are alternate periods for seasonal employers and those not in business in the prior year. It can cover employees making up to $100,000 per year.
Loan Uses: Payroll costs; Costs related to the continuation of group health care benefits during periods of paid sick, medical or family leave, and insurance premiums; Employee compensation; Payments of interest on any mortgage obligation; Rent; Utilities; Interest on any other debt obligations incurred before February 15, 2020.
Loan forgiveness: Up to 100 percent of the PPP loan is forgivable (to the extent that employers maintain specified employment and wage levels), and the loan amounts forgiven are excluded from taxable income for federal income tax purposes. The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (however, the SBA has announced that due to likely “high subscription,” at least 75 percent of the forgiven amount must have been used for payroll).
To determine the amount that will be forgiven, the average number of full-time equivalent employees per month will be compared to either the prior-year period or January through February of 2020, with alternate calculations for other circumstances such as seasonal, and comparisons for wages. Repayment of a proportionate part of the loan may be required if earnings of any employee is reduced by 25% or more compared to the most recent full quarter of employment before the covered period. In addition, reductions in the number of employees or compensation occurring between February 15 and April 26, 2020 will not be considered in reducing the loan forgiveness amount if reversed by June 30, 2020.
Applying for PPP Loans: Employers can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. Employers should consult with your local lender as to whether it is participating in the program.
See https://sbshrs.adpinfo.com/covid19-small-business-loans for more information.
Small business owners can find out more information about the SBA’s Economic Injury Disaster loans at SBA.gov/Disaster and can apply for these loans here: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources.
SBA Economic Injury (EI) Disaster Loans are offering up to $10,000.00 advance. If you have already applied, the SBA advises to re-apply using the new streamlined form which allows a request for the advance. Streamlined application: https://covid19relief.sba.gov/#/
The program will be administered by the Small Business Administration (SBA), which will fully guarantee loans provided by approved lenders to eligible entities. The loan advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application.
Additional Details:
The U.S. Small Business Administration (SBA) is offering low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the coronavirus 2019 (COVID-19). Here are some facts about the loans:
General EIDL Approval Criteria:
Advances/Grants:
An eligible business that applies for an EIDL can also obtain an emergency advance of up to $10,000 within three days of when the SBA receives the EIDL application. To access the advance, businesses must first apply for an EIDL and then request the advance. The advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.
Until December 31, 2020, the following EIDL rules are waived:
Other Rules that May Be Waived:
The SBA also has the authority, but isn’t required to:
Interplay with PPP:
An employer that applies for an EIDL (regardless of whether related to COVID-19) may also apply for a PPP loan, so long as both loans are not used for the same purpose or are otherwise duplicative. An employer can also refinance an existing EIDL into a PPP loan by adding the amount of an EIDL to the sum of the payroll costs. However, any advance amount received under the EIDL Grant Program would be subtracted from the amount forgiven of the PPP loan.
Small businesses should work with an experienced financial advisor to carefully assess all of the available assistance programs to determine the interplay and best option for their specific circumstances. More information is available here. For questions, contact the SBA disaster assistance customer service center at 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail disastercustomerservice@sba.gov.
Businesses and nonprofit organizations with fewer than 500 employees, sole proprietorships and independent contractors that have suffered economic injury due to COVID-19 may be eligible for a loan under the existing SBA “Express” Loans program. The SBA Express Loans program helps small businesses obtain loans in a faster and easier way (usually within 36 hours). These loans provide businesses with revolving lines of credit for working capital purposes.
The CARES Act expands the allowable uses for loans under this program to permit payroll support, including paid sick leave, supply chain disruptions, employee salaries, mortgage payments and other debt obligations, to provide immediate access to funds for affected small businesses. The CARES Act increases the maximum loan amount for SBA Express loans from $350,000 to $1,000,000, until December 31, 2020. The CARES Act also reduces the cost of participation in the program by providing fee waivers, an automatic deferment of payments for up to one year, and no prepayment penalties.
For
small businesses with current non-disaster SBA loans, under the CARES Act, the SBA will cover all loan
payments on these loans, including principal, interest and fees, for six
months. This relief will also be available to new borrowers who take out loans
within six months of March 27, 2020. PPP Loans and EIDLs are not eligible for
this debt-relief program.
The loans eligible for this relief include those guaranteed by the SBA, such as
the SBA Business Loan Program (including the Community Advantage Pilot Program,
but excluding PPP Loans) or Title V of the Small Business Investment Act. Loans
made by an intermediary to a small business using loans or grants received
under the SBA’s Microloan Program are also eligible.
Business helping businesses: Microsoft is offering Microsoft 365, specifically the E1 Trial license, available at a reduced fee or free for businesses for six months. Microsoft is making this E1 Trial license available in response to the increased need for employees to work from home in response to the COVID-19 (coronavirus) outbreak. To learn what’s available with an E1 license, visit https://www.microsoft.com/en-us/microsoft-365/business/office-365-enterprise-e1-business-software?rtc=1&activetab=pivot%3aoverviewtab. Microsoft regularly updates and answers most frequently asked questions about this offer here: https://docs.microsoft.com/en-us/microsoftteams/faq-support-remote-workforce.
