Category: Employment Law Tracker


Emergency loans under SBA Economic Injury Disaster Loan Program (EIDL)

April 8th, 2020 — 8:57pm

By Joseph Kelly

As we’ve written about previously here, the Keeping American Workers Paid and Employed Act (“Workers Act”), amends Section 7(a) of the Small Business Act (15 USC 636(a)), by providing for the new paycheck protection (“PPP”) loans. The Workers Act, in addition, amends Section 7(b)(2) regarding economic injury disaster loans of up to $2 million, by expanding the class of eligible recipients, relaxing some requirements for approval, limiting personal guarantees, and providing a $10,000 “emergency” grant to cover certain expenses. But the circumstance in which a business or nonprofit will qualify for these loans is much more limited than for PPP loans.

Here are more details, including some comparisons to PPP loan:

  • What sort of businesses and nonprofits are eligible for this loan?

“”[I]n addition to small business concerns [(as defined under the Small Business Act)], private nonprofit organizations, small agricultural cooperatives,” and any “eligible entity,” meaning “(A) a business with not more than 500 employees; (B) any individual who operates under a sole proprietorship, with or without employees, or an independent contractor; (C) a cooperative with not less than 500 employees; (D) an ESOP … with not less than 500 employees; or (E) [certain tribal businesses] …” (Workers Act, Sec. 1110).

  • What is a private nonprofit organization?

“An eligible private non-profit organization is a non-governmental agency or entity that currently has: (1) An effective ruling letter from the U.S. Internal Revenue Service, granting tax exemption under sections 510(c), (d), or (e) of the Internal Revenue Code of 1954, or (2) Satisfactory evidence from the State that the non-revenue producing organization or entity is a non-profit one organized or doing business under State law.” 13 CFR 123.300(d). This includes faith-based organizations. (Non-profits eligible for PPP loans, in contrast, are limited to those described in 501(c)(3) of the Internal Revenue Code and exempt form tax under 501(a) of the Code. See Workers Act, 1102(a)(2)(A)(vii)).

  • Has there been a “disaster” or “emergency” of a type necessary for a disaster loan?

Yes, wherever you are in the United States. The SBA may “make such loans … as [it] may determine to be necessary or appropriate to any small business concern, private nonprofit organization, or small agricultural cooperative located in an area affected by disaster, … if [it] determines that the concern, the organization, or the cooperative has suffered a substantial economic injury as a result of such disaster” (15 USC 636 (b)(2)). It’s enough that there was a declaration by the President that “such disaster constitutes … an emergency involving Federal primary responsibility determined to exist by the President under the section 501(b) of the [Stafford Act].” (15 USC 636 (b)(2)(D), as amended sec. 1110(f) of Workers Act). (There is no such requirement for a PPP loan).

  • How do we determine if we have “suffered a substantial economic injury as a result of such disaster,” as is required for a disaster loan?

According to SBA regulations: “If your business is located in a declared disaster area and suffered substantial economic injury as a direct result of a declared disaster, you are eligible to apply for an economic injury disaster loan. (1) Substantial economic injury is such that a business concern is unable to meet its obligations as they mature or to pay its ordinary and necessary operating expenses. (2) Loss of anticipated profits or a drop in sales is not considered substantial economic injury for this purpose. “ 13 CFR 123.300(a). In addition, “[e]conomic injury disaster loans are available only if … you and your affiliates and principal owners (20% or more ownership interest) have used all reasonably available funds ….” 13 CFR 123.300(b). The circumstances under which disaster loans are available for a business, thus, are much narrower than for PPP loans. For PPP loans, the applicant must merely certify “that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operation of the eligible recipient.”).

  • Are these disaster loans available to business start-ups?

Yes. SBA waives through December 31, 2020 the “requirement that an applicant needs to be in business for the 1-year period before the disaster”—provided that the business was in operation on January 31, 2020. (Sec. 1110(c)(2) of Workers Act).

  • Is there a credit test for the loan?

