By Jim Paretti and Michael J. Lotito
On August 8, 2020, the president signed several executive memoranda and an order addressing the continued economic havoc of the COVID-19 pandemic, two of which are of direct interest to employers.
Payroll Tax Deferral
The first memorandum defers the due date for the employee portion of federal payroll taxes (6.2% for Social Security and 1.45% for Medicare) due beginning on September 1, 2020 until December 31, 2020. The memorandum allows employers to defer payment of the employee portion of these payroll taxes for workers earning less than $4,000 on a biweekly basis (roughly $104,000 annually). It has been reported that the deferral may be retroactive to taxes due on August 1, 2020, but that has not yet been made clear. The secretary of the U.S. Department of the Treasury is directed to issue guidance implementing these provisions. Note that an employer is not required to delay the payment of these taxes, but is allowed to do so if it so chooses, and the Treasury Department is directed to explore avenues, including legislative solutions, to forgive rather than defer the payment of these taxes (which would require congressional approval).
The memorandum raises numerous questions as to employer implementation to which there simply are not yet clear answers, and employers are advised to monitor developments closely. Littler expects additional guidance will be forthcoming, and will provide additional information as it becomes available.
A second memorandum allows states to extend enhanced unemployment insurance (UI) benefits through the end of the year, although at a lower rate than had previously been authorized. Expanded UI benefits of up to $600 per week, authorized by the CARES Act, expired on July 31, 2020. Under the executive memorandum, the Federal Emergency Management Agency (FEMA) is directed to provide up to $44 billion in previously approved disaster aid for states to make available for lost wages. States are allowed to determine the level of benefit increase (up to $400/week), and are required to fund 25% of the increase (although some administration officials have indicated that states may be allowed to seek a waiver for their portion of funding). It is unclear whether the re-programming of this FEMA disaster aid is within the president’s executive power, and it is possible that it may face judicial challenge.
The president signed two additional items. One order directs the secretary of the Department of Health and Human Services and the director of the Centers for Disease Control to “consider whether any measures temporarily halting residential evictions” are necessary to prevent the spread of COVID-19, and directs the secretaries of the Treasury and Housing and Urban Development to identify federal funds to provide assistance to renters and homeowners. The final memorandum extends through the end of the year the current suspension of student loan payments and interest rate reductions.
These actions come at a time when Congress remains at a stalemate over whether to provide additional legislative relief. Given the rapidly changing landscape of regulatory and legislative action, Littler’s WPI will provide details on these orders as more become available.