As a business owner, you are undoubtedly under immense pressure as you consider how to keep your business and your life’s work afloat in the midst of the Coronavirus (COVID-19) pandemic while caring for employees who rely on your business for their livelihood. I have been fielding questions since last week and wanted to gather as much information and list of resources as we could to be of assistance. Whether your concerns are related to unexpected financial hardship, risk mitigation, or health and safety measures, we are here to help you navigate the times ahead.
Please keep in mind that the situation is ever-developing and information and guidelines will constantly change. That being said, as of today, there are many programs available to you both on the state and federal level.
Where can I get help if my business is facing financial strain due to COVID-19?
The United States Small Business Administration (SBA) provides small business owners with low-interest disaster relief loans if their business is in a state and county that has been declared an “Eligible Disaster Area” by the SBA. In California, as of March 16, the following counties have been declared as eligible: Alameda, Calaveras, Contra Costa, Los Angeles, Sacramento, San Diego, San Francisco, San Mateo, Sonoma, Tuolumne, Alpine, Amador, El Dorado, Imperial, Kern, Lake, Madera, Marin, Mariposa, Mendocino, Merced, Mono, Napa, Orange, Placer, Riverside, San Bernardino, San Joaquin, Santa Clara, Santa Cruz, Solano, Stanislaus, Sutter, Ventura and Yolo.
If your business is located in an Eligible Disaster Area, you may qualify for an Economic Injury Disaster Loan (EIDL) from the SBA. To qualify, an applicant must have an acceptable credit history, an ability to repay the loan, and collateral if the loan will be over $25,000 (but don’t let the lack of collateral deter you because the SBA will work with you if needed). EIDL loans are capped at a maximum interest rate of 4% for a maximum 30-year term, determined on a case-by-case basis. An EIDL loan is usually limited to a maximum amount of $2 million dollars.
A business owner can apply for the SBA’s EIDL at www.disasterloan.sba.gov. If you need help navigating the application process, or would like to learn what other options are available, below are some resources for business owners:
- America’s Small
Business Development Centers (SBDCs) www.americassbdc.org offers free services in person and on-line to help with:
- the SBA application process,
- a plan for your business to survive the pandemic,
- exploring what other capital infusion options may be available to you, and understanding the practical impact of loan terms.
- The Small Business Majority www.smallbusinessmajority.org focuses on helping businesses with 100 or less employees. Their tools can be accessed at www.venturize.org.
In California, the Disaster Relief Loan Guarantee Program is available to small businesses in need of working capital. This program can help businesses qualify for loans, including the SBA’s EIDL, that otherwise would be considered ineligible. The guarantee can cover up to 95% of the loan for up to $1 million. More information can be found at www.ibank.ca.gov and www.sbfdoc.org specifically for Orange County businesses.
What about taxes?
Both the federal and state government have extended the deadline to pay monies owed for personal and business taxes. The federal deadline has been extended to July 1, 2020, in the amount of up to $1 million for individuals and $10 million for corporations, and the California deadline has been extended to June 15, 2020.
Employers experiencing a hardship as a result of COVID-19 may request up to a 60-day extension of time from the EDD to file their state payroll reports and/or deposit state payroll taxes without penalty or interest. A written request for extension must be received within 60 days from the original delinquent date of the payment or return.
Employers may call the EDD Taxpayer Assistance Center at (888) 745-3886.
What are my obligations to my employees?
Do I have to let employees work remotely?
If your business is open and work could get done remotely, you may want to explore remote working, for your own and your employees’ health, but most importantly for morale. Here are some tips on remote working:
- Explore online connection platforms such as JoinMe, Hangouts, Cisco, and Zoom for remote conferences and meetings.
- If employees are using their personal equipment to work from home, you must reimburse them the reasonable proportion of their personal cell-phone plan or internet plan that they are using for the business. Learn more about expense reimbursements.
Do I have to give employees time off to stay home with their children if remote work is not feasible in my business?
If your business has 25 or more employees, employees are entitled to up to 40 hours of leave per year for specific school-related emergencies, such as the closure of a child’s school or day care by civil authorities. (See Labor Code section 230.8) Whether that leave is paid or unpaid depends on your company’s paid leave, vacation or other paid time off policies. You may require employees to use their vacation or paid time off benefits before they are allowed to take unpaid leave, but cannot require employees to use paid sick leave. However, a parent may choose to use any available paid sick leave to be with their child as preventative care.
What are my obligations if I have to send employees home?
If hourly employees are sent home for any reason other than a closure order by civil authorities.
In this case, if an employee reports for their regularly scheduled shift but is required to work fewer hours or is sent home, the employee must be paid for half of their normally scheduled shift, but in no event should they be paid less than 2 hours or more than 4 hours. For example, a worker who reports to work for an eight-hour shift and only works for one hour must receive four hours of pay.
If hourly employees are sent home because of a business closure order by civil authorities.
