Renewal of CARES Act Section 3610 faces tough road

Section 3610 of The CARES Act became law on March 27, 2020. And it expires this Sept. 30, coinciding with the end of the government fiscal year.

Put another way, or at least how GSA spins it, contract adjustments may apply only “for leave that a contractor has provided during the period March 27, 2020 through Sept. 30, 2020.” Thus, it is the leave pay that accrues after Sept. 30 that is on the line.

So now what?

CARES allocated more than $2.2 trillion in response to COVID-19’s devastating impact on the economy. As you may recall from my earlier commentary, Section 3610 authorized agencies to pay contractors for paid leave under certain conditions to keep employees in a “ready state.” 

The law was designed for contractor employees restricted from government worksites and unable to telecommute because their jobs cannot be performed remotely. Some contractor employees have been in this position due to government facility closures, state and local lockdown orders (at least in the earlier “phases”), and where the employee cannot work remotely because he/she or a family member contracts COVID, or is caring for someone who does, or where the employee or family member is quarantined because of COVID, or some other legitimate reason.

Either way there are a variety of situations where the pandemic still prevents an employee from both accessing a worksite and working from home.

Section 3610 has its limitation. Foremost, the provision is only as good as the available funding that comes with it. Under CARES, Congress could have provided specific funding for this type of contract reimbursement (which it didn’t) or funding could be provided through the affected contract so long as there are available funds on that contract.

As DOD stated in its Aug. 17 updated Implementation Guidance/FAQ (Q28), “[a]ny funds that are otherwise legally available . . . for use under a contract may be used to fund section 3610 reimbursement under that contract. Section 3610 adjustments need not be funded with only CARES Act appropriations.”

The bottom line, however, is that available funding is a prerequisite to reimbursement.

Another challenge is that since CARES was enacted several different government agencies have issued an array of written implementation memos, FAQs and other advisories interpreting or commenting on Section 3610 and, as I pointed out previously, not all of them are consistent with each other or are a precise reflection of the law.

Nonetheless, the demise of Section 3610 could hurt the government business. In her testimony before the House Armed Services Committee on June 10, DOD Under Secretary Ellen Lord stated that payroll relief requests under Section 3610 are likely to be in the billions of dollars. So, as contractor employees continue to be unable to access work locations and unable to telework yet expected to remain in that perennial ready state, the continued need for a Section 3610 extension looms large.

Some also argue that failing to extend Section 3610 will threaten the continuity of government operations and the ability of industry to fully support critical government missions. That may be if this pandemic doesn’t subside further to allow both government and contractor employees to fully return to work.

On a positive note, some agencies have started to implement return-to-work plans on a limited basis. That may relieve some of the pressure that would otherwise warrant leave pay under Section 3610. Maybe.

One other piece of solace is that there’s a decent chance that forgivable loan amounts received by contractors under the CARES Act’s Paycheck Protection Program (CARES Section 1102) would cover or at least offset such otherwise allowable (or even unallowable) paid leave, assuming a PPP recipient complies with the PPP’s terms.

In that case, however, the law is quite clear that a PPP recipient cannot double dip by also being reimbursed for that very same paid leave covered by Section 3610. But will PPP loans (or grants depending on how you look at it) cover all non-reimbursed Section 3610 expenses? I’m guessing not.

Of course, the challenge is how to convince Congress to extend the Section 3610 period. Unfortunately, with the current state of congressional bickering, I’m not optimistic. Worse is that the competing House and Senate versions of Son of CARES currently don’t contain Section 3610 extensions.

For example, the House in May passed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800), which addresses further implementation of Section 3610 and would provide some clarity to its provisions, but doesn’t extend it. The Senate’s Health, Economic Assistance, Liability Protection and Schools (HEALS) Act, also passed in May (S.1624), looks to add $10.8 billion in funding to support Section 3610-related claims for DOD contractors, but that bill also doesn’t extend the September deadline.

It seems that convincing Congress to pass any additional relief measures despite a still-raging pandemic, in the heat of a hotly contested presidential election, with 35 Senate seats on the line and a divisive Congress that can’t agree on how to make a ham sandwich no less pass a major relief bill of Depression-era proportions, is becoming as easy as shoveling sand against the tide. And that includes extending Section 3610. Without an extension to Section 3610, not to mention other critical follow-on relief measures that are critical to the entire economy, businesses in this sector will again face a bleak uncertainty going forward.

On a somewhat brighter note, the Section 3610 extension movement has been getting recent traction on the Hill. On the Senate side, at least the Virginia and Maryland delegations are pushing the Senate leadership to extend the law, stating in in a July 31 letter that “[f]ailure to provide an extension of Section 3610 may undermine agencies’ ability to provide critical support to important government missions and operation needs during this time.”

 Industry associations are also nudging Congress to extend Section 3610. In a July 31 joint letter to the House and Senate leadership from PSC, NDIA, AFCEA, and other acronymic organizations catering to the government business, it was argued that extending the law through 2021 “would support the continuity of government operations through the COVID-19 national emergency while preserving the ability of the private sector to maintain its capability to fully support agency missions into the future.”

A similar letter by the U.S. Chamber of Commerce on July 24 went further to suggest that Congress extend the provision and appropriate funds specifically to support Section 3610 leave pay reimbursements.

But at least for now none of this matters, for Congress is deadlocked on all the additional needed COVID relief, and the chances that it will pass some type of comprehensive relief measure, no less one that will extend Section 3610 by the end of September, is becoming more remote by the day.

Beyond the futilely of arguing that Congress shouldn’t have imposed such a short time limit on Section 3610 in the first place, and I tend to stay away from such “who shot John” discussions, the law cannot extend itself. Congress needs to do that. And given the way Section 3610 was drafted in that Congress provided the specific relief for only specific dates, it is questionable at best whether such an extension can be made through non-legislative means.

Or can it?

Stay tuned.