On June 3rd, the U.S. Senate passed the “Paycheck Protection Program Flexibility Act” (the “Flexibility Act”) which had been previously passed by the House of Representatives on May 28, 2020. It is expected that President Trump will sign the legislation today, June 4th.  The Flexibility Act provides a number of modifications to the Paycheck Protection Program (“PPP”) provisions of the CARES Act, which will significantly increase the forgivable loan amounts of PPP borrowers.  Arguably, the Flexibility Act turns the PPP into more of a small business subsidy/assistance program, rather than a true paycheck protection program.

The Flexibility Act includes the following changes to the PPP:

As state governments issue stay-at-home orders, employment lawyers across the country have been digesting new employment laws, assisting clients in managing layoffs, furloughs, and leaves of absence, and working to keep up with a changing employment landscape.  Federal legislation has imposed dramatic, although temporary, changes to the way employers manage their employees during this trying time.  The Families First Coronavirus Response Act (“Families First Act”) and its regulations impose, for the first time under federal law, paid leave obligations.  The CARES Act changes the economics of layoffs, furloughs and reduced hours for employers.  

On March 18, 2020, President Trump signed the Families First Act into law.  The Act includes provisions to assist employers and employees during these extraordinary times.    The Families First Act creates two forms of paid leave related to the Covid-19 crisis:  two-week paid leave (“Emergency Leave”); and expansion of the Family and Medical Leave Act (“FMLA”) to provide twelve weeks of paid leave (“Expanded FMLA Leave”).

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law on March 27, 2020, provides $349 Billion in SBA 7(a) forgivable loans to businesses and nonprofits with fewer than 500 employees [see endnote 1), including sole proprietors, the self-employed and independent contractors.  Known as the Paycheck Protection Program (PPP), the maximum available loan amount is 2.5 times your average total monthly payroll costs, capped at $100,000 per employee on an annualized basis [see endnote 2].  The loan proceeds can be used for any authorized business purpose, but to the extent used to pay payroll costs, healthcare benefits, eligible rent or mortgage interest payments and utility costs over an eight (8) week period from the date the loan is made, the loan can be forgiven (the lender is paid by the SBA). There is no collateral and no personal guarantees required.  There is no requirement regarding exhausting other available credit.  The SBA pays the lender all loan origination fees and has waived many of its otherwise onerous requirements.  To the extent any loan balance is not forgiven, the interest rate will be fixed at the time of the loan somewhere between 0.50% and 4.0% [see endnote 3], amortized over up to 10 years, payable over two (2) years, with all payments deferred for six (6) months.  There is no prepayment penalty.  The program is only available through June 30, 2020, but funds are limited, so don’t wait.  For more detailed information, see below and PPP Information Sheet.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (referred to as the “CARES Act”). This sweeping legislation provides economic relief for small businesses and taxpayers who are impacted by the Coronavirus pandemic. Nonprofit charitable organizations and their employees share in some of these benefits.

As most of you know, last night the U.S. Senate passed the “Coronavirus Aid, Relief and Economic Security Act”, being referred to as the CARES Act, which is now being sent to the House of Representatives for a final vote.  It is expected that the House will pass the measure without further changes, and that it will be signed into law by the President.  More details will be provided as we move along, but broadly speaking the CARES Act provides the following benefits and stimulus to U.S. small businesses and individuals: