CARES Act and the Special Provision for Federal Contractors

April 9, 2020

The CARES Act has a special provision for federal contractors. Contractors may obtain relief for qualified employees under Section 3610 of the CARES Act for employees unable to work due to facility closures or other restrictions. Section 3610 is just one of several important potential remedies contractors should review and consider in addition to other FAR-based and contractual remedies, such as contract changes clauses, and excusable delay clauses. Contractors should also consider other COVID-19 relief programs to support the maintenance of payroll and keeping the workforce in a “ready state.” Maintenance of a “ready state” workforce is particularly important in the defense, health, and intelligence communities.

Section 3610 of the Act states:

“Notwithstanding any other provision of law, and subject to the availability of appropriations, funds made available to an agency by this Act or any other Act may be used by such agency to modify the terms and conditions of a contract, or other agreement, without consideration, to reimburse at the minimum applicable contract billing rates not to exceed an average of 40 hours per week any paid leave, including sick leave, a contractor provides to keep its employees or subcontractors in a ready state, including to protect the life and safety of Government and contractor personnel, but in no event beyond September 30, 2020. Such authority shall apply only to a contractor whose employees or subcontractors cannot perform work on a site that has been approved by the Federal Government, including a federally-owned or leased facility or site, due to facility closures or other restrictions, and who cannot telework because their job duties cannot be performed remotely during the public health emergency declared on January 31, 2020 for COVID–19: Provided, That the maximum reimbursement authorized by this section shall be reduced by the amount of credit a contractor is allowed pursuant to division G of Public Law 116–127 and any applicable credits a contractor is allowed under this Act.”

Who is a qualified contractor?

A contractor whose employees or subcontractors cannot perform work at a site approved by the federal government and who cannot telework are considered qualified employees. Contractors with qualified employees may request a modification of the contract to reimburse for paid leave if: (1) their employees perform work on a site that has been approved by the federal government; and (2) their employees are unable to work due to facility closures or other restrictions arising from the COVID-19 pandemic. Contractors shall cite Section 3610 of the CARES Act in any notices placing an employee on leave and whatever conditions necessary to invoke Section 3610.

How do I obtain relief/invoke Section 3610?

Aronson advises contractors to reach out to their contracting officer overseeing the specific contracts with qualified employees to obtain written authorization and billing instructions. Review the resources provided by the Defense Pricing and Contracting Department. At this point, federal contractors will likely have to rely on their contracting officer for authorization and determine what restrictions must be placed on employees to ensure they remain in a “ready state” (the stated purpose in Section 3610 behind reimbursing federal contractors for employee paid leave).

What is the amount available for relief?

If a contracting officer authorizes to reimburse the contractor under Section 3610, the amount is restricted to an amount equal to the minimum applicable contract billing rates, not to exceed an average of 40 hours per week. Furthermore, the contractor cannot duplicate any other type of reimbursement or tax credit the federal contractor may obtain through any other COVID-19 relief. Thus, federal contractors already intending to claim a payroll tax credit for paid leave offered through the Families First Coronavirus Response Act (FFCRA), or any applicable credits allowed under other sections of the CARES Act, cannot obtain additional reimbursement through Section 3610. This is to prevent a federal contractor from obtaining more benefit than it would have paid out in leave. It is important to note the reimbursement for paid leave related to reasons associated with the COVID-19 pandemic only runs through September 30, 2020, after which time federal agencies will no longer offer any reimbursement.

If you have additional questions or concerns, please contact Nicole Mitchell at 301.231.6200. For additional COVID-19 Government Contracting Resources, visit our hub here.