Yes. SBA through December 31, 2020 “may—(1) approve an applicant based solely on the credit score of the applicant and shall not require … tax return or a tax return transcript … ; or (2) use alternative appropriate methods to determine applicant’s ability to repay.” (Sec. 1110(d)).

  • Does it matter whether we can obtain credit elsewhere?

No. The SBA waives through December 31, 2020 usual condition that “applicant is not able to obtain credit elsewhere.” 15 USC 636 (b)(2), as amended by sec. 1110(c)(3) of Workers Act). The same waiver exists for PPP loans.

  • Are there limitations on use?

Yes. Use is limited to “working capital necessary to carry your concern until resumption of normal operations and for expenditures necessary to alleviate the specific economic injury, but not to exceed that to which the business could have provided had the injury not occurred.” 13 CFR 123.303 (a). Also, proceeds can’t be used to refinance debt incurred before the disaster event, pay certain tax penalties or non-tax penalties or fines, make payments on another SBA or other Federal loan, repair physical damage, or pay dividends or disbursements to owners, except reasonable compensation of services for the business. 13 CFR 123.303 (b). Uses for a disaster loan, thus, are broader than for a PPP loan, where at least 75% of proceeds must be use for “payroll costs.”

  • Are personal guarantees required?

Only if the loan exceeds $200,000. The SBA waives through December 31, 2020 “any rules related to personal guarantees on advances and loans of not more than $200,000 during the covered period [1/31/20 to 12/31/20].” (Sec. 1110(c)(1) of Workers Act). Generally, no guarantee is required for PPP loans, regardless of amount.

  • Is collateral required?

Not for a loan of $25,000 or less; for larger loans, a security interest in business property is required. (13 CFR 123.11 (a) (1) and (b)). PPP loans in contrast generally require no collateral.

  • What is the maximum loan amount?*

The “aggregate loan amount outstanding and committed to a borrower … may not exceed $2,000,000.” 15 USC 636 (b)(8)(A); PPP loans are limited to 2.5 times average monthly payroll costs, subject to $10 million limit

  • What is the interest rate?

Reportedly 3.75% for business; 2.75% for non-profit – compared to 1% for PPP loans

  • What is the maximum loan term?

30 year maximum (15 USC 636 (b)(2); PPP loans have a 2-year term

  • What about the $10,000 emergency grant we heard about?

Yes, there exists such a thing, subject to self-certification under penalty of perjury of eligibility. The applicant “may request that the [SBA] provide an advance [of “not more than $10,000”] … within 3 days after receiving an application from such applicant”; so, before loan approval and regardless of whether the loan is approved. (Sec. 1110(c)(2) and (3) of Workers Act). (There is no such 3-day grant under the PPP loan program). “An advance … may be used to address any allowable purpose for a loan under section 7(b)(2) of the Small Business Act …, including—(A) providing paid sick leave to employees unable to work due to the direct effect of the COVID-19; (B) maintaining payroll to retain employees during business disruptions or substantial slowdowns; (C) meeting increased costs to obtain materials unavailable from the applicant’s original source due to interrupted supply chains; (D) making rent or mortgage payments; and (E) repaying obligations that cannot be met due to revenue losses.” (Sec. 1110(c)(4) of Workers Act). “An applicant shall not be required to repay any amounts of an advance … even if subsequently denied a loan ….” (Sec. 1110 (c)(5)).

  • Is there loan forgiveness for a disaster loan?

No, except the $10,000 advance will not require repayment; forgiveness for PPP loans is limited to certain amounts paid during 8-week period immediately following loan origination, but only for payments through June 30, 2020 (so possibly less than 8 weeks if the loan closes after May 1) and will be proportionately reduced if there are layoffs or wage and salary reductions during that 8-week period.

  • What if we have other loans?

You will need to consider restrictions in other loan documents that affect your ability to obtain an SBA loan and consult with your lender – and legal counsel. If you qualify for a disaster loan, you presumably will be in default under other loans; a business may obtain a disaster loan only if as a direct result of the disaster, it “is unable to meet its obligations as they mature or to pay its ordinary and necessary operating expenses.”