In addition, Cox Communications and Verizon are both offering relief for residential and small business customers in response to COVID-19. To learn more about Cox Communications’ program, visit https://cc1d0ced-f6cd-4b0f-b40f-b3800c378993.filesusr.com/ugd/b28b67_d8daaa27e4704dbba62f0b1d5f122101.pdf. You can find out more information on Verizon’s relief here: https://cc1d0ced-f6cd-4b0f-b40f-b3800c378993.filesusr.com/ugd/b28b67_368f35ba4d804bc59976f907577f2ed4.pdf.
**April 2, 2020 Update:
Please note that DECD is not accepting applications for the Connecticut Recovery Bridge Loan Program at this time. For those that have already submitted an application, additional documentation can be sent within seven days of submittal. Incomplete applications will not be considered for funding.
We encourage businesses seeking financial assistance dealing with the effects of the COVID-19 pandemic to consider the following resources:
Small businesses with questions about the SBA loan program or other state-level assistance can call 860-500-2300 to speak directly to a DECD representative. Businesses can also stay informed on news and guidance related to COVID-19 and its impact on Connecticut by visiting the state’s dedicated coronavirus website, https://portal.ct.gov/coronavirus .
The CT Department of Economic and Community Development is launching the COVID-19 Business Emergency Response Unit to aid businesses in economic recovery and assist in navigating existing resources and developing new ones. Currently, one possible resource in development is the use of small business bridge loans at a lower percentage rate than SBA loans for the short term (3-12 months) with a cap on the dollar amount. Rollout is expected the week of March 24, and details could change in the meantime.
**AS OF APRIL 2, 2020 IT APPEARS THIS PROGRAM IS NO LONGER AVAILABLE**
To provide emergency cash flow relief to small businesses and nonprofits negatively impacted by the coronavirus, Connecticut is now offering qualifying organizations with 100 or fewer employees access to no-interest loans to qualifying businesses or nonprofit organization loans of up to $75,000 or three months of operating expenses (whichever is lesser). Must be in good standing with the Department of Revenue Services (DRS) & DECD, been profitable prior to March 10, 2020— with no adverse personal credit reports 60 days past due the past six months. Not applicable to these businesses: real estate, multi-level marketing, adult entertainment, cannabis or firearms; nor be a state elected public official or state employee.
Terms
Loan maximum of (a) $75,000 or (b) three months operating expenses, whichever is less, 0% interest rate for 12-month term (with 6-month extension available per request), and Personal guarantee and credit score required.
How to Apply
To apply for the Connecticut Recovery Bridge Loan Program, applicants must complete an application. Go to: https://portal.ct.gov/DECD/Content/Coronavirus-Business-Recovery/Emergency-Bridge-Loan-Application-Form
The following additional information will also be required:
Program Process
Upon completing the application and obtaining the required documentation, organizations can submit the information online, via email to decdctrecovery@ct.gov. After the underwriting and due diligence process, if your loan application is approved DECD will issue a LOI with terms, have you execute a Standard Assistance Agreement and complete ACH paperwork so that funds can be transferred by wire. For questions go to: View Frequently Asked Questions at https://portal.ct.gov/DECD/Content/Coronavirus-Business-Recovery/CT-Recovery-Bridge-Loan-Program/FAQ or contact: Express Hotline at (860) 500-2333 or via email at decdctrecovery@ct.gov. Email preferred due to high volume on phone lines.
Additionally, the Department of Banking issued guidance to state-chartered banks and credit unions. Requests have been made by the state to eliminate interest until June 30 of this year, but there is currently no pending or active legislation at this time. We will keep monitoring progress on this.
Recognizing that many people’s incomes are affected at this time when most businesses have been forced to close, state Attorney General William Tong called for a moratorium on utilities under the Public Utilities Regulatory Authority (PURA), prohibiting utility companies from shutting off residential utility services if customers are unable to pay their bills. Additionally, as of Wednesday, March 18, Connecticut – and 13 other states, DC, and several counties around the US – has put an eviction freeze in place until further notice. More states and counties are instituting these freezes daily. Note that each order varies in length of time, rental property owner’s ability to file during the freeze, and whether there are exceptions in emergency situations like lockouts or habitability issues.
Like these residential policies, some business policies have been modified during this time. One such policy is the allowance as of March 20 for restaurants with certain types of liquor permits to sell alcohol with takeout orders. Restaurant owners and management should ensure that certain policies are followed, such as verifying that the person picking up the order is of legal drinking age and is not intoxicated. Additionally, the alcohol must be served in sealed containers as received by the wholesaler, and orders must include food. Specific details on what permissions are allowed for different permit holders are available here: https://portal.ct.gov/-/media/DCP/LIQUOR_CONTROL/Latest%20Liquor%20News%20Alerts/Implementation%20Order-%20DCP%20Final%20(003) .
