Recently, Governor Whitmer announced that Michigan had signed an agreement with the United States Secretary of Labor, so that it can provide expanded unemployment benefits to eligible employees. That agreement and the extended unemployment benefits was made possible by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that was signed into law late last week. The CARES Act is expansive, spanning over 800-pages, and addresses issues such as tax credits, expanded unemployment, and education. This alert will focus on unemployment, the health care coverage of coronavirus (COVID-19) testing, and the employer-specific tax credits.
The section of the CARES Act addressing expanded unemployment provisions is called the Relief for Workers Affected by Coronavirus Act (the “RWACA”). States can take advantage of the increased unemployment benefits, referred to as pandemic emergency unemployment compensation, by entering into a joint agreement with the Secretary of Labor. States will retain their own eligibility criteria and administer the unemployment, but the funds would be provided by the federal government.
Indeed, the RWACA is more expansive than ordinarly unemployment, because it will also apply to traditional workers for small and large businesses as well as those who are self-employed and workers in the gig economy. The RWACA also provides funding to support “short-time compensation” programs, where employers reduce employee hours instead of laying off workers, and the employees with reduced hours receive a pro-rated unemployment benefit. This provision would pay 100 percent of the costs they incur in providing short-time compensation through December 31, 2020. It would apply to covered individuals whose partial or complete inability to work was caused by COVID-19 for weeks from January 27, 2020 through December 31, 2020.
Covered individuals must:
- Not be eligible for regular compensation or extended benefits under state or federal law, or pandemic emergency unemployment compensation, including an individual who has exhausted all rights to regular unemployment or extended benefits under state or federal law or pandemic emergency unemployment compensation AND
- Provide self-certification that the individual is otherwise able to work and available for work under state law, except the individual is unemployed, partially unemployed, or unable to work because:
- The individual has been diagnosed with COVID-19 or is experiencing symptoms of COVID-19 and is seeking medical diagnosis
- A household member has been diagnosed with COVID-19
- The individual is providing care for a household member or family member who has been diagnosed with COVID-19
- The individual has a child or other person for whom the individual has caregiver responsibilities and the child/other person is unable to attend school or another facility as a direct result of the COVID-19 public health emergency and that school/facility is required for the individual to work
- The individual is unable to reach his or her place of employment because of a quarantine imposed as a direct result of the COVID-19 emergency or because the individual has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19
- The individual was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of the COVID-19 public health emergency
- The individual has become the breadwinner or major support for a household because the head of household has died as a direct result of COVID-19
- The individual has quit his or her job as a direct result of COVID-19
- The individual’s place of employment is closed as a direct result of the COVID-19 public health emergency
- The individual meets any additional criteria established by the Secretary of Labor for unemployment assistance OR
- The individual is self-employed, seeking part-time employment, does not have sufficient work history, or otherwise would not qualify for regular unemployment or extended benefits under state or federal law or pandemic emergency unemployment compensation
The unemployment insurance period is capped at 39 weeks, which includes the period during which a covered employee received regular unemployment compensation or extended unemployment compensation from the state. However, if the duration of the extended benefits under federal or state law is extended, then the 39-week period shall be extended by that same length of time. Additionally, the RWACA would also raise the maximum unemployment insurance benefit by $600 per week.
The RWACA also temporarily eliminates the seven-day waiting period for railroad unemployment insurance benefits through December 31, 2020 (to make this program consistent with the change made for states through the same period in an earlier section of this title).
The Secretary of Labor will develop a process for applying for unemployment compensation under the RWACA and make such information available before the CARES Act takes effect.
Finally, the Michigan Unemployment Insurance Agency will be issuing guidance regarding eligibility in the coming days. The $600 increase will apply to workers already in the unemployment system and to those eligible employees about to apply. Additionally, the usual 14-day application window has been expanded to 28 days.
Health Insurance Coverage of COVID-19 Testing
All group health plans and health insurance issuers offering group or individual health insurance are required to cover a “qualifying coronavirus preventative service,” without cost-sharing measures. A “qualifying coronavirus preventative service” refers to an item, service, or immunization that is intended to prevent or mitigate COVID-19 and that is:
- An evidence-based item or service that has in effect a rating of “A” or “B” in the current recommendations of the U.S. Preventative Services Task Force; or
- An immunization that has in effect a recommendation from the Advisory Committee on Immunization Practices of the CDC with respect to the types of individuals involved.
Employer-Specific Tax Credits
The payroll credit provided for last week in the Families First Coronavirus Response Act, addressed in a previous Client Alert, is also mentioned in the CARES Act. The credit for required paid sick leave and the credit for required paid family leave can be refunded in advance using forms and instructions the IRS will provide. Under the CARES Act, the IRS is instructed to waive any penalties for failure to deposit payroll taxes arising under Section 3111(a) or 3221(a) of the Internal Revenue Code if the failure was due to an anticipated payroll credit.
Furthermore, there is an employee retention credit for employers that close due to the coronavirus pandemic. Eligible employers are permitted a credit against unemployment taxes equal to 50% of qualified wages, up to $10,000, for each employee. Eligible employers are defined as:
- employers who were carrying on a trade or business during 2020 and the operation of that business is fully or partially suspended due to orders from a government authority limiting commerce, travel, or group meetings due the COVID-19 public emergency.
- employers that have gross receipts that are less than 50% of their gross receipts for the same quarter from the previous year are also eligible, until their gross receipts exceed 80% of their gross receipts for the same quarter from the previous year.
For employers with more than 100 employees, the only wages eligible for credit are those wages that the employer pays to employees who are not providing services due to the suspension of the business or a drop in gross receipts. For employers with 100 or fewer employees, all wages paid qualify for the credit.
If you have any questions or concerns about the CARES Act and its provisions, please contact the Labor and Employment team at Mika Meyers.