The CARES Act for COVID-19 relief: What Employers Need to Know

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) contains $2 trillion in financial relief for both individuals and businesses. President Trump signed it into law on March 27, 2020. Major provisions affecting employers are summarized below.

The first section of the Act is called the Keeping Workers Paid and Employed Act and includes the Paycheck Protection Program.


The CARES Act creates a $349 billion Paycheck Protection Program (PPP), through which the Small Business Administration (SBA) will make or guarantee loans of up to $10 million per eligible employers for payroll costs. The provisions in the PPP are retroactive to February 15, 2020, and cover loans taken through June 30, 2020. The retroactivity is intended to encourage rehiring employees who were laid off.

Eligible employers include:

  • small employers with 500 employees or fewer, as well as those that meet the current Small Business Administration (SBA) size standards;
  • self-employed individuals and “gig economy” individuals; and
  • certain nonprofits, including 501(c)(3) organizations and 501(c)(19) veteran organizations, and tribal business concerns with under 500 employees.
  • there are some exceptions to the 500 employee threshold for businesses classified as accommodations and food service.

Payroll costs include:

  • salary, wage, commission, or similar compensation;
  • payment of cash tip or equivalent;
  • payment for vacation, parental, family, medical, or sick leave;
  • allowance for dismissal or separation;
  • payment required for the provisions of group health care benefits, including insurance premiums;
  • payment of any retirement benefit; or
  • payment of State or local tax assessed on the compensation of employees; and

Payroll costs do not include:

  • the compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period;
  • any compensation of an employee whose principal place of residence is outside of the United States;
  • qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (FFCRA); or
  • qualified family leave wages for which a credit is allowed under section 7003 of the FFCRA

In addition to payroll costs, borrowers can use the loan for

  • payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation);
  • rent (including rent under a lease agreement);
  • utilities; and
  • interest on any other debt obligations that were incurred before the covered period.

The size of the loans can equal 250 percent of an employer’s average monthly payroll for the year prior to applying for the loan, up to a maximum amount of $10 million. The cost of participation in the program will be reduced for both borrowers and lenders by providing fee waivers, an automatic deferment of payments for six months to one year, and no prepayment penalties. Any portion of that loan used to maintain payroll, keep workers on the books or pay for rent, mortgage and existing debt is eligible to be forgiven. However the amount eligible for forgiveness may be reduced if the employer receiving the loan lays off employees or reduces staff salaries before June 30, 2020.

In addition to PPP, the Act:

  • Provides grants to SBA resource partners, including Small Business Development Centers and Women’s Business Centers, to offer counseling, training, and related assistance to small businesses affected by COVID-19.
  • Expands eligibility for Injury Disaster Loans (EIDL), while also giving SBA more flexibility to process and disperse small dollar loans.

The second section, “Relief for Workers Affected by Coronavirus Act” covers unemployment and payroll taxes. Our article, “COVID-19 CARES Act Expands Unemployment Benefits”, goes into the details.


The CARES act also

  • Clarifies the provision of the Families First Coronavirus Response Act (FFCRA) that all testing for coronavirus (COVID-19) is to be covered by private insurance plans by adding that that coverage also includes any services or items provided during a medical visit—including an in-person or telehealth visit to a doctor’s office, an urgent care center, or an emergency room—that results in coronavirus testing or screening.
  • Allows a high-deductible health plan (HDHP) with a Health Savings Account (HSA) to cover telehealth services prior to a patient reaching the deductible. This provision is temporary and will expire December 31, 2021.
  • Allows for hardship withdrawals or larger loans against a 401(k) for an individual who:
    • is diagnosed with the virus SARS–CoV–2 or with coronavirus disease 2019 (COVID–19) by a test approved by the Centers for Disease Control and Prevention,
    • whose spouse or dependent is diagnosed with such virus or disease by such a test, or
    • who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury (or the Secretary’s delegate).
  • Allows an employee who was laid off by an employer March 1, 2020, or later to have access to paid family and medical leave in certain instances if they are rehired by the employer. The employee would have had to work for the employer at least 30 days prior to being laid off.
  • Ensures that federal contractors who cannot perform work at their duty-station or telework because of the nature of their jobs due to COVID-19, continue to get paid.

We expect there will be guidance documents issued soon, similar to those released for the FFCRA, and Employers Council will send alerts as we see those. Additionally, please utilize the Employers Council Corona (COVID​-19) Resources page for information, samples, and links.