COVID-19 Update

Contents

OVERVIEW

With COVID-19, employers must balance health and safety with the need to protect their business. Brody and Associates is here to help. We continue to monitor the COVID-19 pandemic closely, and all the latest legal and legislative moves that impact employers.

This page is designed to provide you with relevant facts employers should know regarding the virus, links to government agencies which are responding to the outbreak, as well as practical insights.

The subject matter discussed in this post can be very technical. It is an evolving area of law and very fact specific. Our goal here is to simply alert you to some of the key issues involved. We urge you to seek competent legal counsel before applying these ideas to your specific situation. Brody and Associates stands ready to discuss your particular needs.

ARTICLES SUMMARIZING COVID-19 LEGISLATION

Covid-19 Federal Paid Sick Leave Legislation Just Passed: What Employers Are Obligated To Do

Two federal Acts will take effect on April 2, 2020. Both cover employers with less than 500 employees. Together they provide 12 weeks of paid leave for employees who must care for someone impacted by COVID-19 or who are themselves sick or likely infected by the virus. Here is the initial guidance on these laws:

Emergency Family and Medical Leave Expansion Act

This Act expands time off provided under the Family Medical Leave Act (FMLA). However, unlike the FMLA, this Act provides time off with pay. It also covers employees who have worked for as little as 30 days for the employer.

Employers with fewer than 500 employees must provide up to 12 weeks of leave for employees who are unable to work (or telework) due to a need to care for their son or daughter who is under 18 years of age and whose school or place of care has been closed, or the child care provider is unavailable, due to the COVID-19 virus. To qualify, an employee must provide notice as is practical.

The initial 10 days of leave is unpaid (but see below). Thereafter, employers must pay not less than two-thirds (2/3) of the employees’ regular rate for the remaining ten (10) weeks—but limited to $200 per day. Small businesses with fewer than 50 employees may be exempt from these requirements “when the imposition of such requirements would jeopardize the viability of the business.”

For employers with 25 or more employees, the employee is entitled to reinstatement to the same or equivalent position. Employers with fewer than 25 employees must make reasonable efforts to restore an employee to his or her previous position but may be exempt from reinstating the employee if such reasonable efforts fail and the economic or operating conditions of the employer have changed due to the COVID-19 pandemic.

Emergency Paid Sick Leave Act

This Act provides pay for the first two (unpaid) weeks of leave under the Emergency Family Medical Leave Expansion Act. Employees are immediately eligible; there is no 30 day waiting period. Employers with fewer than 500 employees must provide two (2) weeks of paid sick time to employees who are unable to work (including telework) for one of the following six reasons. The reasons break down into COVID-19 quarantine/sick related issues and providing care for someone impacted by COVID-19.

COVID-19 Quarantine/Sick Related Issues
1. The employee is subject to a federal, state, or local quarantine or isolation order relating to COVID-19;
2. The employee has been advised by a health care provider to self-quarantine due to COVID-19;
3. The employee has sought a medical diagnosis resulting from symptoms of COVID-19;

Providing Care for Someone Impacted by COVID-19
4. The employee is caring for an individual subject to a quarantine order;
5. The employee is caring for the employee’s own child whose school is closed, or whose care provider is unavailable due to COVID-19; or
6. The employee is experiencing any other substantially similar condition specified by the Department of Health and Human Services.

For an employee absent under subsections (1), (2), and (3), compensation shall not be less than the employee’s regular rate but shall not exceed $511 per day. The 2/3 pay maximum, as described in the Act above, does not apply here.

For an employee absent under subsections (4), (5), and (6), compensation shall be no more than two-thirds of the employees’ normal pay and shall not exceed $200 per day.

A full-time employee is entitled to 80 hours of paid sick time. A part-time employee is entitled to the number of hours worked on average over a two (2) week period.

Employers may not require the employee to find a replacement worker. Employers may not require an employee to use other paid leave before using paid sick time under this Act.

The employer must post notice of its obligations under this Act in a conspicuous place on its premises. The Secretary of Labor shall make available a model notice by March 25, 2020.

New York State Executive Order 202.8 Shuts Down Many Businesses

By Robert G. Brody and Mark J. Taglia

Executive Order 202.8
Effective Sunday, March 22, 2020 at 8:00 PM, New York State’s Executive Order 202.8 shut down many New York businesses in order to combat the spread of COVID-19. The State also issued guidance on who is exempted from the law. Here is what we know.

As of 8:00 pm, Sunday March 22, 2020 through April 19, 2020:

All businesses and not-for-profit entities need to utilize, to the maximum extent possible, any telecommuting or work from home procedures that they can safely use.
Each employer shall reduce the in-person workforce at any of its work locations by 100%.
Any “essential” business or entity providing essential services or functions shall not be subject to the in-person restrictions. Any business violating the above shall be subject to enforcement as if this were a violation of an order pursuant to section 12 of the Public Health Law (click here to be linked to section 12 of the New York State PHL).

