On Sunday, December 27, 2020, President Trump signed the new COVID-19 relief bill which contains a wide range of provisions in response to the continued pandemic that has affected the country. Two of the most impactful areas stemming from the bill, for businesses, relate to the Families First Coronavirus Act (FFCRA) and Paycheck Protection Program (PPP).
The FFCRA expired on December 31, 2020, and Congress declined to extend the mandatory leave requirements under the new Act. They did however make a provision in the bill to allow a payroll tax credits to employers, which will essentially make the FFCRA optional from January 1, 2021 through March 31, 2021. Originally, the FFCRA provided up to 80 hours of paid sick and family leave under Emergency Paid Sick Leave, along with up to 10 weeks of partially paid family and medical leave under Expanded Family and Medical Leave to eligible employees who were unable to work because of certain COVID-19-related reasons. Employers will be able to claim dollar-for-dollar tax credits on wages paid to employees taking leave consistent with the existing FFCRA framework. Employers will need to revise, update, or eliminate existing FFCRA paid leave policies and notify employees of those changes as the new year begins.
PPP Second Draw Loans
The new bill also makes changes to the current PPP loans that were available to small businesses by expanding the ways the PPP funds may be used and providing second draw loans to eligible recipients. To be eligible to receive a Second Draw Loan, a business must:
- Employ less than 300 employees;
- Have used or will use the full amount of their first PPP loan; and
- Demonstrate at least a 25% reduction in gross receipts in the first, second or third quarter of 2020 relative to the same 2019 quarter. Applications submitted on or after January 1, 2021, are eligible to utilize the gross receipts from the fourth quarter of 2020.
The maximum amount a borrower can take under the second draw loan is the lesser of $2 million or 2.5 times the borrower’s average monthly payroll costs. Businesses classified as Accommodation and Food may receive a loan up to the lesser of 3.5 times their average monthly payroll costs or $2 million. In additional to the original covered expenses, the bill allows the funds to also be used for the following reasons: Covered operations expenditures;
- Covered property damage costs;
- Covered supplier costs for expenditures; and
- Covered worker protection expenditures.
The SBA has 17 days from the enactment of the new law to issue guidance for lenders that would allow borrowers who returned all or part of their PPP loan to reapply for the maximum amount applicable so long as they have not yet received forgiveness. Borrowers are also allowed some modifications of their original loans if the calculated amount has changed under the new PPP’s final rules.