CARES Act: What Public Entity Employers Need to Know About the Federal COVID-19 Stimulus
On March 27, 2020, after passing the United States Senate and House of Representatives, the President signed into law the “Coronavirus Aid, Relief, and Economic Security Act” (“CARES Act”), passed as House Resolution 748 (“HR 748”). This landmark law provides wide-ranging financial relief to businesses, public sector employers, and individuals impacted by the current COVID-19 (Coronavirus) pandemic.
Important! The final version of the law differs from original drafts of the bill in significant ways. The Senate had previously introduced Senate Bill 3548 for this purpose, but ultimately passed HR 748. The final CARES Act includes some, but not all, of the major provisions contained in SB 3548 initially circulated in the Senate. Therefore, be sure to read this Alert closely and in its entirety.
Here’s what you need to know:
Coronavirus Relief Fund (Section 5001)
The CARES Act provides financial assistance to public employers specifically to deal with “necessary expenditures incurred due to the public health emergency” relating to COVID-19. Congress appropriated $150 billion for fiscal year 2020 for this purpose, and earmarked $139 billion for the 50 States and “units of local government” entities therein.
The law does not specify what “expenditures” qualify as “necessary” or arising from the coronavirus pandemic. Therefore, it is not clear if local public agencies can request financial assistance to cover lost tax revenue, as lost revenue may not count as an “expenditure”.
Local public entities can obtain this additional financial assistance in one of two ways. Regardless of the route chosen to obtain financial assistance related to COVID-19, this assistance will be drawn from the same general fund provided by this section of the law.
First, local public entities can directly apply to the federal government for financial aid, if they include a certification that these funds will be used for “necessary expenditures” relating to the COVID-19 pandemic. The “local government” must attest that the funds sought from the federal government were not accounted for in the most recently approved budget as of the date of the law’s enactment. However, the law provides a critical limitation on which local public entities constitute a “local government”, and thus may seek aid directly from the federal government. A public entity qualifies as a “unit of local government” if it is a “county, municipality, town, township, village, parish, borough, or other unit of general government below the State level with a population that exceeds 500,000.” (Emphasis added.) The law does not indicate which year’s population must be used for this requirement. Regardless, this population requirement excludes many local public entities in California from pursuing this option.
Second, local public entities can request financial aid from the State of California, as part of the overall fund received from the federal government. The Secretary of the Treasury will begin providing “State government” this apportioned aid within 30 days of the CARES Act’s enactment, or on April 26, 2020. For many local public entities, this option will be the best avenue for obtaining grant funds to address expenses arising from COVID-19, as the same population requirement of over 500,000 does not apply.
The law includes guidance on how much aid States or local public entities can request. Each State will receive a proportional amount of the overall aid fund, relative to its population for the 2020 fiscal year. In order to calculate the approximate amount for which a State is eligible, one must divide the total population of all 50 States by the population of the State. A State is then entitled to that percentage of the overall fund. However, no State shall receive less than $1.25 billion.
If a local public entity is eligible to apply for direct aid from the federal government, it must use additional calculations to assess the approximate fund amount to which it is entitled. First, the local government entity must divide the total population of the State of California by the population of the local public entity. The law does not specify which year’s population for the local public entity must be used. The local public entity then multiplies this product by 45%. For example, the U.S. Census Bureau provides an estimated population for the State of California as of July 1, 2019 of 39,512,223. (See https://www.census.gov/quickfacts/fact/table/CA/PST045219, last visited March 27, 2020.) If a local public entity had a population as of July 1, 2019 of 3 million persons, the first step of this calculus provides a figure of 7.592%. Upon multiplying this amount by 0.45, a local public entity would be entitled to approximately 3.42% of the overall fund provided to the State of California.
Our firm highly recommends that public entity employers seek the assistance of counsel in determining its eligibility for coronavirus relief funds under this section of the CARES Act.
