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Morris Manning & Martin, LLP

Department of Defense Releases Guidance on the Implementation of Section 3610 of the CARES Act

04.10.2020

Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides agencies with the power to modify the terms and conditions of a current, ongoing federal contract to reimburse the paid leave (including sick leave) a federal contractor provides to its employees if an employee is unable to work as a result of the COVID-19 pandemic. Reimbursement is subject to the availability of funds and is strictly at the contracting officer's discretion.

Section 3610 of the CARES Act states in full:

"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."

New guidance was released by the Department of Defense (DOD) on April 9, 2020, that instructs agency contracting personnel on how to implement reimbursements under fixed price, cost reimbursement and time-and-material/labor hour contracts. The guidance also makes clear that contractors bear the burden of documenting any claimed costs and are required to identify any credits they have received under other COVID-19 relief programs before being reimbursed under this provision. Thus, federal contractors claiming a payroll tax credit for paid leave through the Families First Coronavirus Response Act (FFCRA) or receiving a loan as part of the Small Business Administration's Paycheck Protection Program (PPP), cannot obtain additional reimbursement through Section 3610.

A copy of the DOD Guidance may be found here. The DFAR Deviation 2020-O0013 as referenced in the DOD Guidance is available here.

If you have any questions about this legal update or any other COVID-19 related issue, please reach out to the authors of this update.