Required paid sick leave: consult the (federal) Family Medical Leave Act (as amended by the Families First Coronavirus Response Act passed in March 2020 – see below) and the state specific Connecticut Paid Sick Leave (“PSL”) Law, Connecticut General Statute 31-57r.
Our current understanding of the Families First Coronavirus Response Act, a federal law (not Connecticut-specific) is as follows:
TIME WORKING TO QUALIFY: An employee who has been employed for at least 30 calendar days. Note that this is a much lower threshold than the 12 month/1,250 hour tenure requirement that otherwise applies to FMLA leave.
SIZE OF BUSINESS TO QUALIFY: Private employers with fewer than 500 employees, and most public employers. For smaller employers, this bill could introduce FMLA coverage to their workplace. It is unclear if there are exclusions for emergency responders and/or businesses with less than 50 employees where the requirements would jeopardize that business as a going concern; traditional FMLA did not apply unless 50 or more employees – Munro-Delotto Law, LLC will continue looking into this exclusion.
April 2, 2020 UPDATE ON EXEMPTIONS: The Department of Labor also has the authority to issue regulations exempting employers with fewer than 50 employees from certain aspects of the sick leave requirement if that requirement would jeopardize the viability of the business. Thus, exemptions should apply as they do with the existing FMLA – make sure to document why your business with bewer than 50 employees meets the criteria set forth by the Department, which will be addressed in more detail in forthcoming regulations. Specifically, the guidance states the following about exemptions:
An employer, including a religious or nonprofit organization, with fewer than 50 employees (small business) is exempt from providing (a) paid sick leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons and (b) expanded family and medical leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons when doing so would jeopardize the viability of the small business as a going concern. A small business may claim this exemption if an authorized officer of the business has determined that:
A small business is exempt from certain paid sick leave and expanded family and medical leave requirements if providing an employee such leave would jeopardize the viability of the business as a going concern. This means a small business is exempt from mandated paid sick leave or expanded family and medical leave requirements only if the:
QUALIFYING CONDITIONS FOR PAID SICK LEAVE: – paid leave seems to only cover COVID-19-related actual medical or caregiver leave BUT covers every employee caring for a child of the age needing care if school/childcare are unavailable – Munro-Delotto Law, LLC will be verifying this:
The Act requires emergency sick leave for employees who cannot work for any of the following reasons:
A. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
B. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
C. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
D. The employee is caring for an individual who is either (1) subject to a Federal, State, or local quarantine or isolation order related to COVID-19 or (2) has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
E. The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the childcare provider of such son or daughter is unavailable, due to COVID-19 precautions;
F. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
REQUIRES JOB PROTECTION: The FMLA’s job restoration requirements generally apply, with limited flexibility for employers with fewer than 25 employees – 25 employees and more require job restoration.
REQUIRES PAID FAMILY LEAVE AFTER AN INITIAL 10 DAYS PAID SICK LEAVE: Paid Leave Requirement: Unlike FMLA leave under the 1992 Act, this Act provides for paid leave for various durations for each of the new qualifying conditions. In more detail:
The first 10 days of leave is paid sick leave paid at 100% for conditions (A), (B), or (C) above and two-thirds of regular hourly rate or salary for qualifying conditions ((D), (E), or (F).
After 10 days of sick leave have been taken (where applicable), the employer must provide paid family leave for an additional 10 weeks for qualifying conditions (including children being out of school – see duration below). Paid leave must be an amount that is not less than two-thirds an employee’s regular rate of pay for the number of hours the employee would otherwise be normally scheduled to work. Subject to the specific conditions of forthcoming Treasury Department regulations, 100% of the emergency FMLA and paid sick leave wages may be reimbursed via payroll tax credits – Munro-Delotto Law, LLC is looking into the specifics.
PAYRATES: 100% of regular hourly rate or salary for the duration where the qualifying condition is (A), (B), or (C) above. 2/3rds of regular hourly rate or salary for the duration where qualifying condition is (D), (E), or (F). Family leave is two-thirds normal rate. Tipped workers likely minimum wage.
Pay Rate
For leave reasons (A), (B), or (C): employees taking leave shall be paid at either their regular rate or the applicable minimum wage, whichever is higher, up to $511 per day and $5,110 in the aggregate (over a 2-week period).
For leave reasons (D) or (F): employees taking leave shall be paid at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $2,000 in the aggregate (over a 2-week period).
For leave reason (E): employees taking leave shall be paid at two-thirds their regular rate or two-thirds the applicable minimum wage, whichever is higher, up to $200 per day and $12,000 in the aggregate (over a 12-week period—two weeks of paid sick leave followed by up to 10 weeks of paid expanded family and medical leave).
Part Time: Part-time workers are paid the amount they typically earn in a two-week period.
Duration of Leave
For reasons (A)-(D) and (F): A full-time employee is eligible for up to 80 hours of leave, and a part-time employee is eligible for the number of hours of leave that the employee works on average over a two-week period.
For reason (E): A full-time employee is eligible for up to 12 weeks of leave at 40 hours a week, and a part-time employee is eligible for leave for the number of hours that the employee is normally scheduled to work over that period.
