A Closer Look at California COVID-19 Relief Programs
By Andrea A. Golan and Kelsey Middleton
Apr 22, 2020
The California government has enacted several programs aimed at helping businesses and workers adversely impacted by the novel coronavirus (COVID-19). In this VS Insight, we take a closer look at the state's employment relief programs (for employers and employees), tax relief programs, and loan programs. This post is for informational purposes only and not for the purpose of providing legal or tax advice. We strongly encourage you to contact an attorney if you are seeking advice regarding any specific legal or tax issue.
For more information about California's COVID-19 response and how it may impact cannabis business operators, medical patients, and other consumers, see our "California Regulatory Updates" post. For national updates and additional resources, see our main post on COVID-19, "Coronavirus and Cannabis: Monitoring the Impact."
Employment Relief Programs
For businesses adversely impacted by COVID-19, the California Employment Development Department (EDD) provides support services and assistance, including the Unemployment Insurance (UI) Work Sharing Program and Rapid Response Services for Businesses. Additionally, Executive Order N-31-20, issued by Gov. Gavin Newsom on March 17, temporarily suspends employer WARN ACT obligations, allowing employers to take swift, decisive action to mitigate or prevent the spread of COVID-19.
For California workers, the EDD provides disability, paid family leave, unemployment insurance, and paid sick leave benefits to persons who have lost their jobs or had their work hours reduced. In response to COVID-19, EDD has expanded its services by loosening eligibility criteria for certain existing programs. In addition, EDD will be providing unemployment benefits through the Pandemic Unemployment Assistance Program (PUA) to provide greater access to benefits for persons who may not qualify for benefits otherwise. For more information about these programs please visit the EDD's COVID-19 resources page.
More information about these programs can be found on the EDD's COVID-19 resources page. We have also compiled summaries below.
Employer Relief Programs
UI Work Sharing Program
Employers can apply for the UI Work Sharing Program as an alternative to layoffs. The program aims to eliminate or minimize the need for layoffs by allowing employers to retain their trained employees by reducing their hours and wages and partially offsetting that reduction with unemployment benefits. To participate, employers must meet all the following requirements:
- Be a legally registered business in California.
- Have an active California State Employer Account Number.
- At least 10 percent of the employer’s regular workforce or a unit of the workforce, and a minimum of two employees, must be affected by a reduction in hours and wages.
- Hours and wages must be reduced by at least 10 percent and not exceed 60 percent.Health benefits must remain the same as before, or they must meet the same standards as other employees who are not participating in Work Sharing.
- Retirement benefits must meet the same terms and conditions as before, or they must meet the same as other employees not participating in Work Sharing.
- The collective bargaining agent of employees in a bargaining unit must agree to voluntarily participate and sign the application for Work Sharing.
- Identify the affected work units to be covered by the Work Sharing plan and identify each participating employee by their full name and Social Security number.
- Notify employees in advance of the intent to participate in the Work Sharing program.
- Identify how many layoffs will be avoided by participating in the Work Sharing program.
- Provide the EDD with any necessary reports or documents relating to the Work Sharing plan.
Employers/ employees meeting the following descriptions are restricted from the Work Sharing Program:
- Leased, intermittent, seasonal, or temporary service employees cannot participate in the Work Sharing Program.
- Corporate officers or major stockholders with investment in the company cannot participate in the Work Sharing Program.
Please note that the Work Sharing Program cannot be used as a transition to a layoff.
Employers may apply for a Work Sharing plan by completing and mailing the Work Sharing (WS) Unemployment Insurance Plan Application. Work Sharing plans are approved for one year and effective the Sunday before initial contact with EDD.
Rapid Response Program
Employers planning a closure or major layoffs as a result of the coronavirus may find help through the Rapid Response program. According to the EDD's fact sheet, Rapid Response is a proactive, business-focused program designed to assist companies facing potential layoffs or plant closures by providing early intervention assistance to help avert potential layoffs, and immediate on-site services to assist workers facing job losses. Rapid Response services are tailored to each company based on the needs of the affected employees. Rapid Response teams work with the impacted company to develop programming to avert layoffs including:
- Incumbent worker training: A program designed to assist employers in upgrading the skills of their workers to maintain a quality workforce and avert the need for layoffs.
- Customized training: A program that supports training for new and existing employees to help businesses stay competitive, productive, and profitable, and help employees retain high-wage, high-skilled jobs.
- Work Sharing: A program available to employers who reduce employee hours and wages as an alternative to layoffs. Affected employees are eligible to receive a percentage of unemployment benefits. Employers can retain trained employees until business conditions improve and avoid the expense of recruiting, hiring, and training new employees.
- Career counseling and job search assistance
- Résumé preparation and interviewing skills workshops
- Unemployment Insurance
- Information about education and training opportunities
To learn more about Rapid Response services, contact the local American Job Center in your area.
