CARES Act: Employment Provisions to Challenge Employers

March 27, 2020

The CARES Act requires certain mid-sized companies receiving aid to agree to neutrality and offshoring prohibitions, while generous UI benefits may draw many workers away from the workplace.

Generous unemployment benefits may impede many employers’ efforts to retain employees during the crisis, and to recruit them when the crisis is over because, according to DOL data, the average weekly pandemic UI benefit will be $10 higher than average weekly earnings ($968 vs $958).

The bill also includes several employment-related requirements for businesses seeking loans and financial assistance.

  • For airlines, air cargo, and businesses critical to maintaining national security, a company receiving aid must maintain 90% of its employment level as of March 24, 2020, certify it is a U.S. business, and certify that it “has significant operations in and a majority of its employees based in the United States.”

  • Potential employment requirements/certifications for “mid-sized businesses” (500-10,000 employees) echo elements of the significant labor reform legislation, the PRO Act, passed by the House earlier this year.  While not a certainty, the Treasury Secretary must endeavor to seek the implementation of a loan program with these requirements:

    • Companies may not outsource or offshore jobs or abrogate existing collective bargaining agreements for the duration of the loan and two years afterward and must remain neutral in any union organizing effort for the term of the loan;

    • The company must be a U.S. business that “has significant operations in and a majority of its employees based in the United States;” and

    • The company must certify the funds will be used to maintain 90% of employment levels at full compensation and benefits until September 30, 2020, and that the company intends to restore 90% of the workforce that existed on February 1, 2020, as well as all compensation and benefits no later than 4 months after the crisis.

Payroll tax credit available for employee retention:  Employers whose businesses are fully or partially suspended (gross receipts less than 50% of a year ago) can receive a payroll tax credit for retaining employees. The credit will be equal to 50% of wages up to $10,000 and can include health care expenses.

Payroll taxes delayed: The employer portion of Social Security payroll taxes is delayed until January 1, 2021.

Pension Contributions Delayed:  The CARES Act delays minimum required contributions for single-employer defined benefit pension plans during 2020 to January 1, 2021.