No Carryover: Emergency paid sick time provided by the Act does not carry over from one year to the next.
No Payout at Termination: Paid sick time not used at the time of an employee’s termination, resignation, or retirement does not need to be paid out to the employee.
May be Used Before Other Paid Leave: Employers may not require an employee to use other paid leave provided by the employer to the employee before the employee uses paid sick time provided for by the Act.
Expanded Definition of family members to include: foster, adoptive, step, parent of domestic partner, parental in-laws, guardians, and those who stood in loco parentis.
Effective Date: The Act takes effect April 1, 2020 and applies to leave taken between April 1, 2020 and December 31, 2020.
For business owners and those Self-employed (Applies to all US states): According to the New York Times, people who are self-employed or otherwise own a small business can also receive paid leave, assuming they pay taxes. According to the New York Times, self-employed people should calculate their average daily self-employment income for the year, then claim the amount they take as a tax credit (they can reduce their estimated quarterly tax payments in the meantime). Check with your accountant however as our accountant could not yet confirm this development.
NEW April 2, 2020 Update:
UPDATED ADDITIONAL INFORMATION FROM NEW GUIDANCES – FULL GUIDANCE AVAILABLE AT: https://www.dol.gov/agencies/whd/pandemic/ffcra-questions
Interplay between New FMLA (paid) and Normal Unpaid FMLA Leave: Guidance states that an employee is eligible for paid sick leave regardless of prior FMLA taken through the year. However, for employers covered by FMLA prior to April 1, 2020, if the employee has taken prior FMLA (unpaid leave) the New FMLA paid leave for the family leave provision (i.e. children home from school) is reduced by the amount of time already taken. If the employer only became covered by FMLA on or after April 1, 2020, then no reductions for prior FMLA leave would apply. Remember also, the Emergency Paid Sick Leave under the EFMLEA (2 weeks sick pay) potentially applies to all employees but the expanded family leave (the longest coverage time – up to 12 weeks – applies only in situations where a child is home from school or daycare).
Interplay between new Federal Paid Sick Leave and State Paid Sick Leave laws: In short, having and taking one, either the Emergency Family and Medical Leave Expansion Act, or applicable state paid leave, will not disqualify the employee from qualifying for and taking the other.
Calculating Part-Time employee hours for purposes of sick leave or expanded family/medical leave: Use the average number of work hours in a two-week period and that is the paid sick leave time for two weeks – use that calculation for expanded family leave as well. First try to use the hours normally schedule but if unknown or varied, use six-moth average; if that is not possible as the employee has not been there for six months, use either the agreed upon hours at hire or an average for less time that is reasonable. Remember, employee does not qualify `for EXPANDED PAID FAMILY/MEDICAL LEAVE if not employed for 30 days prior to the leave but DOES qualify for the two weeks paid sick leave because it covers employees regardless of length of employment.
Overtime: This amount must also be paid if the employee normally is scheduled to work more than 40 hours per week HOWEVER since the cap is 80 hours of sick leave (and there are caps on medical leave as well), this would just mean that the overtime hours would be paid the first week with less than 40 ours the next week for sick leave. For illustration, if the employee works 60 hours per week typically, you would pay 60 hours the first week, but since sick leave is capped at 80 hours, the second week they would only be paid 20 hours at the payment rate as determined by the act. If overtime hours are varied, like the part time employee, use an average or other reasonable method stated above.
Tipped, Commissioned, Piece-rate Employees: These must be factored into calculating pay – so pay is the average regular pay (including tips, commission, etc) for up to six months.
Can one take both types of leave: You may be eligible for both types of leave, but only for a total of twelve weeks of paid leave. You may take both paid sick leave and expanded family and medical leave to care for your child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons. The Emergency Paid Sick Leave Act provides for an initial two weeks of paid leave. This period thus covers the first ten workdays of expanded family and medical leave, which are otherwise unpaid under the Emergency and Family Medical Leave Expansion Act unless you elect to use existing vacation, personal, or medical or sick leave under your employer’s policy. After the first ten workdays have elapsed, you will receive 2/3 of your regular rate of pay for the hours you would have been scheduled to work in the subsequent ten weeks under the Emergency and Family Medical Leave Expansion Act.
Please note that you can only receive the additional ten weeks of expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act for leave to care for your child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons.
What documents do employers need if an employee takes paid
leave: You must provide to your employer documentation in support of
your paid sick leave as specified in applicable IRS forms, instructions, and
information.
Your employer may also require you to provide additional in
support of your expanded family and medical leave taken to care for your child
whose school or place of care is closed, or child care provider is unavailable,
due to COVID-19-related reasons. For example, this may include a notice of
closure or unavailability from your child’s school, place of care, or child
care provider, including a notice that may have been posted on a government,
school, or day care website, published in a newspaper, or emailed to you from
an employee or official of the school, place of care, or child care provider.
Your employer must retain this notice or documentation in support of expanded
family and medical leave, including while you may be taking unpaid leave that
runs concurrently with paid sick leave if taken for the same reason.