  • What about using a disaster loan to refinance another loan?

You cannot use a disaster loan to refinance debt incurred before the disaster event. But note that the SBA is providing debt relief for certain existing SBA loans. The SBA provides more information [here.

  • Where and how do we apply for a disaster loan?

Directly to the SBA here.

  • How fast will they process our request?

According to reports, there is a backlog and SBA has been swamped with requests.

  • Can we also apply for a PPP loan and vice versa?

Yes.

  • If we apply for a PPP loan and have a disaster loan, how will things work?

You may obtain a disaster loan after January 31, 2020 and also qualify for a PPP loan, provided that the disaster loan “is for a purpose other than paying for payroll costs and other obligations described in subparagraph (F) …”—namely: “costs related to the continuation group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums”; “employee salaries, commissions, or similar compensations”; “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.” (Sec.1102(a)(2)(F) (i)) and 1102(a)(2)(Q) of Workers Act). You also may also use a PPP loan to refinance a disaster loan made on or after January 31, 2020. (Sec. 1102 (F)(iv)). Any advance for a disaster loan, that wasn’t repaid, would reduce the amount of any PPP loan forgiveness.

For more information, here’s a link to the SBA EIDL program webpage.

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OSHA guidelines for safe workplaces

April 2nd, 2020 — 4:35pm

By Joseph P. Kelly

If your company is still open and operating as an “essential business” under a stay-at-home order, it’s critical that you follow all the social distancing practices set forth in such stay-at-home order and otherwise provided by the CDC.

However, those orders tend to be somewhat general. To that end, OSHA has issued a detailed guidance for those employers still open – “Guidance on Preparing Workplaces for COVID-19”.

For essential businesses with traveling employees, note that the OSHA guidelines contain some specific advisories regarding such travel.

Bottom line for essential businesses — do ALL that you can to keep your workplace safe!

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IRS: Limitations on paid leave for child caretakers; required documentation for employer tax credits

April 2nd, 2020 — 3:48pm

By Joseph P. Kelly

Earlier this week we wrote here about emergency paid sick leave (“EPSL”) under the Families First Coronavirus Response Act and expansion of the Family Medical Leave Act (FMLA+).

Unless you have Covid-19-related sick or quarantined employees or employees caring for Covid-19-related sick or quarantined family members, the main way these new laws would affect you is if you have employees who are home and can’t telework because of a Covid-19 related school closure or closure of a child care (paid) provider. But these laws will only apply if a company is still open; if closed because of a stay-at-home order, employees aren’t entitled to paid leave.

The IRS yesterday provided detailed guidance relating to such childcare-related leave.

Of note is the IRS’s position that only one caretaker per household may take leave to care for a child after a school or daycare closure.

The IRS also detailed the documentation an employee must provide in requesting such leave, as well as the documentation an employer must have to claim tax credits under these new laws.

For more information, please consult the IRS’s “COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs.”

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“Forgivable” loans under Payroll Protection Program/CARES Act

April 1st, 2020 — 5:25pm

By Christopher J. Graham and Joseph P. Kelly

We previously posted here about the new SBA-guaranteed “forgivable” loans available under the Payroll Protection Program portion of the recently-passed CARES Act (the “Act”) and how those loans may be attractive.

This post provides more details.

Limitations on amount:

The new SBA-guaranteed “forgivable” loans for the “covered period” of 2/15/20 – 6/30/20 are limited to 2.5 times average total monthly payments for total payroll costs incurred during the 1-year period before the loan origination date (with a $10 million maximum). There’s also deferral of payments for 6 months; no collateral required; no guarantees; no prepayment penalties; and a 1% interest rate.

Forgiveness:

Subject to documentation requirements, a company (or sole proprietorship) won’t have to repay the loan to the extent loan proceeds are used for costs paid or incurred—during the 8-week period starting with loan origination—for “payroll costs,” interest on “covered mortgage obligations” and payments on any “covered rent obligation” or “covered utility obligation” – as those terms are defined in the Act.

