COVID-19 General Counsel Updates – March 2020
- March 31, 2020: SBA Loans, PA A Major Disaster Area & More
- March 31, 2020: COVID-19 Loan Programs
- March 30, 2020: More SBA Program Detail & some interesting State Updates
- March 30, 2020: MPL General Counsel Corner: Time to clarify…and a little humor
- March 27, 2020 Business Law Update: PA Stay At Home Order Expanded & CARES Act Update
- March 26, 2020: MPL General Counsel Corner – More Updates on the CARES Act; Local Relief Plan for PA Small Businesses; Miscellaneous Items
- March 25, 2020: General Counsel Corner – COVID-19 Stimulus Round 3 (CARES Act)….almost there
- March 24, 2020: General Counsel Update from March 24th
- March 23, 2020: General Counsel Corner – PA jumps in to the “Stay at Home Order” arena in select counties
- March 23, 2020: Employer Tax Credits – The Families First Coronavirus Response Act
- March 22, 2020: Business Law Updates related to Covid-19
- March 21, 2020: Summary – The Families First Coronavirus Response Act
- March 21, 2020: Update from NFIB Conference Call
- March 21, 2020: ALL NON-LIFE-SUSTAINING BUSINESSES IN PENNSYLVANIA TO CLOSE PHYSICAL LOCATIONS AS OF 8 PM MARCH 19 TO SLOW SPREAD OF COVID-19
- General Counsel Updates for March 20, 2020 – James Sanders
- March 20, 2020: A High-Level Overview: Family First Coronavirus Response Act
- March 17, 2020: Business & Employment Guidance for Coronavirus
March 31, 2020: SBA Loans, PA A Major Disaster Area & More
Just like Bill Murray in Groundhog Day, it can certainly feel like we are living the same day over and over again. However, things will get back to normal. Until then, keep moving forward!
Here are the latest updates which we believe are most relevant (short and sweet):
- Which SBA Loan is right for you? Lots of presentations are floating around related to the different SBA programs. Linked is a memo we have drafted to help give you a little clarity. Also, M&T Bank (courtesy of Shane Patterson) has also drafted a good slide deck overview (linked here).
- Fraud, no, say it ain’t so: We have been hearing about phishing scams and fraud related to the SBA programs. Please be aware of who you are dealing with and what information you are providing. Below are some links that may be helpful:
- SBA link to Scams and Fraud Alerts: https://www.sba.gov/document/report–sba-programs-scams-fraud-alerts
- Official SBA.gov website for the EIDL application: https://covid19relief.sba.gov/#/.
- Official SBA Website: www.sba.gov
- PA approved as a major disaster area: PA was declared a major disaster area by the Federal government today. Essentially, this means that Federal funds and resources are more readily available to state, county and municipal governments, along with eligible private non-profits. See the linked article for more details.
- For whom the bell tolls: Check out the latest update from Joel Berg at BizPA. He highlights the latest legal challenge filed in the Eastern District of PA related to Governor Wolf’s actions related to the Covid-19 crisis. Schulmerich Bells, a Bucks County-based maker of handchimes and handbells, and two of its employees have challenged the waiver process for deciding who can stay open. I see a lot of constitutional challenges coming out of this crisis.
- You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program.
- Lenders may begin processing loan applications as soon as April 3, 2020.
- This is a fluid process, so please consult with your local SBA approved lender for more details.
- A sample application is linked here. More details about the SBA’s Paycheck Protection Program have been released.
March 31, 2020: COVID-19 Loan Programs
We have been fielding a lot of calls about loan program details, and which might be right for certain businesses. Accordingly, we wanted to push out the attached memo which gives an overview of the two federal programs for small businesses as provided in the CARES Act (the PPP and EIDL programs). The memo also discussed the PIDA program for PA small businesses. While the EIDL and PIDA programs are up and running, the PPP is still being prepared. As it will be administered through SBA approved lenders, the lenders are in the process of developing their internal programs prior to accepting applications. They are also, as of writing this, waiting for SBA guidelines on administration of the PPP program. This is all to say don’t despair… there have been no deadlines missed, and the great majority of lending relief has yet to even begin.
While reviewing loans, we would like to stress CAUTION in the application process. As with all unfortunate situations, there are certain people looking to take advantage. In this case, that includes scammers looking to hijack application data. For those of you who may be applying for an SBA EIDL, it has been discovered that scammers actually hacked into the original EIDL website and somehow were able to redirect applicants to a different site to make application. This site is asking for personal banking information and when you don’t input it someone personally calls you. Please be on the lookout for grant fraud, loan fraud, and phishing!
Here are several links to official SBA websites you can utilize:
- A link to the SBA page regarding Scams and Fraud Alerts: Learn More
- A link to the official SBA.gov website for the EIDL: https://covid19relief.sba.gov/#/.
- A link to sba.gov. There is a yellow banner that floats across the top of the screen. You can click on it and it takes you directly to the EIDL page.
- Linked is updated information on the SBA Economic Injury Disaster Loan and application process from the SBA. They have changed the process as of March 30th for a more streamlined approach. Hopefully, this can help
- show exactly what the process is (for those of you applying, and show that it has become much easier), and also
- put those of you that will or have already applied at ease if my prior email gave you any concerns about fraud.
- And for those of you worrying about time, please know that individuals that applied over a week ago are just finding out that, while their applications have been approved, no loan amount has been determined or money actually been paid.
March 30, 2020: More SBA Program Detail & some interesting State Updates
With a whole weekend to analyze the various bills and further updates from the Federal, State and Local governments, there is a lot to discuss today. Below are some of the more relevant updates:
1. More info on EIDL, PPP and the PA Working Capital Loans (sent by Chad Bumbaugh at Stambaugh Ness)
- Economic Injury Disaster Loans (EIDL) & $10,000 EIDL Grant
- The question of the day (thus far at least) has been on applying for an EIDL loan to get the $10,000 EIDL grant made available by the CARES act.
- The $10k grants are to be provided within 3 days of request
- These grants are first come, first serve with funding at roughly $10 billion
- To be used to cover sick leave, retaining payroll, paying rent, or covering “obligations that can’t be met due to revenue loss” – should be an easy hurdle to clear. Only requires a self-certification of eligibility.
- Businesses DO NOT have to take out the EIDL loan to get the grant and even if EIDL application is DENIED businesses can get the $10k grant
- The EIDL loan does not have any provisions currently for forgiveness outside of the $10,000 grant
- Important Note: If applying for both the EIDL and PPP loans my understanding is the $10,000 grant essentially becomes an “advance” on any PPP loan forgiveness. The PPP loan forgiveness that is calculated is to be reduced by the EIDL grant.
- To apply for an EIDL loan the SBA is the place to go – specifically https://covid19relief.sba.gov/#/
- Paycheck Protection Programs (PPP) (potentially forgivable loans)
- PPP will be administered by banks (on behalf of the SBA).
- They are to received guidance on the PPP loans by April 11th but goal is for banks to begin processing requests this week.
- Suggest contacting your bank now for their input on timing & next steps.
- Loans are expected to be funded after April 11th – most likely mid to late April based on what I’m reading now but things are moving quickly.
- PA Working Capital Loans I’ll also note that the PA PIDA loan ($100k working capital loans at 0% interest) are, to my knowledge, still in play. I’ve not seen any sort of announcement that those funds have been fully allocated to date.
- Taking an EIDL or PPP loan does appear to remove the ability of businesses to 1) defer payroll taxes and 2) to take the employer retention credit which provides a 50% credit on payroll taxes for qualified wages per quarter for employers under 100. The credit is a maximum of $5k per employee with limitations related to wages & payroll taxes. The site at following link provides one of the best analysis of the interplay between the programs I’ve seen thus far today. https://northmetrosbdc.com/coronavirus/economic-assistance/ . The PA working capital loans do not appear to have any direct impact on the Federal programs.
2. EisnerAmper provides a good overview of the various tax consequences of the CARES ACT in the following link (sent by Carey Gertler in his update email): https://www.eisneramper.com/cares-coronavirus-tax-0320/
3. PA Unemployment Website issues a helpful FAQ for businesses and employees at the following link: https://www.uc.pa.gov/COVID-19/Pages/Employer-COVID19-FAQs.aspx .
- Also, linked is a help guide for various paid sick leave, unemployment and workers comp as they relate for Covid 19 (sent by Patrick Barry in his update email).
4. Business Interruption Insurance Coverage Under the Microscope: New York follows New Jersey by introducing a bill which would force the payment of certain business interruption insurance. Massachusetts is also considering similar legislation. These have not been passed, but I wanted you to be aware of there existence. If passed, these could significantly shift the business insurance landscape.
5. PA Expands Stay At Home Order, Kids are out of school indefinitely (memo linked): Also, here is a quick story on the announcement https://www.pennlive.com/news/2020/03/pa-school-closure-order-extended-for-an-indefinite-period-of-time.html
6. What should business owners have ready to apply for the various programs? Scott Stevens at 44 Capital sent the linked document as a great guide for documents to gather and other available resources.
7. Upcoming webinars and helpful resource Sites
- RKL has conducted a few webinars and has a useful slide deck for employers at the following link: RKL Webinars & Resources
- Assessing the impact on Private Equity: Read here
March 30, 2020: MPL General Counsel Corner: Time to clarify…and a little humor
I hope that you were able to pause a bit over this weekend and spend some much-needed quality time with your family friends (of course 6 feet apart while engaging in such activity – ). Nothing earth-shattering has been announced since Friday, which gave us the opportunity to dig in a little more on certain programs. Below are some of the more relevant items that may be of interest to you:
- SBA Loans, State Programs, borrowing from my Uncle Joe – which is the right program for me and my business/organization?: The long and short of it is…..ready, and I had to go to law school to learn this concept……IT DEPENDS. Below are a few sources and topics that may help you out:
- SBA Consultants and Preferred Lenders: We are in the process of compiling a list of SBA Consultants and preferred lenders who can help you navigate the process. The most common answer we get in our discussions with them has been: “the updates are changing daily….please give us a few days to sort it out”; IF YOU WOULD LIKE TO BE CONNECTED TO OUR CONTACTS, PLEASE EMAIL MYSELF OR OUR OFFICE FOR HELP.
- Coronavirus Emergency Loan Small Business Guide and Checklist – The US Chamber of Commerce provided a useful small business guide and checklist for Coronavirus Emergency Loans.
- If I have employees that make over $100,000 per year, are their salaries eligible for coverage under the Paycheck Protection Program (PPP)? In calculating the maximum loan amount you can get under the PPP, a business can apply for 2.5X the average monthly payroll costs, not to exceed $10m. Compensation of an individual employee in excess of an annual salary of $100k is excluded from the calculation. This same calculation & exclusion is applicable to the loan forgiveness program for the first 8 weeks after the loan approval. So, which is it, is the full salary excluded or just the amount above $100k. We recommend that you discuss this question with your SBA lender or consultant. If official guidance is released, we will update you ASAP.
- SBA Express Bridge Loan (EBL) Program: Prior to the passage of the CARES Act, the SBA had released guidance that an express bridge loan of up to $25k could be applied for as a business awaits a long term financing approval. It is not clear how this program relates to the $10k bridge loan program covered under the CARES Act for Economic Injury Disaster Loan (EIDL) Applications, but we are seeking clarification. Linked here is a guide for the EBL Program.
- When will get my stimulus check and how much will it be? The Washington Post has published a calculator which estimates the amount for you. Check it out: https://www.washingtonpost.com/graphics/business/coronavirus-stimulus-check-calculator/
- NJ Ramps Up Stay At Home Order and Business Restrictions: If you are thinking of having a corona party in NJ, beware….they will find you…..see the story here.
- Preppers aren’t just a reality show anymore: Check out the latest weekend update from the Hustle. The numbers are pretty interesting. In order to prepare for a doomsday scenario, a survey of 15 preppers showed they each spent an average of $10,393 in total over 7.6 years ($1366 per year) on food and gear.
And last, but not least, the following critical advisory was just released (sent by friend and famed UVA alum Todd Marsteller):
March 27, 2020 Business Law Update: PA Stay At Home Order Expanded & CARES Act Update
What a day! There has been lots of information flying around. The CARES Act was just passed and signed into law this afternoon. The Governor of PA expanded the Stay at Home order…and someone just reminded me it is Friday. It certainly does not feel like the end of the week.
CARES Act Update
What was a busy day with the anticipated enactment of the CARES Act (the 3rd phase of the federal stimulus package) became busier with Governor Wolf’s amended stay at home order. As promised, linked is a summary of the CARES Act which we anticipate the president to sign this afternoon/evening (unless he signed while I was composing this email). It has already been passed by the House and Senate. This is a limited summary to provisions we feel our clients are most affected by, which include small business relief and individual relief (such as direct payments, unemployment, retirement account changes, and debt relief).
Key Financial Leaders Are Predicting A Fairly Quick Rebound
In the linked commentary received from Robert Teeter at the Silvercrest Group, they highlight comments from former Fed Chair Ben Bernanke related to the economic recovery once we get past the COVID-19 crisis. I will also highlight that famed Wharton Professor Jeremy Siegel has made similar comments as well. https://www.cnbc.com/2020/03/02/jeremy-siegel-sees-a-short-quick-recession-due-to-the-coronavirus.html
PA Stay At Home Order Expanded
Earlier this afternoon, Governor Wolf extended the stay at home order, which currently only applied to a handful of counties, to additional counties including York & Lancaster. Linked please find a memo regarding what we anticipate to be implications of the order. Please note, the linked document is based on requirements for the current counties under the stay at home order. To the extent the current order changes those requirements, we will be sure to update.
- Order Amending the Order of the Secretary of the Pennsylvania Department of Health Directing Individuals to Stay at Home (PDF)
- Amendment to The Order of The Governor of The Commonwealth of Pennsylvania for Individuals to Stay at Home (PDF)
- Stay at Home Order Guidance (PDF)
Updated Guidance from the Department of Labor for the Families First Coronavirus Response Act
Yesterday, the U.S. Department of Labor clarified that it will not enforce the Families First Coronavirus Response Act until April 17, 2020, provided that employers are making a good-faith effort to comply. As noted yesterday, the act now takes effect on April 1, 2020. Visit this link for more information on the FFCRA.
Please see the linked commentary (1) (2) from a legal colleague, Robert Bovarnick, Esquire, who is very knowledgeable about the business bankruptcy space. He has included information for both the debtor and the creditor.
Eisenhart & Company COVID-19 Resource Center
Another COVID-19 resource for you to use would be Eisenhart & Company. The following link has some helpful information: https://eisenhartcpa.com/covid19-tax-resource-center
March 26, 2020: MPL General Counsel’s Corner: CARES Act Passed by Senate, Initial Unemployment Numbers & More
There are lots of little things that are popping up today. Below are some of the more important updates:
- CARES Act passed by Senate, House passage possibly tomorrow – As I mentioned yesterday, the details of the CARES Act are slowly trickling out. The latest update that I have received is that the US Gov’t will likely be taking equity stakes in airlines in exchanges for rescue grants. There is more to come. This definitely falls into the “We have to pass the bill so that you can find out what is in it” category. See the article at the following link for an update: https://www.wsj.com/articles/mnuchin-indicates-u-s-to-take-stakes-in-airlines-in-exchange-for-grants-11585229047
- Initial Unemployment Numbers – 3.283 million, CARES Act provides additional funding – Unemployment claims were ~3,000,000 higher than the prior week. For perspective, the Great Recession peaked at 665,000 in 2009 and the all-time high was 695,000 in October 1982. Keep in mind that companies really did not have a choice. Also, with the likely to be passed CARES Act, there is an additional $600/week, which is on top of the amount received in the State System. To put that number in perspective, in PA, the max benefit per week is $823. Combined, a filer would be receiving $1423 (or $73k per year annualized). In NY the maximum weekly benefit is $405, which when added to the CARES Act amount is $1005 (or ~$52k per year annualized). This could hinder the return to work for many once we move past the current crisis.
- Overview of Federal and State (MD & PA) Aid Programs: I received three documents from Hal Carney (email@example.com; 717-747-1562) @ People’s Bank. They provide nice overviews of the emergency aid programs available in PA, MD and on the Federal level.
- COVID-19 Working Capital Access (CWCA) Loans from Pennsylvania Infrastructure Development Authority (PIDA). PIDA has issued guidance on its emergency working capital loan program in response to the COVID-19 crisis. We have linked that guidance document here, along with the list of local Economic Development Offices where you may apply for the loans. These loans will have the following features:
- Eligible Borrowers. An eligible small business enterprise is a for-profit corporation, limited liability company, partnership, proprietorship or other legal business entity located in the Commonwealth of Pennsylvania and having 100 or fewer full-time employees worldwide. Retail/service business and agricultural producers are eligible but with certain caveats to the loans available (see below).
- Eligible Costs. (i) Working capital, which for purposes of this program is considered capital used by a small business for operations, excluding fixed assets and production machinery and equipment; and (ii) any eligible working capital cost, as defined above, incurred by the eligible business enterprise three (3) months prior to submission of the loan application will count as an eligible cost toward either the loan amount or, if applicable, the matching investment requirement. Retail / service enterprises are able to incur eligible working capital costs up to six (6) months prior to submission of the loan application. Please note that evidence of eligible working capital costs incurred equal to the amount of the total project cost will be required prior to the loan being disbursed.
- Ineligible Costs. Projects relating to the following activities are not eligible: (i) Providing funds, directly or indirectly, for payment whether as loan repayment, dividend distribution, return of capital, loans, or otherwise to owners, partners or shareholders of the business enterprise, except as ordinary compensation for services rendered; or (ii) finance a project located outside the geographic boundaries of this Commonwealth.
- Rate and Term. The interest rate for the program is 0% except for agricultural producers in which case the interest rate is 2% fixed for the life of the loan. Loan terms are three years with a 12-year amortization. In addition, 1) no payments will be due and payable during the first year, 2) principal and if applicable, interest payments will be due monthly for years two and three, and 3) A balloon payment will be due and payable at the end of the third year.
- Loan Amounts. Maximum amount is $100,000. No match required except for retail/service providers in which case the loan can fund up to 50% up to a maximum of $50,000.
- Collateral. Lien on all assets with highest position available (subordinate to any current lender with a lien on assets).
- Guarantees. Personal guaranty required from any owner with a 20% or greater equity stake.
- Debt Service Coverage Ratio. The borrower must maintain a DSCR of 1:1 or better during the life of the loan.
March 26, 2020: MPL General Counsel Corner – More Updates on the CARES Act; Local Relief Plan for PA Small Businesses; Miscellaneous Items
Information is constantly flowing in and we are working together as a team to try and get the most important points in front. See the latest updates below:
Stimulus Package – The third relief legislation related to the COVID-19 pandemic, a $2 trillion stimulus package titled the Coronavirus Aid, Relief and Economic Security (CARES) Act (“CARES”) is just not in draft form. It still has to be officially approved and signed into law. We are currently reviewing summaries of the various sections. Once CARES is final, and proper analysis has been performed, we will provide summarized updates as they apply to our area. For the time being, some of the highlights include:
- $350 billion would be made available in loans for small businesses with less than 500 employees.
- Pay Check Protection Program
- 8 weeks of cash-flow assistance through 100 percent federally guaranteed loans to employers who maintain their payroll during this emergency.
- The borrower shall have a portion of their loan forgiven in the amount equal to payroll support, employee salaries, leaves, rent and utility payments between the covered period of February 15, 2020 and ending on June 30, 2020.
- Eligible borrowers must make a good faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19; they will use the funds as intended; and are not receiving duplicative funds for the same uses from another SBA program.
- Includes sole-proprietors, independent contractors, and other self-employed individuals as eligible for loans.
- Pay Check Protection Program
- Recovery Rebate for American Households
- All U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work eligible social security number, are eligible for the full $1,200 ($2,400 married) rebate. Families are eligible for an additional $500 per child.
- $150 billion Available in State and Local Stimulus Funds.
- “State Stabilization Fund,” which would assist state governments with looming revenue shortfalls during the pandemic.
- Emergency Increase in Unemployment Compensation Benefits
- Provides an additional $600 per week payment to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months. An addition to the state program.
- Establishes a $500 billion lending fund for industries and cities.
- $130 billion would be allocated to hospitals that have been hit hard by the pandemic.
Local Economic Relief – In Governor Wolf’s press conference today, he described relief for Pennsylvania businesses through $60M of funds provided by the PA Industrial Development Authority (PIDA) Conronavirus Relief. PIDA is making emergency relief loans up to $100,000 available to qualifying small businesses with 100 or fewer employees at a 0% interest rate for a term of 3 years. The new program is called the COVID-19 Working Capital Access Program (CWCA) and is meant for PA businesses to be able to keep their doors open during the shutdown.
This program is currently live as of the governor’s press conference. All loan applications must be submitted a Certified Economic Development Organization (CEDO). To find the correct CEDO, please use this website: www.dced.pa.gov/cedo. For those in York County, the appropriate CEDO is the York County Economic Development Corporation (see their website here). To review additional information about the CWCA program, you can access CWCA program website maintained by DCED.
- New York State Bar Association program for Employer/Employee Covid 19 issues: The NYSBA presented a continuing legal education program today which included some helpful information on Employer/Employee issues related to Covid-19. The below questions and answers may be helpful for our clients with NY operations
- What if an employee tests positive for Covid-19? No single answer can answer this question. First, the employer should follow CDC precautions to ensure a safe workplace which may include shutdown to sanitize the exposed operations. The employer should also notify your local or state health officials so they can do tracing and notify other potentially exposed persons. Because the state and county health officials are currently struggling to keep up with notifications, the employer should also ask the employee who they have been in close contact (within 6 feet) with at work within the last 72 hours. Anyone identified as being within close contact should be notified by letter or email that they have been in close contact with someone at work (kept anonymous unless the employee consents to reveal their name) and should be tested and quarantine themselves until test results come back. Other employees should be notified generally there has been a case at the employer’s place of business and that anyone in close contact has been notified individually. No further precautions are immediately necessary with the employees who were not in close contact with the positive employee. The New York State Department of Health has issued guidance with examples on what constitutes close contact. A copy of that guidance is linked here.
- What if an employee is worried about getting stopped driving to work at a life-sustaining business? We can provide a form letter for you to put on your letterhead that you can provide to employees identifying the employee as an employee of a life-sustaining business that may stay open under the various executive orders. The letter would identify the essential nature of the business and provide an HR contact person for questions or verification. (MPL’S ATTORNEY’S CAN HELP DRAFT A LETTER FOR YOU AND YOUR BUSINESS)
- Bill Gates – a soothsayer? Bill Gates did a TED talk about the very issue we are faced with today……in 2015…..the video is at the following link: https://youtu.be/6Af6b_wyiwI
March 25, 2020: General Counsel Corner – COVID-19 Stimulus Round 3 (CARES Act)….almost there
Importantly, I am glad to see that we are not the only people burning the midnight oil. In the middle of the night, the Senate agreed in principle to a $2 trillion stimulus package (Coronavirus Aid, Relief and Economic Security (CARES) Act). Details are still hard to locate, but at a high level, here are the provisions (I borrowed the points below from a financial advisor, Patrick Barry):
- Direct payments of $1,200 to most individuals making up to $75,000, or $2,400 for couples making up to $150,000. The amount decreases for individuals with incomes above $75,000, and payments cut off for those above $99,000. For those who filed married-joint, the amount decreases with incomes above $150,000 and payments cut off for those above $198,000. There is a reported benefit of $500 for each child.
- Expanded unemployment benefits that boost the maximum benefit by $600 per week and provides laid-off workers their full pay for four months. This benefit may provide additional resources for freelancers as well. I haven’t found more information as of yet on these details.
- $367 billion in loans for small businesses
- $150 billion for state and local governments
- $130 billion for hospitals
- $500 billion in loans for larger industries, including airlines and hospitality ($50 billion for airlines)
- Creation of an oversight board and inspector general to oversee loans to large companies
- Measure prohibiting companies owned by President Trump and his family from receiving federal relief
I also thought the note published by the Heritage Foundation provided more insight as to what is in the ACT: https://www.heritage.org/public-health/commentary/13-key-things-know-about-the-senates-giant-coronavirus-bill
Please note that the CARES bill is still subject to House approval and the President’s signature. Please click on the story on the following link for updates: https://apnews.com/edd230801c0e181169915e67b1fd64c6
We will update you with more information as it is released.
In other news, please see the bullet points below:
- PA Life Sustaining Business Updates: I sent out the updated list of Life Sustaining Business for PA along with a Q&A document. These documents are updated on a regular basis as new information is gathered. Please make sure you check on the following link for the latest information: https://www.pa.gov/guides/responding-to-covid-19/#ForBusinesses
- Waiver determinations in PA: In making decisions on whether to grant businesses waivers, the PA Dept. of Community and Economic Develop is following the US Dept. of Homeland Security’s Cybersecurity and Infrastructure Security Agency’s advice. The advisory link is https://www.cisa.gov/identifying-critical-infrastructure-during-covid-19
- Small Business FAQ from NFIB: The following link provides some great topical FAQ’s for small businesses related to COVID-19. It is updated on a regular basis. Check it out: https://www.nfib.com/content/legal-compliance/healthcare/small-business-faqs-on-covid-19/
- Markets will recover and things will get back to normal: A friend and finance professional (Larry Moskowitz at Certified Financial Services) shared the linked chart with me yesterday. It lays out the S&P 500 with major health epidemics over the last 50 years. It is pretty interesting to see how the market moved.
March 24, 2020: General Counsel Update from March 24th
As of 2pm, I was going to write the following “In relative terms, today is a bit of a slow news day (queue the collective eye roll)”. However, I am glad that I did not send out a note then. Several releases (see bullet points 1, 2 & 3 below) were announced this afternoon. The other bullets are also good things to review as well. I hope these provide some more clarity for you and your business.
- Filings and payments for the IRS are delayed, but questions still linger. The IRS published the following Notice with some helpful guidance: https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers
- No official guidance for small business exemption (<50 employees) from the Families First Act, but they will be out soon. Here is a link to a helpful Q&A ono this topic and other key components: https://www.dol.gov/agencies/whd/pandemic
- PA Updated Stay at Home Order, Life Sustaining Business List & Q&A Released: See the linked documents for an updated list and a Q&A. Also, the Stay at Home order has now been amended to include Erie County.
- Useful Financial Update for Businesses: Linked here is an email we received from Dave Barnitt at Attract Capital, a experienced provider of capital structure advice and business funding. In the email, there is a helpful rundown of important financial updates for your business. You can also visit his website at www.attractcapital.com or his YouTube Channel at https://www.youtube.com/channel/UCXqSHpUjsnWc-z3Kecw5SFg where he has a variety of helpful videos on lending options available in the mid-market.
- What will the world look like post Covid-19? Take a quick read of the article in the following link. While I may not agree with all of the perspectives, it certainly helps me to think through my business options moving forward. See the attached link: https://www.politico.com/news/magazine/2020/03/19/coronavirus-effect-economy-life-society-analysis-covid-135579
- Questions that I have received:
- Business owners that elect S-Corp for tax treatment, actively work in the business & unemployment, what are the options? The long and short of it in PA is that if you only receive a k-1 and do not receive a w-2, then you will not be eligible for unemployment compensation. Also, if you have a controlling interest and still pay your self as a w-2 employee, you are likely not eligible for unemployment as well. I have tried to find a percentage ownership threshold, but to no avail. The best that I have come up with is if you run the daily operations, then you have a controlling interest. Of course, it is a case by case basis when you file.
- If you have a life sustaining business and you are in a county that has a “stay at home” order, how do the employees prove they work at your business if they are stopped? According to the Governor’s order, they are still allowed to go to work, but no guidance was given as to how to document and prove that is what you are doing. I have an email into the State asking for guidance.
March 23, 2020: General Counsel Corner – PA jumps in to the “Stay at Home Order” arena in select counties
In the ever-changing landscape, I know one thing is for certain, we will get through this. However, with my youngest trying to mow our hardwood floors with his toy lawnmower and our dogs cowering in the corner scared, it is tough to see the light at the end of the tunnel sometimes. I guess there is a little humor in every day.
Apologies for the multiple attachments, but there was a lot of information put out over the weekend. Below are the latest updates that I believe are of most interest to your business:
- Politics have not been set aside: Republicans and Democrats are at each other’s throats for the next stimulus bill as it went down in flames again. The big sticking point is the amount of funds going to larger corporate enterprises versus the small business community. See this article for more details.
- PA, albeit limited, jumps into the “stay at home” order arena: Philly already had a stay at home order in place, but now Governor Wolf has issued the same directive to Allegheny, Bucks, Chester, Delaware, Monroe and Montgomery counties. Also, school shutdowns statewide have been extended for another two weeks. See the attached article for more details: https://www.pennlive.com/news/2020/03/gov-tom-wolf-issues-stay-at-home-order-for-7-counties-school-closures-will-extend-two-more-weeks.html
- State by State, no consistency: There is no consistent theme to how States are handling business shutdowns/restrictions and stay at home directives. Linked is an email update that I received from a fellow attorney in NJ (Tedd Kochman at Littler) that lays out orders from a number of states nationwide. Also, we just got an update that MD is following a similar order to what PA did with non-essential business shutdowns; see the following link: https://www.baltimoresun.com/coronavirus/bs-md-pol-hogan-nonessential-businesses-20200323-mb5ltcvsjvbu3ihp236por2xvq-story.html.
- Wall Street Analysts Slashing Forecasts: Notes from two Wall Street Analysts. Earnings, as expected, are being slashed for 2020.
- Latest Non-Life Sustaining List: The latest list of non-life sustaining businesses in the State of PA with some additional guidance. We have heard from some clients that they have received waivers from the State. However, the approval/denial process is still unclear.
- Updated tax credit memo: We have updated our memo discussing the employer tax credits under the Families First Coronavirus Response Act. We have included guidance from the IRS along with examples of how the credits work.
- Updated PA county office status list: The latest list from the PA Land Title Association of all the PA county offices and their respective department/office availability status.
March 23, 2020: Employer Tax Credits – The Families First Coronavirus Response Act
This article provides updates from a prior article posted regarding a Summary of the Families First Coronavirus Response Act signed into law on Wednesday, March 18, 2020 (the “Act”). Per the prior summary and the Act, additional paid leave under the updated Family and Medical Leave Act (the “FMLA”) and the Emergency Paid Sick Leave Act (the “EPSLA”) is subject to immediate tax credit for the paying employer. The additional information is based on the IRS’ guidance memo, which is also on our website.
While the Act mandates certain paid leave to employees regarding COVID-19 related absences, the Act also provides for offsets to employers required to pay such amounts. The offsets are taken directly against payroll withholdings that the employer was otherwise required to make for wages paid. The tax credit is a dollar for dollar offset for paid leave amounts paid by the Employer. Where the payroll taxes owed are less than the credit (or offset) amount, an expedited reimbursement will be established to refund employers the additional amounts paid for COVID- 19 related paid leave.
FMLA and EPSLA Review
The Act amends the current FMLA by permitting eligible employees to use FMLA leave related to a public health emergency for child-care related absences. The new law applies to government employers and employers with fewer than 500 employees. Eligible employees may take up to twelve (12) weeks of job protected FMLA leave where they are unable to work or telework because of a need for leave to care for a child if their (primary or secondary) school or place of care has been closed, or their child-care provider is unavailable, because of a public health emergency declared with respect to COVID-19. While the first 10 days of FMLA leave is unpaid, employees may elect to substitute accrued vacation, personal leave, or sick leave for the unpaid leave under this section. After the 10 days, employers must pay the employee not less than two- thirds of the employee’s regular rate of pay for each day of FMLA leave taken thereafter, capped at $200 per day, and capped at $10,000 in the aggregate.