Employee Relief Programs
Unemployment Insurance Benefits
The EDD’s COVID-19 FAQ provides guidance benefit seekers can use to determine their eligibility for unemployment insurance benefits. In light of the COVID-19 emergency, Gov. Newsom waived the one-week unpaid waiting period typically required of unemployment insurance applicants, allowing them to collect benefits for the first week of unemployment.
An applicant may be eligible for unemployment insurance benefits if they have sufficient earnings over the past 12-18 months to establish a claim and are:
- Totally or partially unemployed.
- Unemployed through no fault of the employee.
- Physically able to work.
- Available for work.
- Ready and willing to accept work immediately.
- Actively seeking work. Persons who will return to their employer post- COVID-19 emergency period are not required to actively seek work to obtain unemployment benefits. Persons who are unemployed and will not return to an employer are expected to actively seek work. Submitting applications online constitutes “actively seeking work.”
Benefits may be available in the following situations. EDD will determine eligibility on a case-by-case basis:
- Work hours are reduced due to quarantine.
- The employee is subject to a quarantine required by a medical professional or state or local health officer.
- The employee chooses to stay home due to underlying health conditions.
- The employee must work to care for a child.
- Self-employed, independent contractors, and gig workers may be eligible subject to certain requirements.
Pandemic Unemployment Assistance Program
The Pandemic Unemployment Assistance Program (PUA) is a new emergency unemployment assistance program under the CARES Act. PUA is intended to help unemployed Californians who are business owners, self-employed, independent contractors, have limited work history, and others not usually eligible for regular state unemployment insurance benefits who are out of business or whose services are significantly reduced as a direct result of COVID-19. EDD began accepting online applications for the PUA program on Tuesday, April 28. Go to EDD’s PUA webpage for more information on how to file a claim.
The benefits of the program include:
- Up to 39 weeks of benefits starting with weeks of unemployment beginning February 2, 2020, through the week ending December 31, 2020, depending on when you became directly impacted by the pandemic.
- An additional $600 to each PUA weekly benefit amount you may be eligible to receive, as part of the separate CARES Act Pandemic Additional Compensation program. Only the weeks of a claim between March 29 and July 25 are eligible for the extra $600 payments.
Because this is a new program, EDD is in the process of preparing forms, processes, and procedures to administer the program.
PUA Eligibility: PUA benefits are only available to persons who do not qualify for regular unemployment benefits in California or another state and also do not qualify for State Disability Insurance or Paid Family Leave benefits. This includes:
- Business owners
- Self-employed individuals
- Independent contractors
- Individuals who may have qualified for regular unemployment benefits but have collected all benefits for which they are eligible.
Non-US citizens cannot be paid PUA benefits unless they were legally permitted to work in the United States at the time serves were rendered. Additionally, one must be authorized to work for any week of PUA benefits claimed to be eligible for payments.
In addition to the above criteria, EDD requires benefit seekers to meet at least one of the following criteria:
- You have been diagnosed with COVID-19 or are experiencing symptoms of COVID-19 and are seeking a medical diagnosis.
- You are unable to work because a health care provider advised you to self-quarantine due to concerns related to COVID-19.
- A member of your household has been diagnosed with COVID-19.
- You are providing care for a family member or a member of your household who has been diagnosed with COVID-19.
- A child or other person in the household for whom you have primary caregiving responsibility is unable to attend a school or another facility that is closed as a direct result of the COVID-19 and the school or facility care is required for you to work.
- You became the breadwinner or major support for a household because the head of the household has died as a direct result of COVID-19.
- You have to quit your job as a direct result of COVID-19.
- Your place of employment is closed as a direct result of COVID-19.
- You were scheduled to start a job that is now unavailable as a direct result of the COVID-19 public health emergency.
- You are unable to reach the place of employment as a direct result of the COVID-19 public health emergency.
- If you work as an independent contractor with reportable income, you may also qualify for PUA benefits if you are unemployed, partially employed, or unable or unavailable to work because the COVID-19 public health emergency has severely limited your ability to continue performing your customary work activities, and has thereby forced you to stop working.
EDD provides that persons who are uncertain as to their eligibility for the PUA program should file for regular unemployment benefits as EDD will determine eligibility for PUA through that process as well.
Tax Relief Programs
Extensions for Businesses to File Returns and Pay Taxes
Any business filing a tax return for less than $1 million will have an additional three (3) months to file their returns and pay taxes administered by the California Department of Tax and Fee Administration (CDTFA). Thus, for small business taxpayers below the $1 million threshold for their current California sales and use tax obligation, returns for the 1st Quarter 2020 will now be due on July 31, 2020. More information on the small business tax extension can be found here.
Eligibility and How to Apply: If your business is filing a return of less than $1 million then it automatically qualifies for this extension and you do not need to apply. Cannabis businesses are presumptively included in this deferral program.
Businesses filing $1 million or more – If your tax liability of $1 million or more, you may still request an extension if you are unable to file and pay timely. These requests will be evaluated on a case-by-case basis and taxpayers will be notified if their extension has been approved or denied. Cannabis businesses are presumptively included in this deferral program.
