The CARES Act of 2020 and what how it applies to sole proprietorships, gig workers, and contractors
On March 25th, the Senate unanimously passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and on the 27th it passed the House of Representatives on a voice vote and was signed into law by the President.
This sweeping legislation, the largest appropriations bill ever passed in the history of the United States, does much to ensure the liquidity of the US economy over the coming months. It creates funds for grants and loans to maintain industries facing imminent collapse as workers are forced to quarantine to protect their health, it pumps more cash into the financial markets to stabilize them as the economy tailspins into a now-unavoidable recession, and overall it helps ensure we have an economy to come back to when the threat of COVID-19 is better-controlled.
Whatever the final outcome of this crisis, our economy and our government’s fiscal policies will never be able to return to the status quo. The CARES Act creates government investment in private-sector businesses at a level not seen since the New Deal, and this Act and others signed into law this week drastically expand unemployment coverage, paid sick leave, and other employee benefits. It is unlikely these will be able to be rolled back easily.
One of the most striking and long-overdue changes to unemployment coverage is in Subtitle A of Title II of Division A. It mandates the creation of a Pandemic Unemployment Assistance program to provide benefits to those not formerly eligible and who are unable to work as a direct result of COVID-19. The Act also provides enhanced benefits for all workers eligible for unemployment. Unlike the Families First Coronavirus Response Act (FFCRA), which only applies to private employers with fewer than 500 employees, the CARES Act applies to all employers regardless of size.
The Act extends coverage to workers who are self-employed, gig-workers, or otherwise could not qualify for unemployment benefits under state or federal law. Specifically noted, and VERY importantly, this provision covers independent contractors.
As independent contractors become a larger part of the overall economy, it becomes vital to ensure that they receive the same protections and benefits as direct employees. Access to unemployment insurance is one important step, and another is decoupling health care from employment. Millions of workers just lost their health coverage or were forced onto extortionately-priced COBRA plans in the past two weeks. Maryland has lead the way in re-opening enrollment onto the state’s ACA exchange, but more must be done at the Federal level.
Our current regulatory environment for employment and employee benefits is based on a series of assumptions that is no longer true; namely, that the vast majority of workers are employed full-time and long-term by companies that pay for benefits packages as part of their compensation, including health insurance and retirement. The reality of the modern era is that large companies feel in no way beholden to their employees, and these systems of compensation are not appropriate for the highly volatile job market and increasing number of contract-based jobs and self-employed workers in the marketplace today.
For those independent workers and small partnerships who would not be otherwise eligible for benefits, the CARES Act is a watershed moment. It is the first acknowledgement of the current economic reality, and it will be a literal lifesaver for many of the self-employed.
It is important to acknowledge that the ranks of the self-employed and independent contractors include many disabled individuals who find working under the conditions they set themselves allows them to maintain an income off disability payments and avoid the woefully inadequate existing safety net. The CARES Act will help ensure that many of these workers do not slip through the cracks and onto the rolls of SSI and SSDI as a matter of last resort.
Over the next few days, instructions should be made available for individuals and self-employed persons to apply for the enhanced unemployment benefits offered as part of the CARES Act.When we know more about how the process works, we will provide updates. Until then, take care and be safe.