For employers’ reference, the New York State Department of Economic Development has issued guidance on what exactly is considered essential services. It has broken these services down into twelve (12) broad categories, as follows:

1. Health care operations including research and laboratory services, hospitals, walk-in care health facilities, veterinary and animal health services, elder care, medical wholesale and distribution, home health care workers or aides, doctor and dentist offices, nursing homes, or residential health care facilities or congregate care facilities and medical supplies and equipment providers.
2. Essential infrastructure including utilities like power generation, fuel supply and transmission; public water and wastewater; telecommunications and data centers; airports/airlines; transportation infrastructure such as bus, rail or for-hire vehicles and garages.
3. Essential manufacturing including food processing, including all foods and beverages, chemicals, medical equipment/instruments, pharmaceuticals, safety and sanitary products, telecommunications, microelectronics/semi-conductor, agriculture/farms, paper products.
4. Essential retail including grocery stores, all food and beverage stores, pharmacies, convenience stores, farmer’s markets, gas stations, restaurants/bars (only for takeout/delivery), hardware and building material stores.
5. Essential services including trash and recycling collection, processing and disposal, mail and shipping services, laundromats/dry cleaning, building cleaning and maintenance, child care services, auto repair, warehouse/distribution and fulfillment, funeral homes, crematoriums and cemeteries, storage for essential businesses, animal shelters or animal care/ management.
6. News media.
7. Financial Institutions including banks, insurance, payroll and accounting.
8. Providers of basic necessities to economically disadvantaged populations including homeless shelters and congregate care facilities, food banks, human services providers whose function includes the direct care of patients in state-licensed or funded voluntary programs; the care, protection, custody and oversight of individuals both in the community and in state-licensed residential facilities; those operating community shelters and other critical human services agencies providing direct care or support.
9. Construction including skilled trades such as electricians, plumbers, other related construction firms and professionals for essential infrastructure or for emergency repair and safety purposes.
10. Defense and national security-related operations supporting the U.S. government or a contractor to the U.S. government.
11. Essential services necessary to maintain the safety, sanitation and essential operations of residences or other essential businesses including law enforcement, fire prevention and response, building code enforcement, security, emergency management and response, building cleaners or janitors, general maintenance whether employed by the entity directly or a vendor, automotive repair, disinfection and doormen.
12. Vendors that provide essential services or products, including logistics and technology support, child care and services needed to ensure the continuing operation of government agencies and provide for the health, safety and welfare of the public including logistics, technology support, child care programs and services, government owned or leased buildings and essential government services.

Despite the length of this list, many employers are asking if they are covered. In many cases we need to make an educated guess, but there is an alternative. New York State has created a service which allows employers to ask the State for guidance on the essential nature of their business. Beyond guidance, the State has already determined single person businesses are deemed essential and do not need to abide by this closure order. Over time, we will have more guidance on the definition of “essential.”

If you need help deciphering the definition of essential, need assistance in asking the State for guidance, or any other employment related issues pertaining to COVID-19, we stand ready to help.

New Amendment to Mandatory Connecticut Unemployment Form

The Connecticut Department of Labor just amended the mandatory form every employer must deliver to its employees when they separate from the Company – regardless of the reason. The key difference is when listing the reason for separation, a new category was added – Leave of Absence. Given the number of employers who are using furloughs – a forced leave of absence with a promise of a return to work – this change is key and likely a reaction to the current COVID-19 pandemic. The new form and the entire unemployment packet can be found here.

Emergency Relief Available for Your Business

The Federal government passed a stimulus package designed to put tens of thousands of dollars in your pocket. This package is designed to keep our economy going during this tragic time. You need to understand your options. The bare bones of three programs are below.

PAYCHECK PROTECTION PROGRAM
Under the recently passed CARES Act, you can borrow, through an SBA approved bank, a 100% forgivable loan equal to 250% of your average monthly payroll to cover payroll, rent, benefits, and certain interest payments. We believe practically all of our clients should do this. The money could be in your hands within the next few weeks.

SBA EMERGENCY LOANS
You can get a 30 year, 3.7% loan directly from the SBA for the amount of profit you expect to lose due to the COVID-19 pandemic. To induce you to apply, every applicant gets a $10,000 payment that is a non-repayable grant, even if you ultimately do not get the loan.

BRODY AND ASSOCIATES BUSINESS PREPAREDNESS PROGRAM (“BPP”)
We know you have many questions spawned by the pandemic and need answers economically. To help support you and your business, Brody and Associates created the Business Preparedness Program (“BPP”). Our BPP allows clients to purchase one to two hours of legal services per month at $315 per hour – almost 50% off my rate. Because we know you have so many questions, we will double the number of hours you purchase for the first month at no extra cost. BPP hours must be used within the month they are purchased. If you exceed your BPP hours, our standard rates apply.

Recommended Strategies to Help Curtail the Spread of COVID-19

By Robert G. Brody and Mark J. Taglia

The following strategies are for employers to help curtail the spread of COVID-19 and are based on recommendations made by the Centers for Disease Control and Prevention (the “CDC”) with an extra dose of practicality.

