Federal legislation in response to the coronavirus pandemic and its disruption to American life and business has particular implications for owners of construction businesses, including provisions requiring paid time off for workers, alongside reimbursement to businesses if the time off is coronavirus-related.
The Families First Coronavirus Response Act (FFCRA H.R. 6201) is effective April 2; paid leave rules take effect 15 days later. The law expires December 31. Signed March 18 by President Trump, it applies to employers with fewer than 500 employees. It requires 100% of pay for employees who are off work because the novel coronavirus makes them:
* Go to a doctor
* Stay home
It requires 67% of pay for employees when employees are off work to:
* Care for family members
* Care for family member who self-isolate
* Care for children for whom day care is unavailable.
The FFCRA also broadens eligibility for Public Health Emergency Leave to any employee who has been employed for at least 30 calendar days.
Accountant Martin C. McCarthy, CPA, CCIFP, managing partner of McCarthy & Company, PC, in Lafayette Hill, Pennsylvania, said construction contractors’ working capital is under immediate threat during the crisis.
Employers are eligible for tax credits to offset time-off mandates, but these may not be available until taxes are filed in the third or fourth quarter, McCarthy said. McCarthy said the government could decide to push relief forward by reducing the current amount that businesses owe for social security and Medicare taxes, but he called that possibility “speculative.” In the meantime, it could exacerbate the plight of construction firms that struggle to remain liquid as the economy shifts into reverse while government and society attempt to mitigate spread of the virus.
“It could have a negative impact on working capital, because you are going to be required to pay employees for work they have not performed, which generally means you cannot bill for that project.”
McCarthy pointed to bank and federal Small Business Administration loans as possible stopgaps for construction companies that find themselves running low on cash. In addition, help is on the way in the form of $350 billion in federally guaranteed loans that are part of a massive coronavirus relief package in Congress. President Trump signed the emergency stimulus on Friday, March 27 after Congress passed it earlier that day.
The federal government has also extended the tax payment deadline for any individual who owes less than $1 million and extended the filing deadline for everyone until July 15.
The precise timing and reimbursement method to companies for paid time off is just one of the uncertainties faced by business owners. McCarthy said it was unclear what the employer’s responsibility is if the companies choose to shut down in response to the virus. Provisions are included in the proposed $2 trillion economic stimulus package to help small businesses that keep their payroll steady during the crisis, even if they have to temporarily close. He said liability issues connected to work-related infections could crop up as construction contractors are pulled in opposite directions. For example, McCarthy noted that Philadelphia has declared construction an essential industry, the work of which must carry on during the crisis. At the same time, the state of Pennsylvania has shut down other construction projects.
“A slowdown is going to come,” said McCarthy, a member of the NASBP Certified Public Accountant Advisory Council. “To weather the slowdown, you need to be prepared. You have to have enough working capital.”
He said keeping lines of communication open with CPAs, surety companies, bankers, and employees (who may be laid off) about the company’s financial status is key to managing potential cash-flow problems.
“Don’t bury your head in the sand. Talk to them about what your plan is to handle this,” McCarthy advised. “The more that you’re proactive, the better off you are.”