Freelancers account for 35 percent of U.S. workers and generate $1 trillion in income. They are also being particularly hard hit by the coronavirus (COVID-19) pandemic. Thankfully, federal and state governments are making relief programs available to independent contractors, gig workers, and other freelance workers.
Pandemic Unemployment Assistance
The Coronavirus Aid, Relief, and Economic Security (CARES) Act extends unemployment insurance (UI) benefits to gig workers, independent contractors, and self-employed individuals, all of whom were previously ineligible for unemployment. In order to receive unemployment benefits under the Pandemic Unemployment Assistance (PUA) program, individuals must self-certify that they are able and available to work within the meaning of applicable state law and are “unemployed, partially unemployed or unable or unavailable to work” because of one or more of the following COVID-19–related reasons:
- The individual is diagnosed with COVID-19
- The individual has symptoms of COVID-19 and is in the process of seeking a medical diagnosis
- A household member has been diagnosed with COVID-19
- The worker is providing care to a household member with COVID-19
- A child or other person in the household for which the individual is the primary caregiver is unable to attend school or daycare due to COVID-19
- The individual is unable to reach work due to a quarantine
- The individual is unable to attend work because a healthcare professional advised him or her to self-quarantine
- The individual is scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of COVID-19
- The individual is the sole wage earner in his or her household due to death of the head of household as a direct result of COVID-19
- The individual was required to quit his or her job as a direct result of COVID-19
- The individual’s place of employment closed as a direct result of COVID-19
- The individual is self-employed, is seeking part-time employment, and does not have sufficient work history or otherwise would not qualify for unemployment benefits under another state unemployment program
Individuals receiving paid sick leave or other paid leave benefits are not eligible for PUA benefits, even if they satisfy the above criteria. Individuals who can telework with pay are also excluded.
The CARES Act also established Pandemic Unemployment Compensation, which provides an additional $600 per week, on top of regular benefits, to all recipients of unemployment insurance benefits; retroactive to the week ending April 4, 2020. The law also established Pandemic Emergency Unemployment Compensation, which provides up to an additional 13 weeks of unemployment benefits for individuals who have exhausted all regular UI compensation and are able to work, available for work, and actively seeking work. The extension is available through December 31, 2020.
States are currently working to update their UI programs to facilitate the expansion of benefits to independent contractors. However, some are moving more quickly than others, and all states are facing unprecedented demand for UI benefits.
Paid Sick and Family Leave
The Families First Coronavirus Response Act (FFCRA) provides paid sick leave and paid family leave to independent contractors in the form of a tax credit. Under the Emergency Paid Sick Time Act and the Emergency Family and Medical Leave Expansion Act, paid leave is available to any “eligible self-employed individual,” which is defined as an individual who “regularly carries on a trade or business . . . and would be entitled to receive paid leave . . . if the individual were an employee of an employer (other than himself or herself).” The amount payable to the self-employed individual may be taken as a 100% tax credit.
Paid Sick Leave
Paid sick leave is available to independent contractors for up to ten days. For an eligible self-employed individual who is unable to work or telework because the individual is subject to a quarantine or isolation order related to COVID-19; has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or is experiencing symptoms of COVID-19 and seeking a medical diagnosis, the qualified sick leave equivalent amount is equal to the number of days during the taxable year that the individual can’t perform services for one of the above reasons, multiplied by the lesser of $511 or 100 percent of the “average daily self-employment income” of the individual for the taxable year. Daily average self-employment income is calculated as your self-employment net earnings for the taxable year divided by 260.
Paid Family Leave
Paid family leave is available to independent contractors for a maximum of 50 days. For an eligible self-employed individual who is unable to work or telework because the individual is caring for an individual who is subject to a quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or is caring for a child if the child’s school or place of care has been closed, or child care provider is unavailable due to COVID-19 precautions, the qualified sick leave equivalent amount is equal to the number of days during the taxable year that the individual can’t perform services for one of the above reasons, multiplied by the lesser of $200 or 67 percent of the “average daily self-employment income” of the individual for the taxable year.
For additional information, you can read the IRS paid sick leave FAQs for self-employed individuals.
SBA Economic Injury Disaster Loan
The CARES Act also expanded federal low-interest loan programs to independent contractors. Under the Small Business Association’s Economic Injury Disaster Loan (EIDL) program, sole proprietorships and independent contractors may apply for a maximum business loan of $2 million, which may be used exclusively to address economic injury. Funds can be used to pay for working capital needs, such as payroll, accounts payable, and fixed-payment debts. Loan terms may last up to 30 years. Terms are determined on a case-by-case basis and are dependent upon each borrower’s ability to repay. The interest rate is 3.75% for small businesses and 2.75% for non-profits.
Under the CARES Act, small businesses impacted by COVID-19 can apply for an Emergency Economic Injury Grant (EEIG) of up to a $10,000 advance on an Economic Injury Disaster Loan for emergency capital. To access the advance, you first need to apply for a disaster loan. During the application process, you will be able to request the advance. This loan advance will not have to be repaid.
You can apply for a loan via the SBA’s secure website, disasterloan.sba.gov/ela.
Paycheck Protection Program
Under the Paycheck Protection Program, sole proprietorships, independent contractors, and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses, which includes your own salary. For a sole proprietor or independent contractor, payroll costs include wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee. Employee benefits, such as health insurance premiums, also count as payroll costs. The loan funds can also be used to make certain mortgage, lease, and utility payments.
All payments are deferred for six months; however, interest (at a fixed rate of one percent) will continue to accrue over this period. In addition, loan amounts may be forgiven as long as:
- The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8-week period after the loan is made; and
- Employee and compensation levels are maintained.
You can find a useful fact sheet on the Paycheck Protection Program on the U.S. Treasury website.
Local Aid Programs
States, including New Jersey, are also making economic assistance programs available to independent contractors. The New Jersey Economic Development Authority’s (NJEDA) Small Business Emergency Assistance Grant Program will provide grants up to $5,000 to small businesses, including sole-proprietorships, in retail, arts, entertainment, recreation, accommodation, food service, and other services – such as repair, maintenance, personal, and laundry services – to stabilize their operations. The Small Business Emergency Assistance Loan Program is a $10 million program that will provide working capital loans of up to $100,000 to businesses with less than $5 million in revenues. Loans made through the program will have ten-year terms with zero percent for the first five years, then resetting to the EDA’s prevailing floor rate (capped at 3.00%) for the remaining five years.
NJEDA has created an NJ COVID-19 Business Support Eligibility Wizard to help businesses determine which initiatives may be available to them.
If you have any questions, please contact us
If you need any assistance in regards to the Paycheck Protect Act, the FFCRA, or any of the Federal programs now available, please contact us. We have a dedicated team of attorneys here to help. Feel free to contact me, Ramon Rivera, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.