The Senate late Wednesday passed a groundbreaking $2 trillion economic stimulus package intended to lift businesses and workers crippled by the COVID-19 pandemic.
Sean Kennedy, National Restaurant Association EVP of public affairs, said in a statement, “Restaurants and employees have been community lifelines during the coronavirus crisis—all while dealing with a catastrophic cash flow crunch, massive layoffs, and in too many cases, total shutdowns.”
“We applaud President Trump and bipartisan congressional leaders in crafting a relief bill that gives unique recovery options to the restaurant industry,” he added. “This measure is an important first step to help restaurants weather the storm, take care of our employees, and prepare for when we are given the signal to open our doors once again.”
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The Coronavirus Aid, Relief and Economic Security Act is equal to more than half of the $3.5 trillion the federal government expects to collect in taxes this year, according to the Los Angeles Times. It’s also 9 percent of the country’s gross domestic product. The House is scheduled to vote Friday morning.
“There are challenges that remain before the restaurant industry, and we look forward to working with federal and state leaders to find solutions to support the cornerstone of every community,” Kennedy said.
The relief bill would introduce unprecedented expansion of jobless benefits, with each worker receiving a $600 weekly check for four months in addition to the customary benefits doled out by states. It boosts unemployment benefits for workers who have lost their jobs because of coronavirus and extends eligibility to independent contractors and other workers who generally can’t collect, per Law360. The package also gives small- and medium-size businesses forgivable debt contingent on their continuing to pay employees.
Senate Majority Leader Mitch McConnell called out restaurants specifically Wednesday in a speech from the floor.
“Many American families who have poured everything into a restaurant, or a shop, or a small manufacturer are going to keep making payroll and keep their businesses alive,” he said.
President Trump said during a news conference he would sign the bill immediately when it reaches his desk. “It’s going to take care of people,” he said.
WHY WAS IT DELAYED
- From the original, failed talks to Wednesday’s approval, some key additions were made. They are:
- The expansion of who qualifies for unemployment insurance (people who were furloughed, gig workers, and freelancers now fall into that category).
- An increase in unemployment payments by $600 per week for four months on top of what states provide as a base unemployment compensations (also, the extension of the benefit to 13 weeks for people already collecting unemployment insurance).
- An inspector general will now oversee $500 billion in loans the Treasury Department will distribute to industries affected by the pandemic. There will also be a five-person congressional committee to conduct oversight of the federal government’s spending on the response. (Originally, the Treasury Department would decide which businesses got loans and had the option to wait up to six months to disclose where the money went)
- An additional $150 billion for hospitals, including $100 billion in grants. These can be used to buy medical supplies, like face masks and ventilators.
- Businesses controlled by President Trump, Vice President Mike Pence, members of Congress, and heads of executive brand departments cannot receive loans or investments from the programs. Same is true of their children, spouses, and in-laws.
- The inclusion of $400 million for sates to prepare for 2020 election via vote by mail and early voting. States are not required to participate. The original bill called for $140 million.
The relief bill hit a brief snag Wednesday as Senator Lindsey Graham and several other Republicans argued that laid-off low-wage earners in some states could actually, temporarily, collect more from the expanded unemployment insurance in the bill than from their original salaries. The result being some might be dissuaded from working.
Treasury Secretary Steven T. Mnuchin countered most people would elect to stay employed, and the provision was necessary to streamline and quicken the process of delivering aid to workers laid off by COVID-19’s effect on businesses.
This has been pronounced in the restaurant industry, especially on the full-service side. Multi-concept operator Landry’s announced Wednesday it was furloughing 40,000 employees—the latest such move in a string of them over the past two weeks.
“This is a time when the American people need their government,” Senate Minority Leader Charles E. Schumer said.
Most American adults will receive a one-time direct payout of up to $1,200 (workers with incomes up to $75,000 per year before phasing out and ending altogether for those earning more than $99,000. Families would receive an additional $500 per child. Or roughly 90 percent of people open to full or partial payments, per the Tax Policy Center).
But notably it also includes $500 billion in loans to struggling businesses, $377 billion in loans and grants for small businesses, $150 billion for local, state, and tribal governments struggling with revenue declines, and $130 billion for hospitals.
WHY IT MATTERS TO RESTAURANTS
In the loan section, restaurants that fall under the “fewer than 500 employees,” distinction and that have more than one location, can borrow up to four times their essential monthly fees, or $10 million. They can elect for the higher figure. The loan will be determined by last year’s average monthly fees, including payroll, rent, mortgage payments, and debt services.
For independents, chain affiliations will not factor in. And eligibility will not be determined by the restaurant’s ability to repay at the current time or down the road. Instead, the restaurant will need to have been running as of February 15 and have a payroll with applicable payroll taxes.
The funds can be used for payroll, paid sick and family leave, mortgage payments, utilities, rent, and insurance premiums.
Restaurants can also apply for the Paycheck Protection Program, which is available for businesses hurt by COVID-19. It can be used for maintaining payrolls and paying lease and utilities not covered through other government loans. Borrowers’ fees will be waived and interest rates capped at 4 percent.
Naturally, with dine-in service banned in most markets, tipped employees have taken a major hit. The relief bill enables sit-down restaurants to base their payroll and forgiveness figures on the wages employees are currently being paid. Before, it was wages plus gratuities.