The new due dates for the Cannabis Tax are:
|Original Due Date
|Extension Due Date
|February 2020 taxes due
|March 31, 2020
|June 30, 2020
|March 2020 and 1st Quarter 2020 taxes due
|April 30, 2020
|July 30, 2020
Extension to File State Payroll Report and/or Deposit Payroll Taxes Without Penalty or Interest
Employers directly affected by the coronavirus may request up to a 60-day extension of time from the EDD to file their state payroll reports and/or deposit payroll taxes without penalty or interest. State payroll taxes include Unemployment Insurance (UI), Employment Training Tax (ETT), State Disability Insurance, including Paid Family Leave (SDI and PFL), and Personal Income Tax (PIT).
How to Request an Extension: Employers must first file the report(s) and/ or payment(s) electronically within 60 days of the original due date. Employers must then send a letter to the EDD specifically requesting an extension of time due to the state of emergency. The letter must provide detailed information as to why the report(s) and/or payment(s) could not be submitted in a timely manner. The letter of extension should be mailed to the address specified on the corresponding form(s) (see EDD’s Information Sheet regarding requests for extensions to report and pay during a state of emergency or disaster). If an employer has already been charged a late filing or payment penalty, the employer should send a written request for an extension to: Employment Development Department PO Box 826880 Sacramento, CA 94246-0001. A written request for extension must be received within 60 days from the original delinquent date of the payment or return.
Deferred Payment Plans for Sales and Use Tax for Businesses with Less than $5M in Annual Taxable Sales
Small Businesses with less than $5 million in taxable annual sales, can take advantage of a 12-month, interest-free, payment plan for up to $50,000 of sales and use tax liability. For example, taxpayers choosing to defer their 1st quarter 2020 liability may do so for up to $50,000 of the obligation which would be paid off in twelve equal monthly installments, with the first payment not due until July 31, 2020. If a taxpayer owes more than $50,000, CDTFA will have the taxpayer enter into one payment plan and adjust the appropriate amount of interest off toward the end of the 12-month period. More information on the small business tax payment plan can be found here.
Eligibility and How to Apply: This deferral plan is available to all businesses with less than $5 million in taxable annual sales including cannabis businesses. Payment plan requests can be made through the CDTFA’s online services system in the coming months. Interested persons may fill out this form and the CDTFA will provide notification when the system becomes available. Alternatively, you may contact the CDTFA’s customer service center at 1-800-400-7115 (CRS:711) if you are interested in being notified.
More information on relief for business taxpayers can be found here.
Extensions for All Taxpayers
The Franchise Tax Board (FTB) is postponing until July 15 the filing and payment deadlines for all individuals and business entities for:
- 2019 tax returns; (ii) 2019 tax return payments;
- 2020 1st and 2nd quarter estimate payments;
- 2020 LLC taxes and fees; and
- 2020 Non-wage withholding payments.
Taxpayers do not need to claim any special treatment or call FTB to qualify for this relief. The FTB administers two of California’s major tax programs: Personal Income Tax and the Corporation Tax. For more information, see FTB’s press release regarding updated special tax relief for California taxpayers due to the COVID-19 pandemic.
The primary California programs for financial assistance to small businesses consist of those under the California Infrastructure and Economic Development Bank (IBank) and the California Capital Access Program (CalCAP). CalCAP programs are not available to businesses engaged in activities that are prohibited by federal law or businesses ancillary thereto. However, one of IBank’s programs is available to the cannabis industry: the California Disaster Relief Loan Guarantee Program — COVID-19 (COVID Guarantee Program). The COVID Guarantee Program provides guarantees for loans of up to $50,000 for small business borrowers in declared disaster areas. The hurdle that must first be overcome is finding a lender willing to make a loan to a cannabis business. Qualifying small business owners may apply directly with a participating lender (see a current list). Vicente Sederberg has been in contact with the various lenders under the program, and as of today, most are unwilling to make loans to cannabis or cannabis-ancillary companies. For more information on lenders that are amenable to making loans to cannabis or cannabis-ancillary businesses, please contact Sahar Ayinehsazian in our Los Angeles office.
The COVID Guarantee Program is open to small businesses located in California with 1-750 employees that have been negatively impacted or experienced disruption by COVID-19. Guarantees are for up to 7 years and for up to 95% of the loan. Loan interest rates must be negotiated between the lender and borrower and the borrower must separately meet the qualifications of the lender. Proceeds from loans guaranteed by the COVID Guarantee Program can be used for business continuance or to cure “economic injury” as a result of the COVID-19 pandemic.
California’s Cal-OSBA – Small Business Assistance & Resources (Cal-OSBA) program, the California Entrepreneurship Task Force (CETF) and the Task Force on Business and Jobs Recovery (Task Force) provide advisory or other assistance. For more information regarding Cal-OSBA and CETF, as well as a complete list of resources available to small businesses in California, please visit California’s COVID website for businesses. You can also subscribe to the GO-Biz newsletter to receive updates and announcements as they happen. For more information regarding the Task Force, see Gov. Newsom's April 17 announcement.