If a covered loan has a balance after “forgiveness” under the Act, the SBA will continue its guarantee and “the covered loan shall have a maximum maturity of 10 years from the date on which the borrower applies for loan forgiveness….(Sec. 1102(a)(2)(K)).

Applications; timing of availability

Secretary Munchin reportedly said that the loan program will be up and running by April 3; we shall see. The Act says that the SBA has up to 15 days from enactment (on March 27) to “issue regulations….” (Sec. 1114). So, that would be by Saturday, April 11.

According to the Treasury Department, if using an existing SBA lender, small businesses and sole proprietorships can apply for loans starting on April 3 and independent contractors and self-employed individuals can apply starting April 10. A list of SBA lenders can be found on www.sba.gov. Other lenders will be available to make these loans once they are approved and enrolled in the loan program.

Here’s a link to the application which includes certification requirements described below.

Certification – need and use:

The Act contains a certification requirement on need and use that will factor into any borrower’s decision:. Here’s what it says:

An eligible recipient applying for a covered loan shall make a good faith certification—

(I) that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operation of the eligible recipient; (II) acknowledging that the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments; (III) that the eligible recipient does not have an application pending for a loan under this subsection [(Section 7(a) of the Small Business Act)] for the same purpose and duplicative of amounts applied for or received under a covered loan; (IV) during the period beginning on February 15, 2020 and ending on December 31, 2020, that the eligible recipient has not received amounts under this subsection for the same purpose and duplicative of amounts applied for or received under a covered loan. (Sec. 1102(a)(2)(G))

We think the certification wording has gray areas. If a company is one of the “lucky” ones that has an uptick in business and doesn’t really need the money, it can’t meet the certification requirements—we presume.

But if a company’s business is down and given the “uncertainty of current economic conditions,” it may have a “good faith” belief that it will need the funds in the next month to “support” “ongoing operations,” we presume it could provide the required certification.

If instead of the SBA loan, company owners could cover the expected need by injecting capital or loaning funds to the company, we presume that wouldn’t mean that company is ineligible for the loan and could provide the certification. In that regard, another section of the Act provides that, “During the covered period [2/15/20 – 6/30/20], the requirement that a small business concern is unable to obtain credit elsewhere … shall not apply to a covered loan.” (Sec. 1102(a)(2)(I)). So, if a company is not required to try to obtain “credit elsewhere,” why would owners be required to provide additional capital or loan the company the funds themselves?

Part (II), meanwhile, refers to using the funds “to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.” But that’s a bit different than an earlier part of the Act, regarding use, which provides, subject to a list of exceptions, that:

During the covered period [2/15/20 – 6/30/20], an eligible recipient may, in addition to the allowable uses of such a loan made under this subsection, use the proceeds of the covered loan [meaning a loan made under this new law during the covered period] for—

(I) payroll costs [a defined term]; (II) costs related to the continuation group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums; (III) employee salaries, commissions, or similar compensations; (IV) payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation); (V) rent (including rent under a lease agreement); (VI) utilities; and (VII) interest on any other debt obligations that were incurred before the covered period.” (Sec. 1102(a)(2)(F)).

We expect that there will be SBA regulations shedding some light on the certification requirements. Accuracy in providing certifications will be very important – as we are sure there will be consequences if a certification is false.

Affiliation rules for large corporate groups:

In determining eligibility, a company that is part of a larger corporate group will be subject to SBA “affiliation” rules. For determining whether a potential borrower exceeds the maximum number of employees, the SBA’s affiliation rules (13 C.F.R. 121.103) provide that the employees of the borrower and its affiliates will be aggregated. A company with foreign ownership may be subject to additional limitations – but we have not seen anything specific on that issue yet and have reached out to lenders for more information.

Loan recipients not entitled to tax benefits under the Act:

The Act also includes changes to the Internal Revenue Code, including a new refundable payroll tax credit for employee “retention” and for deferral of payment of 2020 payroll taxes into 2021 and 2022. But neither tax benefit will be available to a company that takes on an SBA “forgivable” loan.