The EPSLA permits employees to use sick leave related to COVID-19. Like the FMLA expansion, this applies to government employers and employers with fewer than 500 employees. All full-time employees (subject to limited exceptions), regardless of their length of employment, are entitled to take 80 hours paid sick leave immediately. Employers additionally must permit employees to use COVID-19 related sick leave before other sick leave. To be eligible, the employee must be subject to one of a possible six qualifying circumstances (which are set forth in the prior article). If an employee qualifies under the enumerated conditions, employers are required to pay an employee (i) at his or her regular rate of pay up to a cap of $511 per day and $5,110 in the aggregate for sick leave use under reasons (1)-(3) (employee quarantine or isolation order, self-quarantine recommendation or experiencing symptoms and seeking treatment), and (ii) at 2/3rds his or her regular rate of pay capped at $200 per day and $2,000 in the aggregate for sick leave use under reasons (4)-(6) (caring for others and additional government-specified conditions). Employers must post a notice related to this section in a conspicuous place in the workplace.
Tax Credits for Employer’s Paid Leave
Paid Sick Leave Credit. These credits are related to paid leave under the EPSLA. For an employee who is unable to work because of COVID-19 quarantine or self-quarantine, or has COVID-19 symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, capped at $511 per day and $5,110 in the aggregate, for a maximum of 10 days. For an employee caring for someone with COVID-19, or caring for a child because the child’s school or child care facility is closed, eligible employers may claim a credit for two-thirds (2/3) of the employee’s regular rate of pay, capped to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit based on costs to maintain health insurance coverage for the eligible employee during the leave period.
Child Care Leave Credit. These credits are related to paid leave under the COVID-19 specific changes to the FMLA. In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the COVID-19, eligible employers may receive a refundable child care leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit. As with the paid sick leave credit, eligible employers are also entitled to an additional tax credit based on costs to maintain health insurance coverage for the eligible employee during the leave period
Prompt Payment for the Cost of Providing Leave. When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees’ share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.
Under guidance to be issued this week from the IRS, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS. The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.
If there are not sufficient payroll taxes to cover the cost (offset) of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this expedited payment procedure will be announced later this week with the additional guidance referenced above.
- If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
- If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
- Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.
Per the IRS guidance, the Dept. of Labor will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, the Dept. of Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. The Dept. of Labor will instead focus on compliance assistance during the 30-day period. While our office will remain closed pursuant to Governor Wolf’s shutdown order, our attorneys will remain available via cell phone and email. If you have any questions, please contact your MPL attorney to discuss the above, or other questions about the effect of COVID-19 on your operations. Email contacts: Andy Miller (firstname.lastname@example.org); James Sanders (email@example.com); and Christian Miller (firstname.lastname@example.org).
March 22, 2020: Business Law Updates related to Covid-19
In an effort to keep you up to date, I have pulled together some highlights which I think may be important for your business:
Stay at home orders spreading across the U.S.; No order yet for PA, but likely being considered
As of this writing, outside of NY and CA, we have seen Ohio, Louisiana and Rhode Island enact stay-at home orders along with Philadelphia). Governor Wolf in PA has not ordered a similar action as of yet, but we assume that they are considering the option. A press conference is scheduled for 6pm this evening (https://www.pennlive.com/
Governor Wolf’s Non-Life Sustaining Business Location Order Enforced Monday 3/23/2020 at 8am
The enforcement of the order will begin tomorrow morning at 8am by State Troopers, local officials, State Health & Agriculture departments and the Liquor Control Board. Failure to comply could result in citations, fines or license suspensions and possibly the forfeiture of any disaster relief. If you believe you are an exempt business, please click on the following link for assistance: https://www.scribd.com/
Two Lawsuits Filed Against Governor Wolf’s Order
Two lawsuits have been filed (one an attorney and the other a gun shop owner) challenging Governor Wolf’s authority to order the shut down of non-life sustaining businesses. The PA Supreme Court has not yet weighed in.
Round three of Covid-19 related stimulus – $1 Trillion or more in Federal Aid – CARES Act
Nothing agreed to as of yet, but plans are coming out from the Republicans in the Senate and the Democrats in the House. Small business aid and focused lending to “At Risk” industries (airlines, hospitality, energy) likely be provided. See the following article for some insight: https://www.marketwatch.com/
Loan agreement covenants – time to review
For many businesses with lines of credit or outstanding loans, I do hope that you have pulled our your loan documents and understand the covenants contained in them. If not, I would suggest you take some time to review these items and discuss options with your professional advisors (attorney, CPA, banker, investment advisor).
Alternative debt structures
I am attaching an interesting piece from DealBook. In it, they discuss how private equity, venture capital and private lenders are flush with cash coming into this downturn. They could be alternative lenders or sources of capital for your business in the event that traditional commercial financing is not available.
March 21, 2020: Summary – The Families First Coronavirus Response Act
In order to keep our clients, which employ individuals, updated on the rapidly evolving landscape of employment law changes in response to the COVID-19 pandemic, below is a summary of the Families First Coronavirus Response Act (the “Act”). Specifically, this summary outlines how the Act effects paid time off for employees with absences related to COVID-19. The below information is based off information provided by the National Law Review.
The Act President Trump signed the Act into law late Wednesday night. The law goes into effect April 2, 2020 and will remain in place until December 31, 2020. In short, the Act amends the current Family and Medical Leave Act (the “FMLA”) and creates additional paid time off through the Emergency Paid Sick Leave Act (the “EPSLA”). Collectively, they, among other things: (1) extend and expand the protections of FMLA job-protected leave for certain childcare COVID-19 related absences, including requiring paid FMLA leave benefits; (2) provide a new paid sick leave entitlement for certain COVID-19 related absences; (3) provide tax credits to help employers defray the costs of paying these benefits; and (4) provide grants to eligible states to further fund their unemployment trust fund accounts. Importantly, the law’s new entitlements only remain in effect through December 31, 2020.
Expansion of FMLA
The Act amends the current FMLA by permitting eligible employees to use FMLA leave related to a public health emergency for child-care related absences. Below are key considerations for employers related to these amendments:
The new law applies to government employers and employers with fewer than 500 employees. Employees working for at least 30 days for a covered employer are eligible immediately to use leave. The Department of Labor has the power to exclude employers with fewer than 50 employees where a hardship exemption applies. The hardship exemption is generally related to an employer’s financial inability to cover the FMLA paid leave. The
Department of Labor is expected to issue guidance as to what does and does not qualify as an exemption.
Eligible employees may take up to twelve (12) weeks of job protected FMLA leave where they are unable to work or telework because of a need for leave to care for a child if their (primary or secondary) school or place of care has been closed, or their child-care provider is unavailable, because of a public health emergency declared with respect to COVID-19. This change also applies to a recommendation to quarantine or where the employee needed to care for a family member recommended to quarantine.
The first 10 days of FMLA leave is unpaid, but employees may elect to substitute accrued vacation, personal leave, or sick leave for the unpaid leave under this section. An employer may not require such substitution. After the 10 days are exhausted, employers must pay the employee not less than two-thirds of the employee’s regular rate of pay for each day of FMLA leave taken thereafter, capped at $200 per day, and capped at $10,000 in the aggregate. There are separate provisions regarding this paid leave benefit for employees subject to a multi-employer collective bargaining agreement.
The EPSLA permits employees to use sick leave related to COVID-19, the key components of which are set forth below. Like the FMLA expansion, this applies to government employers and employers with fewer than 500 employees. It may also exclude employers with fewer than 50 employees where a hardship exemption applies. Again, as with the FMLA updates, this is generally related to financial hardships. We are waiting on Department of Labor guidance to clarify the exemption qualifications.
All full-time employees (subject to limited exceptions), regardless of their length of employment, are entitled to take 80 hours paid sick leave immediately. Part-time employees get a pro-rated amount. These new sick leave amounts are in addition to, and not in lieu of, any other statutorily provided or employer-provided paid sick leave benefits. Employers additionally must permit employees to use COVID-19 related sick leave before other sick leave.
Paid sick leave under the EPSLA cannot be carried over into the new year, nor are they paid out at termination. Below are the qualifications which permit employees to use this sick leave if they cannot work, or telework:
- They are subject to a Federal, State, or local quarantine or isolation order related to COVID-
19; 2. The employee has been advised by a health care provider to self-quarantine due to
COVID19 related concerns; 3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis; 4. The employee is caring for someone who is subject to a quarantine or isolation order or
who has been advised to self-quarantine; 5. The employee is caring for a child if the child’s school or place of care is closed or the
child-care provider is unavailable because of COVID-19 precautions; or 6. The employee is experiencing any other substantially similar conditions specified by the Secretary of Health and Human Services in consultation with the Secretary of Treasury and the Secretary of Labor.
