Answering Clients’ Questions About COVID-19 Relief

When the coronavirus pandemic hit the U.S. in February, McGuireWoods swiftly established a Response Team to answer their clients’ most pressing business questions.

McGuireWoods established a COVID-19 Response Team to help clients navigate legal and business issues and government relations challenges arising from the pandemic. Why was it important to take this approach, and how has it been effective in helping clients?

In mid-February, we identified the COVID-19 pandemic as a unique event for our clients that would require a creative way for us to marshal our resources to respond as effectively and efficiently as possible to their needs and issues. While other law firms undertook similar actions, we established our Response Team to be able to call on the depth and breadth of our practice groups and the focus of our industry teams, along with our partners at McGuireWoods Consulting and their crisis communications team.

Two emergency measures enacted by Congress in response to COVID-19 – the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act – created new paid leave policies and provided emergency relief for individuals and businesses. What were the most urgent questions or concerns you were hearing from business clients in response to these measures?

These two laws have provided a number of different benefits and programs for our clients. Regarding the FFCRA, many have been asking questions about how the leave is calculated, how the sick leave and extended family leave work together, and the rules that the Department of Labor issued regarding the specific reasons for sick leave. In addition, there have been a number of issues regarding what constitutes the ability to work or telework. For the CARES Act, there are a number of regulations that still need to be issued. But for the Paycheck Protection Program through the Small Business Administration (SBA), there have been a lot of questions about the rules for affiliates, and how related companies may or may not be considered together for SBA purposes. These rules differ from the usual joint-employer questions that we often see.

How should businesses manage the new sick and family leave policies?

The FFCRA is effective until December 31, 2020. Thus, we recommend clients develop separate policies for these leaves instead of modifying existing policies. That way, when the law expires, their existing leave policies don’t need to be changed again. In some instances, existing paid leave may be taken as part of the new family medical leave. This is another reason to have one policy for both the new sick leave and the new family leave, so that they can seamlessly work with existing policies. If the FFCRA gets extended or new regulations come out, modifying one policy should be more efficient.

What are the key employment issues and developments under the CARES Act?

The key CARES employment issue relates to the enhanced and extended unemployment benefits. Because of the interplay with state unemployment schemes, this new law greatly changes the calculus for clients in evaluating furloughs versus permanent layoffs, while at the same time ensuring the continuity of the workforce. Indeed, some employees will receive more compensation on unemployment than their regular wages. 

Also, we have had a number of questions related to employee head count for purposes of qualifying for the Paycheck Protection Program and/or the Employee Retention Credit, as well as other questions about how various short-term compensation program provisions will work. The tax credit has been one area of strategic focus for clients as they balance cash flow with payroll obligations and navigate how to manage the benefits the tax credit provides.

What employee benefits considerations should companies evaluate in light of the new COVID-19 laws and the options they provide?

The workforce changes arising from COVID-19, including terminations, furloughs, reduced hours and rising medical costs, have put tremendous pressure on employee benefit plans. In addition, COVID-19-related legislation has had a major impact on employee benefit plans, most of which is designed to ease the financial impact on plan participants and plan sponsors. For example, for 401(k) plans, the CARES Act eased the limitations on participant loans and early withdrawals, created a specific new “coronavirus-related” distribution, and suspended required minimum distribution rules for certain plan participants.

The CARES Act also eased the funding requirements for defined-benefit pension plans. For group health plans, the CARES Act builds on the provisions of the Families First Coronavirus Relief Act requirement that group health plans provide access to COVID-19 testing, diagnosis and treatments. The CARES Act also eases some deductible rules for high-deductible health plans with health savings accounts for purposes of COVID-19, adopts a safe harbor for providing telehealth services, and relaxes certain reimbursement restrictions for pretax accounts such as health savings accounts. The CARES Act also imposes limits on executive compensation paid by businesses that receive loans, loan assistance or other financial assistance under the act, and, at least temporarily, provides tax-free status to employer-paid student loan repayment programs.

Do you expect there to be permanent changes in labor regulations or policies that will affect the way your clients do business when the pandemic is behind us?

This is a difficult but fascinating question. Once employers and their workforces get used to a new statutory or regulatory reality, it is difficult to go back to the former status quo. Furthermore, there has been tremendous activity at state and local levels related to the COVID-19 crisis. This is an acceleration of the pattern that we have seen over the last five to 10 years, as states, cities and localities, even more than the federal government, have become very active in regulating the employment relationship and are implementing their own paid leave laws, minimum wage statutes and ordinances, and other workplace protections. 

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