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Correction to required posting under Families First Coronavirus Response Act – effective April 1

March 31st, 2020 — 6:00pm

By Christopher J. Graham and Joseph P. Kelly

We previously posted here about the required posting for employers with less than 500 employees under the Families First Coronavirus Response Act.

The Department of Labor issued a corrected poster (link here) to address an error in the original poster.

An employer meets the “posting” requirement by posting the poster “in a conspicuous place on its premises” or “by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website.” As a practical matter, the most efficient way for employers to meet the “posting” requirement likely is to email the corrected poster to its employees.

Remember – the “posting” deadline is April 1 and all employers with less than 500 employees must comply with the posting requirement!

Notwithstanding the “posting” requirement, for most employers, the new law will make a difference only if it has employees caring for children due to a school closure resulting from coronavirus and who don’t telework or if an employer has employees who become ill or quarantined because of coronavirus or care for others with coronavirus.

The Department of Labor issued a guidance (Fact Sheet for Employers, Fast Sheet for Employees, and Questions and Answers) that contain more information for affected employers.

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Emergency small business relief – CARES ACT

March 29th, 2020 — 7:50pm

By Christopher J. Graham and Joseph P. Kelly

Every “small” business (less than 500 employees) should give serious consideration to taking advantage of SBA guaranteed loans under the Coronavirus Aid, Relief and Economic Security (CARES) Act, whether you’re an entity employing many people or even just a sole proprietor or independent contractor.

The “forgiveness” aspect of the loan is attractive. Subject to certain documentation requirements, you won’t have to repay the loan to the extent you use loan proceeds for costs paid or incurred – during the 8-week period starting with loan origination – for “payroll costs,” interest on “covered mortgage obligations “and payments on any “covered rent obligation” or “covered utility obligation” – as those terms are defined in the Act.

The 1% interest rate is attractive and so is deferral of payments for at least 6 months, or up to one year; and there’s no personal guarantee or collateral requirement, at least to start.

Even self-employed persons may borrow funds to cover “payroll costs” and “covered” “rent,” “utility,” and mortgage interest payments – and then, subject to the documentation requirements, obtain loan forgiveness for amounts paid to cover those costs.

If you obtain this sort of loan and pursue loan forgiveness, it will be critical to comply with the documentation requirements that are a condition for loan forgiveness.

You should consult with your banker for details and presumably the SBA will have more information soon. We would expect the SBA to post details on the loan process soon.

Remember, if you already have an SBA loan, the Act provides you relief as well. There is a separate section addressing those existing loans.

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Posting required under Families First Coronavirus Response Act – now effective April 1

March 29th, 2020 — 7:32pm

By Christopher J. Graham and Joseph P. Kelly

UPDATE (3/31/20 1:00 p.m. CST): The DOL issued a new poster and we blogged about it here.


Here’s a link to the poster all employers with less than 500 employees are required to “post” under the Familes First Coronavirus Response Act.

For most employers, the new law will make a difference only if it has employees caring for children due to a school closure resulting from coronavirus and who don’t telework. The other way it will apply is if an employer has employees who become ill or quarantined because of coronavirus or care for others with coronavirus.

As for the details of the “posting” requirement including electronic posting, see this link to the DOL.

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Families First Coronavirus Response Act – Info for Employers

March 29th, 2020 — 7:14pm

By Christopher J. Graham and Joseph P. Kelly

The US Department of Labor just published FAQs answering many questions about the details of the new Families First Coronavirus Response Act and expanded Family Medical Leave Act.

As a general matter, unless you have Covid-19-related sick or quarantined employees or employees caring for Covid-19-related sick or quarantined family members, the main way it would affect you is if you have employees who are home and can’t telework because of a Covid-19 related school closure or closure of a child care (paid) provider.

There’s now greater clarity about many issues, such as permissible documentation requirements; intermittent leave, whether from teleworking or otherwise; and calculating pay for part and full-time workers.