If an employee qualifies under the above enumerated conditions, employers are required to pay an employee (i) at his or her regular rate of pay up to a cap of $511 per day and $5,110 in the aggregate for sick leave use under reasons (1)-(3) above (employee quarantine or isolation order, self-quarantine recommendation or experiencing symptoms and seeking treatment), and (ii) at 2/3rds his or her regular rate of pay capped at $200 per day and $2,000 in the aggregate for sick leave use under reasons (4)-(6) above (caring for others and additional government-specified conditions). Employers must post a notice related to this section in a conspicuous place in the workplace. A model notice will be provided by the Department of Labor by next week.
Tax Credits for Employer’s Paid Leave
The Act provides a refundable tax credit equal to 100% percent of qualified paid leave benefits paid by an employer under the new FMLA and EPSLA requirements. The tax credits are subject to certain caps and offset against social security taxes paid by the employer.
Employers should take the following steps.
- Confirm employee headcount, taking into account part-time employees and any planned
layoffs, to determine which provisions of the law would apply. 2. Think about drafting a stand-alone emergency leave policy that outlines these FMLA and sick leave rights, with an eye for ensuring that this policy aligns with the company’s leave of absence, sick leave, and PTO policies. 3. Prepare to account for the new paid FMLA and sick leave entitlements from a
financial/accounting perspective. 4. Consider potential fluctuations in staffing levels in anticipation of employees taking
advantage of these leave entitlements this calendar year. 5. Be mindful of parallel or overlapping leave and PTO requirements under applicable state
and local laws.
On the Horizon – Additional Congressional Action – CARES Act
There is a third COVID-19 related bill (CARES Act) which was introduced by Senate Republicans on 3/19. It would cover business interruption loans and further expand tax relief for individuals and businesses. While the details are continuously changing, below are some of the highlights of the bill:
- Up to $10,000,000 in loans to cover payroll, health insurance, salaries, mortgage, rent
and debt obligations. 2. Potential loan forgiveness for monies used from loans taken to maintain payroll from
March 1-June 1, 2020. 3. If you have already taken out an SBA Disaster Assistance loan, you would not be
eligible for a business interruption loan and vice versa.
Further consideration of the CARES Act is expected next Monday. We will update as we learn more.
While our office will closed, pursuant to Governor Wolf’s shutdown order, our attorneys will remain available via cell phone and email. If you have any questions, please contact your MPL attorney to discuss the above, or other questions about the effect of COVID-19 on your operations. Email contacts: Andy Miller (email@example.com); James Sanders (firstname.lastname@example.org); and Christian Miller (email@example.com).
March 21, 2020: Update from NFIB Conference Call
We just got off the NFIB call (see slides here). A few key things to note:
- There is still no clarity as to what qualifies as an exemption for small business from the expansion of the FMLA benefits in the Families First Coronavirus Response Act. The Department of Labor is expected to provide further guidance. The NFIB is pushing for as broad an exemption as possible.
- There is a third Covid-19 related bill (CARES Act), which was proposed by Senate Republicans on 3/19. It would include business interruption loans for things like payroll, mortgage payments and debt payments. Additional consideration/deliberation of this bill is expected on Monday.
Outside of those two points, we have drafted a memo which more fully details the Families First Coronavirus Response Act.
March 21, 2020: ALL NON-LIFE-SUSTAINING BUSINESSES IN PENNSYLVANIA TO CLOSE PHYSICAL LOCATIONS AS OF 8 PM MARCH 19 TO SLOW SPREAD OF COVID-19
Note: This content was originally published by the website of Governor Tom Wolf here on March 19th.
Wolf Administration Orders Closure of Non-Life-Sustaining Businesses at 8 p.m. Today, March 19
Enforcement Actions for Restaurant, Bar Dine-In Closure Began at 8 p.m., March 18
Enforcement Actions for Non-Compliance will Begin at 12:01 a.m. Saturday, March 21
Governor Tom Wolf today ordered all non-life-sustaining businesses in Pennsylvania to close their physical locations as of 8 p.m. today, March 19, to slow the spread of COVID-19. Enforcement actions against businesses that do not close physical locations will begin at 12:01 a.m. Saturday, March 21.
In extenuating circumstances, special exemptions will be granted to businesses that are supplying or servicing health care providers.
“To protect the health and safety of all Pennsylvanians, we need to take more aggressive mitigation actions,” said Gov. Wolf. “This virus is an invisible danger that could be present everywhere. We need to act with the strength we use against any other severe threat. And, we need to act now before the illness spreads more widely.”
The governor had previously encouraged non-life-sustaining businesses to close to mitigate the spread of COVID-19. Restaurants and bars were already required to stop all dine-in services. Enforcement for establishments with a liquor license began at 8 p.m. March 18, and enforcement for all other food establishments will begin at 8 p.m. tonight. Food establishments can offer carry-out, delivery, and drive-through food and beverage service, including alcohol.
Pursuant to the Emergency Management Services Code, the governor is granted extraordinary powers upon his declaration of a disaster emergency, such as COVID-19. Among these powers, the governor may control the ingress and egress into the disaster area, the movement of persons, and the occupancy of premises within the disaster area, which has been established to be the entire commonwealth for the COVID-19 disaster emergency. The secretary of health separately is authorized under the law to employ measures necessary for the prevention and suppression of disease.
Separately, and taken together, the administration is exercising these powers to temporarily close all non-life-sustaining businesses and dine-in facilities at all restaurants and bars across the commonwealth. Persons must be removed from these premises to cope with the COVID-19 disaster emergency.
Failure to Comply and Enforcement
Failure to comply with these requirements will result in enforcement action that could include citations, fines, or license suspensions.
The governor has directed the following state agencies and local officials to enforce the closure orders to the full extent of the law:
- Pennsylvania Liquor Control Board
- Department of Health
- Department of Agriculture
- Pennsylvania State Police
- Local officials, using their resources to enforce closure orders within their jurisdictions
Private businesses, local organizations and other noncompliant entities that fail or refuse to comply with the governor’s orders that protect the lives and health of Pennsylvanians will forfeit their ability to receive any applicable disaster relief and/or may be subject to other appropriate administrative action. Such action may include termination of state loan or grant funding, including Redevelopment Assistance Capital Project (RACP) grant funding and/or suspension or revocation of licensure for violation of the law.
Finally, in addition to any other criminal charges that might be applicable, the Department of Health is authorized to prosecute noncompliant entities for the failure to comply with health laws, including quarantine, isolation or other disease control measures. Violators are subject to fines or imprisonment.
Business Loans and Support
The Department of Community and Economic Development (DCED) offers working capital loans that could be of assistance to businesses impacted by COVID-19. Resources and information will be posted to http://dced.pa.gov/resources as they become available. The U.S. Small Business Administration, in addition to local funding partners, may also be a source of assistance for affected businesses.
The Wolf Administration today announced the availability of low-interest loans for small businesses and eligible non-profits in all 67 counties in Pennsylvania through the U.S. Small Business Administration (SBA).
Businesses seeking guidance from DCED can also contact its customer service resource account at firstname.lastname@example.org or by calling 1-877-PA-HEALTH and selecting option 1.
For the most up-to-date information on COVID-19, Pennsylvanians should visit: https://www.pa.gov/guides/responding-to-covid-19/.
General Counsel Updates for March 20, 2020 – James Sanders
There has not been any major news overnight other than last night’s 8pm shutdown of non-life sustaining businesses ordered by Governor Wolf in PA.
The biggest question I have received is what category a business fits into. As of now, I would recommend that you use your best judgment and if you are ordered to close by the respective authorities, then you should follow the directive. In the alternative, you could also reach out to your local elected State representative to verify your category.
Please remember that this order relates to your physical location. It does not mean you cannot work remotely from home. You cannot be open to the public if you are in a category that is non-life sustaining. The intent is get social distancing implemented.
A few other things:
- NFIB Update Call: Today I will be listening to the National Federation of Independent Business (NFIB) update call at 12pm. I will send out a follow-up notification with any further clarifications.