Please also note that all existing certification requirements
under the FMLA remain in effect if you are taking leave for one of the existing
qualifying reasons under the FMLA. For example, if you are taking leave beyond
the two weeks of emergency paid sick leave because your medical condition for
COVID-19-related reasons rises to the level of a serious health condition, you
must continue to provide medical certifications under the FMLA if required by your employer.
Can Leave Be Taken Intermittently: Yes. For more information see questions 20/21/22 at Federal Guidance (https://www.dol.gov/agencies/whd/pandemic/ffcra-questions)
If the business is closed can employees take paid leave? No, if closed after April 1, 2020 which is the effective date but employees of a closed business are eligible for unemployment. No, if furloughed after April 1, 2020. However, employees would be eligible for unemployment.
Reduction of hours: If reduced by company paid leave cannot supplement (but unemployment can). But if an employee cannot work their full schedule due to a qualifying reason, then hours up to the work schedule worked prior to the leave can be supplemented by paid leave.
Interplay between Unemployment and Paid Leave: An employee, GENERALLY, is either on one or the other and cannot be on both. However, check with the state for the interplay as the Federal Government has provided some flexibility to states.
Interplay of Employer-Provided Paid Leave and FFCRA Paid Leave: The employee can choose to use existing paid vacation/PTO time instead but the employer must agree. But the employer cannot force the employee to take employer-provided leave instead of FFCRA leave if they do not agree.
UPDATE: PAID LEAVE TAX CREDIT
Under the law, employers with fewer than 500 employees are allowed a credit against employer Social Security tax liability equal to 100 percent of the qualified sick leave wages paid by the employer, subject to the caps discussed above. The credit is increased by certain specified health expenses (such as, employer-paid health plan premiums) that are excluded from employees’ income.
The tax credit effectively reduces the amount of federal employment taxes that must be deposited with the IRS, usually within a few days of the payroll date. This is intended to provide the funds needed to pay sick and family leave benefits under the law. However, in some cases, such as complete closure of a business, the Treasury Department and IRS will process claims for advance payments of the tax credit.
Because the credit is fully refundable, employers will receive reimbursement of the amount paid, subject to the caps, even if their tax liability is less than the amount paid out in the required leave. Emergency paid sick leave and PHEL wages paid are also exempt from Social Security taxes otherwise imposed on the employer.
Details on the Connecticut PSL Law, which has been in place since before the COVID-19 outbreak, are as follows:
Connecticut is one of a few states that requires employers to give paid sick days to employees.
In Connecticut, employers with 50 or more employees must provide paid sick leave to workers that are “Service Workers.” BE AWARE THAT THIS IS A BROAD DEFINITION – SEE JOB CATEGORIES BELOW.
These employees accrue one hour of paid sick leave for every 40 hours they work and may accrue up to 40 hours off per year (ACCRUES AT 1 HOUR PER EVERY 40 HOURS WORKED) and applies to part time.
Employees must be hourly/non-exempt (but temporary and per diem do not qualify). They paid time may use their time off for their own illnesses or to care for an ailing family member.
Service worker is entitled to use accrued paid sick leave upon completion of 680 hours of employment from the date of hire (if the employee works at least 10 hours per week av. prior quarter).
Hours (40) can be carried over per year but employee can only use 40 hours per year no matter how many accrued. The employee can be paid out of accrued sick time yearly rather than allowed to carry over but employer is not required to pay out accrued leave if it remains unused upon termination.
Other paid leave than can count toward compliance with the law may include, but not be limited to, paid vacation, personal days or paid time off.
Service workers who earn tip credit – because hourly rate is lower than minimum wage, would likely be paid minimum wage for any paid sick leave hours used; all others normal hourly wages during sick leave.
Manufacturing and non-profit (and potentially other) exemptions apply.
Break in service rules (if employee leaves then returns). With layoffs it is unclear if the accrued leave is gone upon re-employment or if it remains – normally with a break in service accrued leave starts over upon re-employment but with mass layoffs it is unclear how this will work.
Anti-Discrimination and Anti-Retaliation provisions and implied job protection.
Questions? Please call the Wage and Workplace Standards Division at (860) 263-6790 or the Office of Program Policy at (860) 263-6755. If you would like to email your questions, please contact: jennifer.devine@ct.gov or heidi.lane@ct.gov or contact Munro-Delotto Law, LLC.