Restaurants, like other small businesses, will be forgiven parts of loans used for employee compensations and other maintenance items. Importantly for restaurants, this includes what is spent on payroll, mortgage and rent, and utilities. It will be prorated by how payroll has changed year-over-year. Employees rehired will be classified as workers who never exited payroll.
Restaurants that have continued to pay employees will be rewarded by getting back payroll taxes paid on half of wages. This provision is limited to restaurants have closed due to COVID-19 or seen revenue drop 50 percent from last year. Restaurants with 100 or more employees are eligible for the break on wages paid while stores were closed. Smaller shops receive credit on all wages paid. Fees for paid sick leave are also capped at $200 per day and $100 for each worker. Paid family leave stops at $200 a day or $2,000 for employees taking care of children or family members affected by the crisis.
It also blocks foreclosures and evictions during the crisis on properties where the federal government backs the mortgage. Federal student loan payments will be paused for six months and interest waived. States will receive millions of dollars to begin offering mail or early voting. And it also provides more than $25 billion in new money for food assistance programs.
Returning to the unemployment expansion, the relief bill would create a temporary Pandemic Unemployment Assistance program that will pay out affected workers who are not traditionally eligible for benefits through December 31. As noted, it includes independent contractors, self-employed individuals, people with limited worker history, and others. The bill provides as many as 13 more weeks of payments to workers whose state benefits end before they can return to work.
There’s a provision in the bill called the Paycheck Protection Program that incentivizes small- and medium-sized businesses to continue paying workers and providing benefits through partially forgivable loans to cover salaries, insurance, rent, and other costs.
Employers with fewer than 500 workers would be forgiven the amounts they put into payroll costs and mortgage payments and interests for eight weeks after loan origination, with some limitations. Additionally, the forgiveness is available to businesses that rehire workers who have already been laid off—which has been a stated goal of many restaurants furloughing employees during the crisis.
The bill provides $500 billion in non-forgivable loans to other businesses under certain conditions, including that they maintain their current staffing through September “to the extent practicable,” and refrain from stock buybacks “unless contractually obligated.”
As the Los Angeles Times notes, the bill will face its biggest test Friday in terms of whether or not the House will accept it as is. House Majority Leader Steny H. Hoyer said the vote will be conducted by a voice vote, which means representatives—many displaced from COVID-19—don’t have to return to Washington.
Typically, a voice vote is determined by which side is the loudest, as decided by the member presiding over the House at the time. The losing side will often ask for a recorded vote, which would require House Speaker Nancy Pelosi to recall House members from across the country, The Los Angeles Times said.
There are some concerns being voiced already. Michigan Representative Rashida Tlaib, a Democrat, said she was dissatisfied the relief bill doesn’t help people whose water was shut off for lack of payment during the outbreak.
Graham and three other GOP senators, Rick Scott of Florida, Tim Scott of South Carolina, and Nebraska’s Ben Sassee, are calling for an amendment that would cap benefits for the jobless at 100 percent of a worker’s pay before they were out of a job. Graham contended the bill would pay unemployed people roughly $24 per hour, “more not to work than if you were working,” he said, as shared by ABC News.
Unemployment insurance, which is administered at the state level through individual programs, was not conducive to imposing a brand new federal bureaucracy to dole out emergency benefits, ABC News reported. Senate negotiators chose to come up with a national average wage in order to arrive at the $600 weekly figure, and the bill would have the states take on that financial burden on the front end only to be repaid by the federal government.
Pelosi said she during an appearance on PBS that she does not believe the House will be able to pass the stimulus bill by unanimous consent.
Of the direct payments, Mnuchin said they could arrive in three weeks for those who have direct deposit set up with the IRS. It could take several additional weeks for printed checks. A Republican aide told The Los Angeles Times payments could also be issued in the form of debit cards.
Even people without income, whose income stems entirely from nontaxable benefit programs like Social Security, or who file a tax return only in order to take advantage of the refundable Earned Income Tax Credit and Child Tax Credit, should get a check, the publication said.
The NYC Hospitality Alliance released survey results Wednesday from owners and operators of 1,870 restaurants, bars, and nightclubs. Together, they reported laying off or furloughing 67,650 employees since March 20, when Governor Andrew Cuomo signed the “New York State on Pause” executive order mandating that non-essential businesses must close, and restaurants and bars can provide delivery or takeout food only.
The NYC Hospitality Alliance said it was advocating for a package of policies at the city and state level that will help the Big Apple’s businesses survive the shutdown. These policies would complement the provisions in the $2 trillion federal stimulus plan, it said.
They included: New York State sales tax remittance converted into cash grants for businesses to have immediate money on hand to cover expenses. If the money was remitted via the Prompt Pay program (or otherwise) it should be reverted back to the businesses.
COVID-19 ordered to be a covered peril in business interruption insurance policies and claims must be paid to business as fast as possible, or a special insurance should be created to pay claims. A government backstop must be provided to the insurance companies.
And, as restaurants are forced to survive as “deliver only,” New York City to intervene by capping the fees that third-party delivery apps like Grubhub and Seamless charge to restaurants (which are as high as 30 percent per order).
“It’s devastating,” Andrew Rigie, executive director of the NYC Hospitality Alliance, said in a statement. “Restaurants, bars and clubs and the people who work at them are the fabric of our communities. We need to do everything in our power, as fast as possible, to support these businesses and revive New York City’s economy, while protecting public health and safety.”