- Business interruption insurance: It may be a good time to review your business insurance coverage and have a conversation with your agent/broker. I had an interesting conversation with a business colleague that was told that this business interruption insurance does not apply to his business because he has the ability to work from home. He argued that the essential part of his job is being on a client’s site for business inspections. While not an issue now, I can see this issue being contested once we get on the other side of the coronavirus. The article in the following link has an interesting solution: https://riskandinsurance.com/butlers-risk-manager-calls-for-a-pandemic-risk-insurance-act/?rid=62098
- Force majeure: This contract clause, which is seldom understood or vetted unless you are in manufacturing or logistics, permits a company to suspend or terminate the performance of its obligations for a period of time due to an unforeseeable event (think a hurricane hitting an oil rig in the Gulf of Mexico). The big question, and one that is likely to be argued and litigated over, is whether these mandated shutdowns fall under this clause. Given that each state has rolled out quarantines and shut downs differently, I imagine there will be disputes. Please make sure that you fully understand the ramifications on your business if this clause is invoked by you or a supplier.
- Small Business Administration Loans: The SBA has agreed to start making low-interest loans to small businesses that are struggling during this crisis. The loans will be capped at $2M, with terms lasting as long as 30 months at rates of 3.75% for businesses and 2.75% for non-profits. Applications are due by 12/21 through the following link: https://www.sba.gov/funding-programs/disaster-assistance
- Deals & Liquidity: The weird thing about the current state of the business world is that deals, for the most part, are still moving forward. Let’s hope that the credit markets stay liquid. The following link provides some insight into this: https://pitchbook.com/news/articles/coronavirus-updates-latest-news-and-analysis#top3
For other general business updates, please check out the attached emails from some very informative colleagues. We are all coordinating our efforts to bring you the most accurate and important information related to your business.
March 20, 2020: Governor Wolf’s PA Mandated Closures (Update) – COVID-19
Order Requiring Shut-down of All Non-Life-Sustaining Businesses
Governor Wolf issued an updated shutdown Order earlier this afternoon that required the shutdown of all non-life sustaining businesses as of 8:00 pm this evening for an indefinite period of time. The Order will be enforced beginning 12:01 am on Saturday. This Order applies to any business that is not a life-sustaining business regardless of whether the business is open to the public. For businesses not permitted to remain open, the ordered shutdown only applies to physical locations and physical work. Businesses are permitted to maintain working in a remote capacity. A copy of the Order and list identifying life-sustaining businesses is attached with this update.
This means all places of businesses should be closed after tonight other than those that are life-sustaining businesses as identified on the attached chart. A variety of basic services and retail providers are permitted to remain open, similar to the prior shutdown order. The difference is the updated shutdown Order is enforceable compared to the prior shutdown order being a stern “recommendation.” Enforcement will be accomplished through a patchwork of different tactics that could include citations, fines, or license suspensions.
The governor has directed the following state agencies and local officials to enforce the closure orders to the fullest extent of the law:
- Pennsylvania Liquor Control Board
- Department of Health
- Department of Agriculture
- Pennsylvania State Police Local officials, using their resources to enforce closure orders within their jurisdictions
Private businesses, local organizations and other noncompliant entities that fail or refuse to comply with the updated shutdown Order will forfeit their ability to receive any applicable disaster relief and/or may be subject to other appropriate administrative action. Such action may include termination of state loan or grant funding, including Redevelopment Assistance Capital Project (RACP) grant funding and/or suspension or revocation of licensure from the various agencies listed above for violation of the updated shutdown Order. This seems to stretch from building and construction permits, the health inspection permits, food licenses, liquor and alcohol licenses, as well as professional licenses.
Finally, in addition to any other criminal charges that might be applicable, the Department of Health is authorized to prosecute noncompliant entities for the failure to comply with health laws, including quarantine, isolation or other disease control measures which is the primary purposes of the updated shutdown Order. Violators are subject to fines or imprisonment.
Again, please review the identification chart attached to determine if your business is permitted to remain open. Any required closure will subject employers and employees to the first “qualification” for the updated FMLA provisions (being an instance where an employee is subject to a federal, state or local quarantine or isolation order related to COVID-19). This means effected employees would be eligible for FMLA benefits after the ten (10) day wait period.
While our office will close as of Friday afternoon, March 20, 2020, our attorneys will remain available via cell phone and email. If you have any questions, please contact your MPL attorney to discuss the status of your business’ ability to continue operation, and to review any FMLA questions. Email contacts: Andy Miller (email@example.com); James Sanders (firstname.lastname@example.org); and Christian Miller (email@example.com).
Additionally, please stay tuned as we anticipate a federal order to follow in the next few days which will institute a broader mandatory shutdown.
March 20, 2020: A High-Level Overview: Family First Coronavirus Response Act
In an effort to keep you as informed as possible, here are the high-level bullet points related to the Family First Coronavirus Response Act, which was passed in the Senate last night and signed by President Trump. It will take effect on April 2, 2020 and will sunset on December 31, 2020.
Essentially, the bill guarantees testing or coverage for testing for coronavirus, extends tax payment (not filing) deadlines, and expands the FMLA coverage (see below). While not addressed in this bill, there are talks of stimulus payments coming in subsequent bills (i.e., these are the $1000 payment per citizen talks).
Here are the quick business-related bullet points from an article in Inc.com (https://www.inc.com/suzanne-lucas/what-senates-passage-of-families-first-coronavirus-response-act-means-for-you.html).
Qualifying for coverage.
The bill covers all companies with up to 500 employees. There is no 50 person minimum with the typical Family Medical Leave Act, and self-employed people can see some benefits.
There are six qualifying reasons for coverage under this bill. The National Law Review Describes them as follows:
- The employee is subject to a federal, state or local quarantine or isolation order related to COVID-19;
- The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- The employee is experiencing symptoms of COVID-19 and seeking medical diagnosis;
- The employee is caring for an individual who is subject to a federal, state or local quarantine order, or the individual has been advised to self-quarantine due to concerns related to COVID-19;
- The employee is caring for the employee’s son or daughter, if the child’s school or child care facility has been closed or the child’s care provider is unavailable due to COVID-19 precautions; or
- The employee is experiencing any other substantially similar condition specified by Health and Human Services in consultation with the Department of the Treasury and the Department of Labor.
Benefits for Employees
- Normal FMLA is unpaid, but under the FFCRA, employees who are on sick leave because they are sick can receive their full pay, up to $511 per day, or $5110 total.
- Leave taken to care for children whose schools or daycares have closed is paid at two-thirds the employee’s regular rate of pay, with a maximum of $200 per day or $10,000 total.
- Employers cannot force you to use up your vacation or other sick time before receiving this benefit.
- There is a ten-day waiting period before this benefit applies. Employees can use existing sick or vacation time to cover these days.
Benefits for Employers
- Employers receive tax credits for 100 percent of what they pay out to employees, with the above-noted limits.
- For employers with 50 or fewer employees, the Secretary of Labor can exempt the business from these requirements. However, in order to be exempt, the imposition of this Bill’s requirements would have to jeopardize the viability of the business as a going concern. As of this email, we are not certain as to the process to seek an exemption. Once we get clarification, we will send it out. A business owner should weigh the costs of complying with the requirements versus the cost of seeking an exemption.
- Employers with fewer than 25 employees do not have to restore employees to their previous positions.
Please contact us if you have any questions related to this or other business-related topics.
March 17, 2020: Business & Employment Guidance for Coronavirus
Our office wanted to share some insight we have recently gained into Governor Wolf’s mandated closures for the entire state of Pennsylvania, as well as useful information regarding employment and compensation-related issues.
The mandate was announced yesterday (March 16, 2020) at a 2pm press conference. However, a subsequent press was released which provided more specifics regarding businesses that may remain open. Due to your substantial operations in Pennsylvania, please note the below.
Note: Please note that due to demographic differences, Philadelphia has slightly different mandates. If you require Philadelphia-specific guidance, please contact our office directly. Please also note, this applies to the private sector, and does not apply to government positions such as first-responders and government offices.
