The recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provides $2.2 trillion to stabilize the American economy as the country deals with the novel coronavirus COVID-19. In addition to directly providing many American families with cash stimulus payments, the CARES Act provides federal funds, grants, loan guarantees, and other resources to a wide variety of entities to help them combat the virus and weather the storm of its effects. These include state, local, and tribal governments; hospitals and healthcare workers; law enforcement and first responders; scientific research institutions; small businesses; local schools and universities; and federal contractors.
While contractors should note that the relief window is not open ended and agencies can only provide relief up to September 6, 2020, for federal contractors, the CARES Act provides potential new business opportunities, and throws an immediate lifeline to qualifying firms whose workforce has been displaced by COVID-19 shutdowns.
Section 3610 provides funds to aid government contractors who satisfy two conditions:
- Their employees or subcontractors cannot perform work on a site that has been approved by the federal government, including a federally-owned or -leased facility or site, due to facility closures or other restrictions; and
- Their employees or subcontractors cannot telework because their job duties cannot be performed remotely during the COVID-19 public health emergency.
Section 3610 provides funds that federal agencies can use to modify the terms and conditions of a contract to reimburse contractors who provide paid leave, including sick leave, to its employees in order to keep them “on a ready state.”
Section 3610 places restrictions on the amount of relief contractors can receive. Agencies can only reimburse qualifying contractors at minimum applicable contract billing rates not to exceed an average of 40 hours per week.
Finally, Section 3610 prevents double dipping. It reduces the amount of money contractors can receive under this provision by the amount of credit a contractor is allowed pursuant to Division G of Public Law 116–127—which provides tax credits against payroll taxes for employer-paid qualified sick leave wages—and any applicable credits a contractor is allowed under the CARES Act.
- Speed is key: This relief is only available up to September 6, 2020. Qualifying contractors should immediately contact their Contracting Officer and determine how they can apply for this relief, and identify all of the documentation necessary to do so.
- Ensure your employees remain in a “ready state”: Ask your Contracting Officer what employees can and cannot do while on leave in order to maintain a ready state footing.
- Precisely document your steps: Ensure that all notices placing employees on leave pursuant to section 3610 cite this portion of the CARES Act, and recite all of the conditions necessary to invoke it.
- Guard against double dipping: Calculate the amount of the tax credits you are entitled to under Division G of Public Law 116–127 and other CARES Act sections. The maximum amount of relief you can receive under Section 3610 will be reduced by this amount. It is best to know up front how much you can accept to avoid myriad headaches and potential pitfalls down the road.
As COVID-19 issues permeate virtually all aspects of commerce nationally and internationally, we stand ready to help. Blank Rome’s Coronavirus (“COVID-19”) Task Force includes interdisciplinary resources across every business sector from insurance recovery to HR.