Under the PSL, “Service workers” are defined as:Food Service Managers, Medical and Health Services Managers, Social Workers, Social and Human Service Assistants, Community Health Workers, Community and Social Service Specialists, Librarians, Pharmacists, Physician Assistants, Therapists,Registered Nurses, Nurse Anesthetists, Nurse Midwives, Nurse Practitioners, Dental Hygienists, Radiologic Technologists, Emergency Medical Technicians and Paramedics, Health Practitioner Support Technologists, and Technicians, Licensed Practical and Licensed Vocational Nurses, Home Health Aides, Nursing Aides, Orderlies, and Attendants, Psychiatric Aides, Dental Assistants, Medical Assistants, Security Guards,Crossing Guards,Building Cleaning Workers, Ushers, Lobby Attendants, and Ticket Takers, Barbers, Hairdressers, Hairstylists, and Cosmetologists, Baggage Porters, Bellhops, and Concierges, Child Care Workers, Personal Care Aides, First-Line Supervisors of Sales Workers, Cashiers, Counter and Rental Clerks, Retail Salespersons, Tellers, Hotel, Motel, and Resort Desk Clerks, Supervisors of Food Preparation and Serving Workers, Cooks, Food Preparation Workers, Bartenders, Fast Food and Counter Workers, Waiters and Waitresses, Food Servers (Nonrestaurant), Dining Room and Cafeteria Attendants and Bartender Helpers, Dishwashers, Hosts and Hostesses – (Restaurant, Lounge, and Coffee Shop), Miscellaneous Food Preparation and Serving Related Workers, Janitors and Cleaners (Except Maids and Housekeeping Cleaners), Receptionists and Information Clerks, Couriers and Messengers, Secretaries and Administrative Assistants, Computer Operators, Data Entry and Information Processing Workers, Desktop Publishers, Insurance Claims and Policy Processing Clerks, Mail Clerks and Mail Machine Operators (Except Postal Service), Office Clerks (General), Office Machine Operators (Except Computer), Proofreaders and Copy Markers, Statistical Assistants, Miscellaneous Office and Administrative Support Workers, Statistical Assistants, Bakers, Butchers and Other Meat, Poultry, and Fish Processing Workers, Miscellaneous Food Processing Workers, Ambulance Drivers and Attendants (Except Emergency Medical Technicians), Bus Drivers, and Taxi Drivers and Chauffeurs.
The Connecticut Family Medical Leave Law (State “FMLA”): This is unpaid leave with job protection and anti-retaliation provisions; this state law largely duplicates federal FMLA, but has different qualification and allows for additional weeks of benefits.
The Connecticut Family Medical Leave Law requires employers with at least 75 employees to give eligible employees up to 16 weeks off in any 24-month period for the following reasons: for the employee to recover from a serious health condition; for the employee to care for a family member with a serious health condition (state law covers more family members than the federal FMLA, such as parents-in-law, domestic partners, and the children of domestic partners); for organ or bone marrow donation; or for the birth, adoption, or placement of a child.
Private Business Interruption Insurance:
A business interruption insurance policy should list or describe the types of events it covers. Events that are not described in the policy are typically not covered. You should also determine if the policy requires your business interruption to last for a certain time period before you are entitled to any policy benefits. Business interruption coverage typically can only be triggered if you have property loss that leads to the business interruption. One example could be that a fire in your office has caused you to suspend your business activities. Because coverage varies across policies, you will need to read your particular policy and consult your broker, insurer or its agent for more information. Also consider checking with a contract litigation attorney to read the contract to see if this unique circumstance might be argued to be within coverage. Lack of case law (since we have never dealt with a pandemic) means there is always a chance. The Connecticut Insurance Department has an FAQ that provides more information (/CID/Coronavirus/Coronavirus-FAQs).
If you do not carry this insurance there may be coverage under another insurance policy such as part of a Business Owners Policy.
The Connecticut Insurance Department has an FAQ that provides more information (https://portal.ct.gov/CID/Coronavirus/Coronavirus-FAQs).
Coronavirus Aid, Relief and Economic Security (CARES) Act –FEDERAL UNEMPLOYMENT CHANGES
The Federal plan, as it has been explained, includes many substantial changes that could benefit small businesses, or more specifically the owners and the employees. The Federal plan will modify the typical state-funded and administered unemployment by adding features that are applicable to all states; how these are applied within each state’s plan will vary as states administer their own programs. Changes that should apply are:
Increases in Benefit Length and Amount:
Example: So, if an employee normally earns $385 a week under a state employment plan, under the new legislation, the worker could expect $985 a week for four months ($600 in extra relief plus state benefits), followed by up to 23 weeks of $385 a week in standard state benefits. Unemployment benefits are generally taxable.
Broader Qualification Groups – funded by federal government:
Expanded benefits would last through December 2020. Also stated maximum duration of unemployment benefits to 39 weeks — or, almost 10 months.
Under the guidance, federal law permits significant flexibility for states to amend their laws to provide UI benefits in multiple scenarios related to COVID-19. For example, federal law allows states to pay benefits where: (1) An employer temporarily ceases operations due to COVID-19, preventing employees from coming to work; (2) An individual is quarantined with the expectation of returning to work after the quarantine is over; and (3) An individual leaves employment due to a risk of exposure or infection or to care for a family member. In addition, federal law does not require an employee to quit in order to receive benefits due to the impact of COVID-19.
An individual receiving paid sick leave or paid family leave is still receiving pay. Thus, generally speaking, the individual is not “unemployed,” so the individual is ineligible for unemployment insurance. The Department’s Employment and Training Administration will continue to assist any states seeking assistance in implementing these flexibilities.