Essential Services to Remain Open
Essential services and sectors may remain open (but should employ social distancing practices and be thoughtful in visits). These essential services include, but are not limited to, the following:
- Food processing
- Industrial manufacturing
- Feed mills
- Trash collection
- Grocery and household goods (including convenience stores)
- Home repair/hardware and auto repair
- Pharmacy and other medical facilities
- Biomedical and healthcare
- Post offices
- Shipping outlets
- Gas stations
- Veterinary clinics and pet stores
- Warehousing, storage and distribution
- Public transportation
- Hotel and commercial lodging
Non-essential Businesses to Remain Open (on a modified basis)
These other businesses are deemed non-essential but may remain open nonetheless. However they are strongly encouraged to have employees work remotely or telecommute. If the foregoing precautions are not possible, such businesses should employ social distancing and be aware of the Trump Administration’s guidance to avoid gatherings of 10 or more people. The non-essential businesses that may remain open on a modified basis generally include the following, and those similar professional services:
- Legal services
- Business and management consulting
- Professional services
- Insurance services
Non-essential Businesses to Close
The following non-essential businesses are mandated to temporarily close for 14 days. These non-essential businesses generally include public-facing industries such as entertainment, hospitality and recreation facilities. The non-essential businesses that are mandated to close (or operate on a modified basis) include the following:
- Restaurants and bars must close dine-in facilities. They are permitted to offer carry-out, delivery and drive through food and beverage service, but must employ social distancing best practices and avoid gatherings of 10 or more as per the Trump Administration’s guidance.
- Retail stores and facilities, including shopping malls (except for pharmacy or other health care facilities located therein)
- Community and recreation centers
- Gyms, including yoga and spin facilities
- Hair salons, nail salons, and spas
- Casinos, concert venues, cinemas and theaters
- Sporting events facilities and golf courses
Please note, the above mandates have been issued by the Wolf Administration for Pennsylvania businesses, but are not been legally compelled closures. Rather, the Wolf Administration’s goal in the mandates is to rely on businesses to immediately act according to the mandate without legally compelling closures. If the mandates are ineffective, either the Wolf Administration or the Secretary of Health may compel closures under the law for the interest of public health, including pursuant to § 7301 of the Emergency Management Services Code.
Additional information for York County based businesses can be located here: www.preparedyork.com/. This site is a compilation of information to assist businesses, non- profits, and employees with resources and information. Due to these unprecedented and incredibly dynamic circumstances, the website will continue to be populated with new and additional information. For direct information on COVID-19, we direct you to the CDC, PA Department of Health, or other healthcare agencies and organizations.
If you are unsure of how your business operation should be treated under the above guidance, please contact our office directly to discuss your concerns.
EMPLOYMENT AND COMPENSATION ISSUES
Compensation for Employees during Quarantine or Furlough Periods
Employers will need to consider issues regarding payment of wages and/or the use of PTO during a quarantine or furlough or when an employee is sent home due to COVID-19 concerns. In general—and subject to the below reporting time or predictive scheduling laws, as well as state and local paid sick leave laws—an employer can send a non-exempt employee home without pay and, so long as the employee does not perform any compensable work from home, no wages are due.
Compensation may be required during an extraordinary event, however, for waiting time or on-call time. The Fair Labor Standards Act considers employees to be “on call” if they must remain on the employer’s premises and are unable to use their time for their own purposes. Thus, for example, employees who are required to remain at a location where operations have shut down to assist when they begin again should be paid for the time spent “holding down the fort” despite their inactivity.
Importantly, if a non-exempt employee performs any work during a quarantine or similar period, the employer should ensure that the employee accurately tracks their working time and is paid for that time in accordance with all applicable federal, state and local laws. Non-exempt employees working from home during quarantine should be directed to comply fully with any and all company policies related to timekeeping, overtime approval, and meal and rest breaks.
Exempt employees must be paid their full salary if they perform any work in workweeks during which they are quarantined at home or furloughed (including only minimal tasks, such as checking emails). If an exempt employee is quarantined for a complete workweek, and performs no work in that week, it is possible that the employee may not need not to be compensated – however, this assessment should be determined on a case-by-case basis with counsel to ensure the employee’s exempt status is not compromised.
In the event of a quarantine or furlough, employees may choose to use sick leave, PTO or vacation during this time.
Furloughs and Other Temporary Responses to Coronavirus (Covid-19) Disruptions
Among the many issues employers are facing in the wake of the spread of the novel coronavirus (COVID-19) is the possibility of furloughs, temporary office and location closings, and short-term layoffs. A furlough involves reducing the days or weeks that an employee may work. A layoff can be temporary or permanent. Employers may also consider reducing the daily hours of some employees.
A common concern that employers have for planning COVID-19 decisions is whether the employer has a notice obligation under the federal Worker Adjustment and Retraining Notification (WARN) Act and similar state mini-WARN Acts. Fed WARN requires employers to provide 60 days’ advance notice to covered employees, unions, and government officials prior to a plant closing or mass layoff at a single site of employment. State mini-WARN laws contain separate and distinct requirements from Fed WARN that can be a trap to unwary employers. A WARN notice requirement can be a significant concern if a company is moving rapidly to address COVID- 19 disruptions.
The following guidance is designed to help address some common questions that employers have and inform employers of different areas of concern involved with furloughs and temporary shutdowns and layoffs.
What is the effect of furloughs or reduced hours?
Employers generally can schedule non-exempt employees for fewer days or hours without liability concerns. Employers do not need to pay non-exempt employees for time not worked. Exempt employees involve a more difficult analysis when considering furloughs or reduce hours as an alternative to layoffs. Employers should be aware that exempt employees under federal law and most state laws must be paid the same minimum salary for each pay period. Moreover, if an exempt employee performs any work during a workweek, that exempt employee must receive their entire salary that week. Failure to compensate an exempt employee for a week where any work is performed jeopardizes that employee’s exempt status. If an employer furloughs an exempt employee for an entire workweek, however, then no salary is owed for that full week and the employee’s status is not affected. Certain types of furloughs may involve changes to pay practices. Generally, prospective changes are acceptable, but state law may require specific periods for advance notice and may limit changes to particular types of pay (e.g., PTO).
When employees are furloughed, employers should expect that they will not work, including checking email and voicemail. An exempt employee is entitled to pay for any workweek in which they perform any work. Employers should therefore inform employees that work is not authorized during the furlough period without advance written approval. Employers also should notify non-exempt employees about the same issue as non-exempt employees generally are entitled to compensation for performing work when not in the office. A signed policy indicating the types of activities that require supervisor approval and the company’s expectation for recording any time spent on such activities is something employers should seriously consider.
If the employer has to furlough or temporarily lay off employees, are there any notification requirements?
There may be. Fed WARN and state mini-WARN statutes require employers to provide advance notification (60 days or 90 days, depending on the jurisdiction) to employees and government officials of certain group employment terminations. Not all layoffs trigger these requirements, however, and exceptions may apply. Temporary layoffs of less than six months are not considered to be employment losses under Fed WARN, and the same is true under many, but not all, state mini-WARNs. The size of the layoff also matters. Fed WARN is not triggered unless, at a minimum, there are 50 employment losses at a single site of employment in a 90-day period. State mini-WARNs can be triggered at lower levels.
Unfortunately, there is no exception to WARN for epidemics. Although Fed WARN and most state mini-WARN statutes have provisions addressing terminations due to natural disasters or calamities, it is unlikely that these provisions could be used to cover an epidemic.
What level of layoffs will trigger notice under Fed WARN?
Generally, 60 days’ specific written notice must be provided for a plant closing or a mass layoff. A plant closing is defined as 50 or more countable employment losses at a single site of employment in a 90-day period that results from ceasing operations in one or more operating units. A mass layoff is defined as 50 or more countable employment losses at a single site of employment in a 90-day period that also involves 33% of the active workforce at the site. Employees with less than 6 months of service in the prior 12 months, or who work less than 20 hours per week, are not countable. Notably, temporary layoffs of less than 6 months are not counted as an employment loss under Fed WARN.
If you feel that your employment issues may trigger Fed WARN or the PA mini- WARN, as described above, please contact our office directly to discuss whether any WARN notifications are required, as exceptions do apply.
Important Notice: This content is for informational purposes only. It is not intended to be, nor should it be considered, a substitution for legal counsel by a licensed attorney.