You are not required to pay reporting time pay. However, you may consider giving employees the option to use any paid time off available.
If an exempt employee works any portion of a day, there can be no deduction from salary for a partial day absence for personal or medical reasons.
What if we have to reduce work hours?
If you have a salaried employee and cut hours across the board, you may reduce their compensation as long as you provide them with a Notice of Reduced Earnings to Employee (which can be found at https://www.edd.ca.gov/pdf_pub_ctr/de2063.pdf) as well as the Notice to Employee that there are changes to the terms of their employment. If this is necessary, inform your employee(s) that they may be eligible to receive partial unemployment benefits through the EDD. As of March 12, there is no longer any waiting period to receive unemployment benefits due to COVID-19 related claims.
As of now, if an employee who does not have COVID-19 and/or is not caring for anyone who does, requests to stay home , you are not required to keep their job open or pay for unworked time. However, as a matter of good will, and if your business is able to withstand the financial impact, you may wish to allow employees to use accrued but unused vacation time.
What if my employee has been personally affected by COVID-19?
If an employee is ill, is positive for COVID-19, or is taking care of someone who has tested positive for COVID-19, you must allow them to use accrued paid sick leave. Additionally, employees may be eligible for benefits under California’s Paid Family Leave (PFL), California’s Family Rights Act (FRA), and the federal FMLA. Employees who are ill may be eligible for disability benefits.
California requires all employers to provide employees with 3 days (24 hours) paid sick leave, with some cities requiring 6 or 9 days. Currently, there is a federal bill (Families First Coronavirus Response Act) that the House has approved that would allow employees an additional 14-days coverage if they are impacted by COVID-19. If an employee is on sick leave, their position is protected, and they receive full pay. The federal government is considering reimbursing employers for the 14-day coverage period if enacted in the form of a tax credit. Businesses with less than 50 employees may request an exemption if it would hurt the viability of the business. Update: This bill was signed into law on March 18, 2020. Read about the Families First Coronavirus Response Act.
Employees are also eligible to apply for PFL which provides for 6 weeks of partial payment, usually between 60-70% of the employee’s typical wages. Employees may also be eligible for CFRA coverage if the business has over 20 employees, and FMLA coverage if the business has over 50 employees.
If an employee exhausts sick leave, can other paid leave be used?
Yes, if an employee does not qualify to use paid sick leave, or has exhausted sick leave, other leave may be available. If there is a vacation or paid time off policy, an employee may choose to take such leave and be compensated provided that the terms of the vacation or paid time off policy allows for leave in this circumstance.
Can I require a worker who is quarantined to exhaust paid sick leave?
An employer cannot require that the worker use paid sick leave; that is the worker’s choice. If the worker decides to use paid sick leave, the employer can require they take a minimum of two hours of paid sick leave. The determination of how much paid sick leave will be used is up to the employee.
What if my employees need to travel?
Travel should be avoided if possible to minimize community risk. However, as an employer, you still have the right to ask your employees to travel as long as the travel does not violate OSHA requirements to provide a safe workplace, which includes travel destinations that may be unsafe. Whether or not a travel location violates safety standards can be determined according to the CDC’s health travel information found here: https://wwwnc.cdc.gov/travel.
What if I have to close my business and lay people off?
If your employee believes they have contracted COVID-19, then it may be best to temporarily close your business. If this is the case, inform your employees that they are eligible for unemployment as described above. You can determine what steps you need to take according to CDC recommended guidelines, which can be found at https://www.cdc.gov/coronavirus/2019-ncov/php/risk-assessment.html. The EDD also has Rapid Response teams to help avert layoffs if possible and to provide on-site assistance to employees facing layoffs. See https://www.edd.ca.gov/pdf_pub_ctr/de8714rrb.pdf
We understand it is a concern for businesses if their employees submit unemployment claims because their unemployment insurance can go up significantly. While no concrete information is yet available, plans are being discussed which would assist employers by limiting any potential insurance premium raises. Additionally, California’s Unemployment Work Sharing Program is available to help employers with associated costs. Information can be found at https://edd.ca.gov/unemployment/Work_Sharing_Program.htm.
Maintaining a Healthy Workplace
Most businesses are dealing with a balancing act of keeping business afloat while ensuring the continued health of yourself and your employees. Here are some things to consider as you make extremely difficult decisions over the next few days or weeks:
- Actively encourage sick employees to stay home even if they otherwise wouldn’t have;
- Keep your sick leave policies flexible so that an employee does not make the decision to come to work sick out of financial need;
- Provide readily-available disinfecting products throughout the workplace;
- Instruct employees to clean their hands often per CDC recommendations;
- Routinely clean all commonly touched surfaces; and
- Increase routine cleanings for a temporary time.
Specific recommendations on how to clean and properly disinfect your workplace can be found at https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/cleaning-disinfection.html.
We will continue to monitor the situation provide updates on the Families First Coronavirus Response Act as well as any additional resources we believe will be helpful.