Grant Programs for Rural Health Care Services (Section 3213)
The CARES Act also apportions funds to be provided to healthcare providers in rural areas, to mitigate the impact of COVID-19. Federal law currently permits rural health care service providers to apply for grants for a 3-year period for the “development of an integrated health care network.” (42 U.S.C. § 254c(f).) The law expands these provisions to provide for the award of grants for up to 5 years, amounting to $79.5 million funding for each fiscal year between 2021 and 2025. A healthcare provider is eligible for these grants if they have “demonstrated experience serving, or the capacity to serve, rural underserved populations.”
Emergency Appropriations for Coronavirus Health Response and Agency Operations
The CARES Act provides funds for specific “agency operations” in the public sector. Under appropriations for the Department of Justice, the law provides emergency relief of $850 million to federal law enforcement for “State and Local Law Enforcement Assistance” to provide assistance to “respond to coronavirus”.
This section of the law does not provide direct financial assistance to local public entities. However, public employers should remain aware that they may seek assistance from federal law enforcement to act as partners in responding to the current pandemic crisis, as this section of the CARES Act provides federal law enforcement with additional funding directly tied to responding to COVID-19. The law does not include any guidance on what form this response to the COVID-19 pandemic crisis should take, simply that it must relate to “coronavirus” and it may include “domestic and international” actions.
Emergency Relief and Taxpayer Protections (Section 4003)
In addition to providing grant access, the CARES Act also extends loans to public employers to address losses incurred due to the COVID-19 pandemic. The law extends up to $500 billion in loans to “eligible businesses, States, and municipalities”, with $454 billion marked for general pandemic-related relief for “States” and “municipalities.” These loans carry a term of up to five years. The law provides that the Secretary of the Treasury will issue procedures for how to apply for these loans within 10 days of the law’s enactment, or by April 3, 2020.
Section 4003 provides financial assistance to a much broader range of local public entities, compared to the Coronavirus Relief Fund. The law defines a “municipality” as a “political subdivision of a State”, or an “instrumentality of a municipality” or a State, and does not include a population requirement.
This provision includes an important limitation for loans extended to certain “eligible businesses”. Subsection (c) of this provision requires those entities not to reduce their employment levels as of March 24, 2020 by more than 10% through September 30, 2020, in order to remain eligible for these emergency loans. However, this limitation on workforce reductions does not apply to public agencies, as this part of the law mentions “eligible businesses” but not “States” or “municipalities.”
Unemployment Insurance Expansion (Sections 2101 et seq.)
The CARES Act also provides relief to individual employees impacted by COVID-19 by expanding unemployment insurance benefits in several important ways.
First, the law provides direct financial assistance to State unemployment benefit systems, which are facing high numbers of applicants for unemployment benefits. Section 2103 provides that the federal government will reimburse up to one half of the amount States pay each week into unemployment insurance programs between March 13, 2020 and December 31, 2020.
Second, the law supplements the unemployment benefits that individuals receive under state systems. Section 2104 of the bill provides eligible individuals with $600 per week in unemployment benefits, in addition to the benefits provided under state unemployment systems, through July 31, 2020. As a result, eligible individuals will receive augmented unemployment benefits for the four-month period of time spanning from April 2020 through July 31, 2020.
Third, the law expands the pool of applicants for unemployment insurance benefits. Section 2102 provides several additional circumstances relating to COVID-19, in which an individual who is otherwise ineligible for unemployment benefits may still receive them. Among others, the law extends unemployment insurance benefits in the event an individual: (i) has been diagnosed with or is experiencing symptoms of COVID-19, (ii) has a family member who has been diagnosed with COVID-19; (iii) is providing care for a family member who has been diagnosed with COVID-19; (iv) has primary caregiver responsibility for a child or other household person who is unable to attend school or a childcare facility due to its closure over COVID-19; (v) is unable to commute to work due to a quarantine imposed based upon COVID-19; or (vi) is unable to commute to work due to advice provided by a healthcare provider to self-quarantine.
Fourth, Section 2107 of the law expands individuals’ entitlement to unemployment insurance benefits. So long as the individual is available to work and is actively seeking to work, an individual remains eligible to receive unemployment benefits (including the additional $600 in federal unemployment benefits through July 31, 2020) for 39 weeks — rather than the standard 26 weeks provided in California. This expanded term of eligibility for unemployment benefits expires on December 31, 2020. For this additional 13-week period, the federal government will reimburse states for the entire unemployment benefit amount.
