Many independent contractors unable to work because of the COVID-19 pandemic could soon receive unprecedented relief from the U.S. Government as a result of the roughly $2 trillion coronavirus aid package that President Trump just signed into law. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) is a sweeping piece of legislation intended to provide emergency assistance to individuals, families and businesses affected by the COVID-19 outbreak. It is not an understatement to say that the unprecedented circumstances gripping the economy prompted the government to venture into uncharted territory in order to help mitigate the impact of the pandemic on independent contractors.
For instance, unemployment benefits are now extended to independent contractors under the CARES Act. Contractors unable to work due to COVID-19 may be eligible to collect these unemployment benefits, which are essentially federal disaster benefits, for up to 39 weeks or until December 31, 2020. In addition to independent contractors, this benefit applies to self-employed workers, business owners, as well as employees who do not satisfy work history or other eligibility requirements for state unemployment, or those who have exhausted regular unemployment benefits. The benefits are calculated the same way as a state’s unemployment insurance benefit, but consistent with federal disaster benefit calculations, have a higher minimum benefit or floor, which is one-half of the state’s average weekly employment insurance benefit. Workers who receive this benefit will also receive an additional $600 payment, but only through July 31, 2020.
This is a major deviation from state laws concerning unemployment benefits, which exclude independent contractors from coverage. It remains to be seen whether companies that engage independent contractors will now face increased scrutiny of their contractor classifications from state employment agencies as a result of the anticipated flood of unemployment claims. Companies that engage independent contractors should be mindful of this possibility.
In addition, independent contractors may be eligible to apply for small business and disaster relief loans under the CARES Act, loans which under usual circumstances are typically available only to certain types of businesses. While this does not directly impact businesses that engage with independent contractors in the short term, the receipt of such loans could be construed as evidence that a contractor pursuing a misclassification claim is, in fact, an independent businessperson rather than an employee, as the funding is suggestive of the contractor’s efforts to maintain profitability.
We will continue monitoring these developments and report back on any updates.