Congressional Aid for Manufacturers and MROs Takes One More Step Forward

The most recent version of the Covid-19 relief bill (HR 1319) appears to include the relief for aviation manufacturers and MROs that the industry had requested (a “Payroll Support Program”).

The program provides payroll support for a portion of your workforce – the supported portion is known as the “eligible employee group.” An “eligible employee group” is a group of up to 25% of the business’ (manufacturing and/or MRO) workforce for whom the government will provide payroll support. Under the program, for the portion of employees identified as the “eligible employee group,” the government will provide 50% of their compensation and the company will provide 50% of their compensation.

The program will be under the control of the Secretary of Transportation, and thus we should expect the Department of Transportation to set the standards for fund distribution. Typically the funding is subject to an agreement between the recipient and the government.

Payroll support funds a will be available to FAA production approval holders (like PMA holders and TSOA holders) as well as FAA Part 145 MROs. To qualify, the business must meet the following criteria:

• Must have (1) involuntarily furloughed or laid off at least 10 percent of its workforce in 2020 as compared to 2019 or (2) experienced at least a 15 percent decline in 2020 revenues as compared to 2019 revenues;
• Must identify an eligible employee group that (1) is not more than 25% of the business’ workforce (as of April 1, 2020), and (2) contains only employees with a total compensation level of $200,000 or less per year, and (3) is engaged in aviation manufacturing activities or MRO activities;
• Must agree to maintain the total compensation level for the eligible employee group for the duration of the agreement with the government, and to keep them employed (subject to the right to discipline or terminate according to the employer’s policy);
• Must agree to notify the government of any involuntary furloughs or layoffs exceeding 10 percent of the workforce that is not included in the eligible employee group (the other employees) during the agreement;
• Must not fall into one of the ineligible categories, which include (1) an employer who was allowed an employee retention credit due to Covid-19 closure under section 2301 of the CARES Act (26 U.S.C. 3111 note) for 2020, (2) an employer who received financial assistance under the air carrier and contractor PSP program (15 U.S.C. 9073), (3) an employer who is still spending funding received under the paycheck protection program (PPP) (15 U.S.C. 636(a)(36)) as of the date of application (but if you’ve already spent the PPP money then you may be eligible).

Relevant standards include (note this is only part of the proposed law):

SEC. 7102. Payroll support program.

(a) In general.—The Secretary shall establish a payroll support program and enter into agreements with employers who meet the eligibility criteria specified in subsection (b) and are not ineligible under subsection (c), to provide public contributions to supplement compensation of an eligible employee group. There is appropriated for fiscal year 2021, out of amounts in the Treasury not otherwise appropriated, $3,000,000,000, to remain available until September 30, 2023, for the Secretary to carry out the payroll support program authorized under the preceding sentence for which 1 percent of the funds may be used for implementation costs and administrative expenses.

(b) Eligibility.—The Secretary shall enter into an agreement and provide public contributions, for a term no longer than 6 months, solely with an employer that agrees to use the funds received under an agreement exclusively for the continuation of employee wages, salaries, and benefits, to maintain the total compensation level for the eligible employee group as of April 1, 2020 for the duration of the agreement, and to facilitate the retention, rehire, or recall of employees of the employer, except that such funds may not be used for back pay of returning rehired or recalled employees.

(c) Ineligibility.—The Secretary may not enter into any agreement under this section with an employer who was allowed a credit under section 2301 of the CARES Act (26 U.S.C. 3111 note) for the immediately preceding calendar quarter ending before such agreement is entered into, who received financial assistance under section 4113 of the CARES Act (15 U.S.C. 9073), or who is currently expending financial assistance under the paycheck protection program established under section 7(a)(36) of the Small Business Act (15 U.S.C. 636(a)(36)), as of the date the employer submits an application under the payroll support program established under subsection (a).

(d) Reductions.—To address any shortfall in assistance that would otherwise be provided under this subtitle, the Secretary shall reduce, on a pro rata basis, the financial assistance provided under this subtitle.

(e) Agreement deadline.—No agreement may be entered into by the Secretary under the payroll support program established under subsection (a) after the last day of the 6 month period that begins on the effective date of the first agreement entered into under such program.

Additional definitions can be viewed in section 7101 of the bill.

This bill has been passed by the Senate and it next goes back to the House, where it is expected (but not guaranteed) to pass. Not all of the amendments addressed in the Senate on Saturday are yet available, so we have not yet gotten access to the final version being sent to the House.