For more information about COVID-19, please visit: https://www.cdc.gov/coronavirus/2019-ncov/index.html.
Layoff vs Furlough
The Federal plan willmake a distinction between furlough (temporary layoff) and a layoff which matters for purposes of benefits. In the case of a furlough, an employer can continue to pay medical benefits and the employee can retain benefits. By contrast, employees who are laid off cannot participate in the employer’s medical plan and can sign up for COBRA for medical benefits. According to Susan Houseman, director of research at the W. E. Upjohn Institute for Employment Research, furloughed workers can both collect unemployment and also be eligible for benefits.
Source: https://www.cnbc.com/2020/03/26/coronavirus-relief-bill-what-to-know-about-unemployment-benefits.html We are currently awaiting federal guidance and we will update this with more detail when such guidance is released.
Unemployment Reminders:
•File at www.filectui.com – live chat is also available
•Employer separation packets available at: http://www.ctdol.state.ct.us/gendocs/employers.html
•General questions can be submitted to dol.webhelp@ct.gov (3-5 day expected response)
•Job Centers closed to in-person appointments, but you can call 860-263-6975 or 203-455-2653
•Remember that retaliation against employees for filing unemployment (under any circumstances) is unlawful under Conn. Gen. Stat. 31-266a.
To help your employees with faster processing, ensure employees have the employer’s registration number and ensure you provided an Unemployment Separation Package completed.
State Unemployment Changes:
•Employees directly impacted by COVID-19 no longer must be actively searching for work the qualify for unemployment assistance (and thus no requirement they are immediately employable such as if sick, assumedly)
•Employers who are furloughing workers can use the DOL shared work program, which allows business to reduce working hours to have those wages supplemented by unemployment insurance. If employer has to reduce hours from 10-60% unemployment could pick up the slack. (See below for full, updated information on the Connecticut Work Share Program)
Employees: If you have been recently laid off, or furloughed for at least two weeks or more and worked as a school employee even if you were not eligible to claim during summer, you can claim now under certain circumstances.
Unemployment may not be charged back to employers insurance due to state of emergency.
Where anemployer needs to reduce hours and unemployment will cover the difference which benefits the employee in more pay (plus retaining benefits) and the employer (less possibly against unemployment insurance). REQ: Min employees are 2; only for employees with hours reduced between 10% and 60%, not less or more; employee must work one day per week it appears)
WORK SHARE INFO – CT Work Share Contact:
Visit SharedWorkCT.com or https://www.ctdol.state.ct.us/progsupt/bussrvce/shared_work/index.htm
200 Folly Brook Boulevard, Wethersfield, CT 06109 / Phone: 860-263-6000
or 860.263.6660
Employer contact DLT and requests – allows partially laid off workers (hours cut) and work partial time – pay difference comes from unemployment if the employer sets up a work share program with state unemployment entity.
Process – A company must contact unemployment to set up work share, and then the employee would file for partial benefits for just the lost work hours. Each week when the employee certifies they would enter the amount they earned and it appears the rest is covered by unemployment (within their normal formula). An employer can do work share as long as they are reducing the hours by not less than 10% and not more than 60%. Shared work has less impact on an employer’s unemployment taxes than a full layoff, AND as an added benefit, an employer is able to retain its skilled workforce.
Payment example: John works 40-hours per week and earns $20 an hour in regular pay. Under the Shared Work program, John’s hours are reduced by 20 hours per week, from 40 to 20 hours or a 50% reduction. Before the layoff, he would have earned $800 normally, but with unemployment compensation, he would earn only $400. However, if instead of laying him off, his hours were reduced by 50%, he would earn 20 hours for $400 and for the other 20 hours, he would earn $200 for unemployment, for a total of $600 rather than $400. It benefits the employee and should not affect unemployment insurance rates as much as a layoff.
Force Majeure Events and Clauses:
If you have contractual obligations to vendors or third-party contractors, review contracts for force majeure clauses.
A force majeure event refers to the occurrence of an event which is outside the reasonable control of a party and which prevents that party from performing its obligations under a contract. English common law has no general concept of force majeure (save for the limited doctrine of contractual frustration, which is addressed below). A party’s ability to claim relief for a force majeure event therefore depends upon the terms of the contract, and the force majeure provision in particular. Force majeure provisions are express terms and will not ordinarily be implied into contracts governed by English law. A party affected by such an event of force majeure will typically be relieved from performing the obligation affected for the duration and to the extent affected and may be entitled to compensation.
As with all matters dependent upon the terms of the contract, each force majeure provision must necessarily be considered on its precise terms and in its specific context.
Events Capable of Constituting Force Majeure
The “test” for force majeure usually requires the satisfaction of three distinct criteria:
2. the affected party’s ability to perform its obligations under the contract must have been prevented, impeded or hindered by the event; and
3. the affected party must have taken all reasonable steps to seek to avoid or mitigate the event or its consequences.
Many contractual provisions set out a specific list of force majeure events which are deemed to be events of force majeure beyond the control of the parties, such as “pandemics,” “epidemics” or “diseases.” A specific reference to a “pandemic” will make it easier to bring a force majeure claim but will still require the other criteria for a force majeure test to be satisfied.