Regarding whether an employee is entitled to paid leave if they are unable to work because of a State stay-at-home order, here’s what the DOL says:

If my employer closes my worksite on or after April 1, 2020 (the effective date of the FFCRA), but tells me that it will reopen at some time in the future, can I receive paid sick leave or expanded family and medical leave?

No. If, prior to the FFCRA’s effective date, your employer sent you home and stops paying you because it does not have work for you to do, you will not get paid sick leave or expanded family and medical leave but you may be eligible for unemployment insurance benefits. This is true whether your employer closes your worksite for lack of business or because it is required to close pursuant to a Federal, State, or local directive. You should contact your State workforce agency or State unemployment insurance office for specific questions about your eligibility. For additional information, please refer to https://www.careeronestop.org/LocalHelp/service-locator.aspx.
It should be noted, however, that if your employer is paying you pursuant to a paid leave policy or State or local requirements, you are not eligible for unemployment insurance.

The same would hold true if the business was closed before April 1 and remained so afterwards.

In a related vein, the DOL says:

If my employer reduces my scheduled work hours, can I use paid sick leave or expanded family and medical leave for the hours that I am no longer scheduled to work?

No. If your employer reduces your work hours because it does not have work for you to perform, you may not use paid sick leave or expanded family and medical leave for the hours that you are no longer scheduled to work. This is because you are not prevented from working those hours due to a COVID-19 qualifying reason, even if your reduction in hours was somehow related to COVID-19.

You may, however, take paid sick leave or expanded family and medical leave if a COVID-19 qualifying reason prevents you from working your full schedule. If you do, the amount of leave to which you are entitled is computed based on your work schedule before it was reduced[.]

Remember though, that if you are required to provide paid family leave, there is a tax credit available to reimburse you for the payments – a credit against the employer share of certain payroll taxes. See IRS site for details.

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Much ado about nothing? Illinois’s new law “requiring” private retirement plan or enrollment in state plan

January 21st, 2015 — 2:50pm

by Christopher Graham and Joseph Kelly.

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On his way out of office, now former Governor Quinn, with much fanfare, signed the “Illinois Secure Choice Savings Program Act”(820 ILCS 80/1 et. seq.), supposedly making Illinois the first state to require employers to either offer employees a retirement plan or enroll them in a State program. Sounds great if your an employee, right? But is it really a monumental piece of legislation as suggested when announced? Or was this just more Illinois politics?

Although the Act is the law, it isn’t effective until June 1, 2015. Even then, the Act provides that “the Program shall be implemented, and enrollment of employees shall begin, within 24 months after the effective date . . .”–so perhaps not until June 1, 2017.

There’s also an exception to that June 1, 2017 deadline, providing for “delay” of “implementation” “[i]if the [Illinois Secure Choice Savings] Board does not obtain adequate funds to implement the Program . . . .” Given the sorry state of Illinois finances, that delay is a realistic possibility, if not a likelihood.

The Board also may not implement the program “if the IRA arrangements offered under the Program fail to qualify for the favorable income tax treatment ordinarily accorded to IRAs under the Internal Revenue Code or if it is determined that the Program is an employee benefit plan and State or employer liability is established under [ERISA].” 820 ILCS 80/95. We’re not sure where things stand on resolving those issues.

If your company offers a qualified retirement plan, moreover, the new law will have no effect on your company, even if implemented. That means it’s meaningless for a huge number of employees and employers.

Assuming implementation occurs, if your company has no qualified retirement plan, but has been in business for less than two years or employed less than 25 employees at any time during the previous calendar year, your company will not be required to participate in the State program at least until the two-year and 25-employee thresholds are reached.

Once the State program–“an automatic enrollment payroll deduction IRA”–is created, a covered company will be required to auto-enroll employees, unless it then creates its own plan, such as a 401K, SEP or SIMPLE.