Railroad Unemployment Insurance Provisions
The CARES Act also expands the unemployment insurance benefits available to public employees working in the rail transit sector. Section 2113 of the law amended the Railroad Unemployment Insurance Act to offer unemployment benefits amounting to $1,200 for each qualifying week, for individuals applying between April 1, 2020 and July 31, 2020. These additional unemployment benefits will expire on December 31, 2020.
Limitation on Liability for Volunteer Health Care Professionals During Pandemic (Section 3215)
The CARES Act also provides protection to workers providing “health care services” in the public health sector, by extending a limitation on liability for volunteer health care professionals. “Health care services” is defined to include: (i) the diagnosis, prevention, or treatment of COVID-19; or (ii) the assessment or care of the health of a human being related to an actual or suspected case of COVID-19. A “volunteer” is defined to mean a health care professional who, with respect to the “health care services” provided, does not receive compensation or any other thing of value in lieu of compensation. “Any other thing of value” includes a payment under any insurance policy or health plan, or a payment under any Federal or State health benefit program, and excludes reimbursement for travel expenses if services are rendered more than 75 miles from the volunteer’s place of residence.
A volunteer health care provider shall not be liable for harm caused by his/her act or omission while providing health care services during the public health emergency relating to the COVID-19 pandemic (as declared on January 30, 2020).
In order to receive this protection from liability, the following conditions must be found:
- The health care provider must provide his/her services in response to the present COVID-19 public health emergency;
- The health care provider must provide services in good faith that the patient is in need of services;
- The health care provider must provide his/her services as a volunteer; and
- The services provided must occur within the scope of the provider’s license or certification.
The law includes exceptions for willful or criminal misconduct, gross negligence, reckless misconduct, conscious indifference to the safety of the individual harmed, and actions taken while under the influence of alcohol or an intoxicating drug. A health care provider qualifies as a “volunteer”, and retains the limitation on liability, even if he/she obtains reimbursement for certain travel expenses. The law indicates that this limitation of liability expires upon the end of the public health emergency, as declared by the Department of Health and Human Services.
Clarifications on Emergency FMLA Leave and Paid Sick Leave
The CARES Act provided clarifications with respect to the recently enacted Emergency FMLA Leave and Emergency Paid Sick Leave provided under HR 6201. Please see our prior alert, for a summary of the operative provisions of HR 6201. (https://www.aalrr.com/newsroom-alerts-3631.)
With respect to Emergency FMLA Leave, the law provides that the payment cap for each employee is $200 per day, and $10,000 in aggregate. With respect to Emergency Paid Sick Leave, the law indicates that employers do not need to pay more than $511 per day or $5,110 in the aggregate for each employee relying on any of the reasons listed in paragraphs (1), (2) or (3) of section 5102(a) of HR 6201. Additionally, employers do not need to pay more than $200 per day or $2,000 in the aggregate for each employee relying on any of the reasons listed in paragraphs (4), (5) or (6) of section 5102(a) of HR 6201. Therefore, an employer is not required to allow an employee to supplement this Emergency FMLA Leave with their accrued leave to receive full pay. Our firm had interpreted these sections of HR 6201 in this fashion, as providing payment caps for each employee. The CARES Act confirms that this position is correct.
The law also provides an important clarification concerning whether employees rehired after April 1, 2020 are eligible for Emergency FMLA Leave. As we advised in our prior alert, employees are eligible to receive compensation for up to 12 weeks of FMLA leave, if they worked for the employer for at least 30 calendar days. The CARES Act clarifies that an employee is eligible for this emergency FMLA leave if the employee: (i) was laid off on or after March 1, 2020; (ii) had worked for the employer for at least 30 of the last 60 calendar days prior to the employee’s layoff; and (iii) was rehired by the employer. This additional coverage for laid off employees was absent from HR 6201.
We will provide additional information regarding the CARES Act and its implementation as more information becomes available