However, if the provision does not include language to that effect, then it will be necessary to consider whether COVID-19, or its impact on a business or a project, is captured by a different concept, such as an “Act of God,” “action by government” or a catch-all provision. Most force majeure provisions contain “catch-all” language in respect of events which are “outside the reasonable control of the party affected.” It seems fairly clear that a pandemic such as COVID-19 would qualify as force majeure under such a provision.
New open enrollment: Coronavirus (COVID-19): Due to exceptional circumstances, qualified UNINSURED CT residents can enroll during a NEW SPECIAL ENROLLMENT PERIOD from March 19 to April 2, 2020. Coverage would start April 1st.
Call 855-365-2428 (8AM-5PM, Monday – Friday). Learn More here: http://bit.ly/2UgCJfh
*Please note that Munro-Delotto Law does not employ a tax attorney; the following is additional information for businesses to look into with their own accountant or tax attorney.
BUSINESS TAX PROVISIONS EXPLAINED BY AN ACCOUNTANT:
FEDERAL Business Tax Filing / Payment Deadlines:
FEDRAL FILING DEADLINE CHANGED to JULY 15, 2020
Questions? https://www.irs.gov/coronavirus
https://home.treasury.gov/news/press-releases/sm948
U.S. Treasury Department and Internal Revenue Service (IRS) today issued guidance allowing all individual and other non-corporate tax filers to defer up to $1 million of federal income tax (including self-employment tax) payments due on April 15, 2020, until July 15, 2020, without penalties or interest. The guidance also allows corporate taxpayers a similar deferment of up to $10 million of federal income tax payments that would be due on April 15, 2020, until July 15, 2020, without penalties or interest.
NEW Connecticut Tax Guidance [April 2, 2020]:
https://portal.ct.gov/CID/News-Releases/Press-Releases/Press-Releases-20200323
TAX FILING DEADLINE NOW July 15 for filing deadline AND payments.
Quarterly payments to DOL due by April 30, 2020 may be extended.
Connecticut Business Tax Filing and payment deadlines:
(“certain annual tax returns due on or after March 15, 2020, are extended by at least 30 days”)
2019 Form CT-1065/CT-1120 SI– CT Pass-Through Entity Tax Return – filing extended to April 15, 2020; payment deadline extended to June 15, 2020 .
2019 Form CT-990T – CT Unrelated Business Income Tax Return – filing extended to June 15, 2020; payment deadline extended to June 15, 2020
2019 Form CT-1120/1120 CU– CT Corporation Business Tax Return – filing extended to June 15, 2020; payment deadline extended to June 15, 2020
Quarterly payments to DOL due by April 30, 2020 may be extended.
April 2, 2020 Update:
On March 30th, the Connecticut Department of Revenue Services extended the filing and payment deadlines for sales and use tax returns for small business taxpayers. A small business taxpayer is a taxpayer that has $150,000 or less in annual sales tax liability. To determine if they qualify, taxpayers are required to utilize a calendar year look back period of January 1, 2019 through December 31, 2019.
The relief also is available for the room occupancy tax. A taxpayer that collects both sales tax and room occupancy tax must evaluate each tax separately to determine eligibility for relief.
For monthly sales tax and room occupancy tax filers: returns and payments due March 31, 2020 and April 30, 2020 are extended to May 31, 2020. For quarterly sales tax and room occupancy tax filers: returns and payments due April 30, 2020 are extended to May 31, 2020. Taxpayers who have already filed and paid taxes due on March 31, 2020 cannot get a refund on the taxes already paid.
Questions? DRS@po.state.ct.us or 860-297-5962. Those who need to contact DRS regarding their specific situation may e-mail at DRS@po.state.ct.us or call 860-297-5962 (from anywhere); 800-382-9463 (within CT, outside Greater Hartford area only); or 860-297-4911 (Hearing Impaired, TDD/TT users only).
It phases out entirely at $99,000 for single taxpayers with no children and $198,000 for joint taxpayers with no children (see Chart 1). 2019 or 2018 tax returns will be used to calculate the rebate advanced to taxpayers, but taxpayers eligible for a larger rebate based on 2020 income will receive it in the 2020 tax season. Taxpayers with higher incomes in 2020 will see the overpayment associated with their rebate forgiven. For example, a single taxpayer with $100,000 in 2019 income would not receive an advance rebate but would receive the $1,200 credit on their 2020 return if their income for the year fell below the phaseout. On the other hand, a single taxpayer with $35,000 in income receives a $1,200 advance rebate but would not have to pay the rebate back on the 2020 return if they make $100,000 this year. This is structurally similar to the 2008 rebate design. We estimate the rebate will decrease federal revenue by about $301 billion in 2020, according to the Tax Foundation General Equilibrium Model. This credit is one-time, but policymakers may consider additional rebates if the downturn is prolonged.
Paige Munro-Delotto Ph.D., Esq.
Call or email us:
860-245-4670