If your company has no qualified retirement plan and doesn’t meet the two-year and 25 employee thresholds, it will be considered a “small employer” and have the option of participating in the State program. We’re not sure why an employer would opt into the State program, rather than choose a low-cost private plan.

If your company is required to offer the State program or chooses to participate as a “small employer”, it won’t be required to contribute to any plan. Employees auto-enrolled will have a payroll deduction of 3% of their earnings earmarked for the State program; this isn’t a mandatory additional contribution by an employer. Employees also may choose to contribute more than 3%. But, if they need or prefer to have the money to use immediately, they can opt out of the State program. We wonder how many employees will prefer to opt out–especially when it’s highly likely that most, if not all employees in State-sponsored programs will be low-wage earners who may need the money just to cover everyday necessitates.

There will be Board-prepared employer and employee information packets, with background information, disclosures for employees, and information about a vendor Internet website. Employers required to participate will be required to provide information packets to employees when the program is launched and to new employees at hiring thereafter. An employee who opts out may participate later by electing to do so during an employer’s annual designated enrollment period or an earlier time if the employer allows.

If your company is required to auto-enroll an employee, but doesn’t, the company will be subject to a penalty of $250 per employee for each calendar year during which the employee neither was enrolled in the program nor opted out–and then $500 for each calendar year after the date a penalty was assessed. So, a company required to auto-enroll better do so, even if most of it’s employees opt out anyway.

It will be interesting to see how many employees really benefit from this program and how much it costs this already-financially-challenged State to administer it, assuming it even is implemented. Stay tuned.

Tags: Illinois, Secure Choice Savings Program Act, employer, private sector, mandatory retirement program, ERISA

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Illinois’ new restrictions on criminal-background inquiries in employment applications and otherwise

January 9th, 2015 — 8:29pm

by Christopher Graham and Joseph Kelly

[background check]

As of January 1, Illinois joined 12 other states and almost 100 cities and counties with so-called “ban-the-box” laws. The banned “box”, common in employment applications, is for checking off whether an applicant has a criminal conviction. Here’s a recent list of all of the states, counties, and municipalities with some version of this law.

Under the new Illinois law, known as the “Job Opportunities for Qualified Applicants Act”:

An employer or employment agency may not inquire about or into, consider, or require disclosure of the criminal record or criminal history of an applicant until the applicant has been determined qualified for the position and notified that the applicant has been selected for an interview by the employer or employment agency or, if there is not an interview, until after a conditional offer of employment is made to the applicant by the employer or employment agency.

The Act thus addresses not only application inquiries about criminal records and histories, but other pre-employment crime-related inquiries. The Act applies to employers with at least 15 employees. A similar Chicago ordinance applies to Chicago employers, regardless of the number of employees.

The Act’s restrictions don’t apply if the employer is: (1) required by law to exclude applicants with criminal convictions, as is the case with certain types of jobs; (2) required to be bonded and an employee with a conviction would prevent the employer from getting that bond; or (3) hiring applicants licensed under the Emergency Medical Services Systems Act.

The Act also “does not prohibit an employer from notifying applicants in writing of the specific offenses that will disqualify an applicant from employment in a particular position due to federal or State law or the employer’s policy.”

The Illinois Department of Labor may investigate potential violations and assess penalties. The Illinois Attorney General may bring civil suits on the Department’s behalf. A single violation will result in a written warning and requirement to remedy. Penalties escalate to $500 for a second offense, and $1500 for each violation thereafter.

If you’re a covered employer and you haven’t done so already, you should review your company’s job descriptions or otherwise consider the requirements of an employee’s job to determine whether it is exempt from the Act’s restrictions.

You also should promptly revise your employment applications for all covered positions to eliminate any question or anything else requiring an applicant to disclose anything about a conviction or other criminal history.

For information about other restrictions on inquiring about criminal histories, see our recent post “What you need to know about background checks for hiring, firing, and other employment decisions”.

Tags: Illinois, background checks, criminal record, criminal history, hiring, applicant, Job Opportunities for Qualified Applicants Act, ban-the-box, ban the box, employment applications, Chicago

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