Actively Encourage Employees Who Might be Sick to Stay Home.

Make sure employees are aware of your sick leave policies and that your policies are consistent with current public health guidelines.
Expand sick leave to cover employees who are not sick but might be.
Employees who were sick should stay home until they are symptom free (including fever) for at least 24 hours, without the use of fever reducing medication.
Maintain flexible work policies to allow employees to stay home to care for sick family members.

Protecting Employees Who are at Work.

Send sick employees home once they begin to display acute respiratory symptoms (i.e. cough or shortness of breath). This should not be an option.
Encourage hand hygiene and respiratory etiquette (i.e. covering one’s mouth when they cough).
Provide tissues, alcohol based hand rubs, soap and water and remind employees where these facilities are located if you have provided new locations with hand cleaning supplies and the like. .
Display posters near the entrance to your offices and in break rooms encouraging hand hygiene, respiratory etiquette and staying home when employees are sick.

Perform Routine Cleaning.

Routinely clean all frequently touched surfaces in your offices.
Provide disposable wipes for employees to use to clean frequently used items they come into contact with throughout the day.
Arrange for regular deep cleaning if possible.

International Travel.

Check with the CDC’s Traveler Health Notices before any international travel. Avoid travel if at all possible.
Encourage employees to check themselves for any acute respiratory symptoms before traveling.
Have any employee who becomes sick while traveling seek healthcare assistance and notify their supervisor.
If any employee becomes sick oversees, the U.S. Consular Office can help locate healthcare services.

Additional Considerations.

Employees with sick housemates should notify their supervisor and refer to current CDC guidelines on how to conduct a self-risk assessment.
Lastly, if you do have an employee who tests positive for COVID-19, you must inform fellow employees of any possible exposure. However, you must maintain the confidentiality of the infected employee as required under the Americans with Disabilities Act (the “ADA”).

Planning for the Pandemic

Based on current forecasts, the full impact of the pandemic has yet to hit the U.S. It is important as a prudent employer to plan ahead. The following are some items to keep in mind when planning:

Consider how to prevent and limit spread within your office while maintaining business operations (remote operations are best).
Plan for potential high absenteeism due to illness of employees and their family members.
Prepare for school closures and how that will impact your business.
Inform employees that some individuals are at greater risk than others for contracting the disease (including older employees and those with chronic medical conditions).
Identify essential job functions within your organization and cross train personnel to perform those functions.
For businesses with multiple locations, assess the similarities and differences of each office to determine how to best utilize the resources you have should some of your operations be closed.
Ensure your response plan is flexible and involve your employees in its design process to limit any gaps. Remember, inclusion will give extra comfort to your team as they will see firsthand you are planning to protect everyone and the business.
Share your plan in advance with your employees.
Consider sharing your plan with other businesses and organizations in your area who may not have planned ahead.

Final Recommendations

Now is a good time to review your HR policies and Employee Handbooks to make sure your policies are consistent with current public health recommendations, state and federal laws.

The CDC, Department of Labor, and Equal Opportunity Commission are excellent resources for employers to use to stay up to date with the latest on the Coronavirus and its impact on businesses.

Next week, in part two of our series, we will be looking at specific laws employers should know when dealing with employees during the coronavirus pandemic.

State Of Connecticut Executive Order 7H “Stay Safe, Stay Home” Campaign Shuts Down Many Businesses

By Robert G. Brody and Mark J. Taglia

It’s been over a week in Connecticut since many business have had to close their doors. Let’s see where we are. Effective Monday, March 23, 2020 at 8:00 PM, the State of Connecticut’s Executive Order 7H shut down many Connecticut businesses in an effort to combat the spread of COVID-19. The State also issued guidance on who is exempted from the law. Here is what we know.

As of 8:00 pm, Monday March 23, 2020:

All businesses and not-for-profit entities need to utilize, to the maximum extent possible, any telecommuting or work from home procedures that they can safely use.
Each employer shall reduce the in-person workforce at any of its work locations by 100%.
Any “essential” business or entity providing essential services or functions shall not be subject to the in-person restrictions. However, individuals working at these locations whose duties are not critical to an essential business function should work from home.

The Executive Order is in effect until April 22, 2020.

To assist employers in defining essential services, the Department of Economic and Community Development (the “DECD”) has issued comprehensive guidance. The text issued by DECD follows:

DECD GUIDANCE ON ESSENTIAL BUSINESSES

DECD’s guidance on essential businesses is as follows:

With respect to non-essential businesses and nonprofits, this guidance applies to each business location individually and is intended to assist businesses in determining whether they are an essential business and the steps they may take to request that designation.

The guidelines set forth here apply to places of business. Non-essential businesses may continue activities that are conducted off-site (e.g. a customer’s home) and/or by telecommuting or working from home.

Pursuant to the Governor’s Executive Order 7J, issued on March 22, 2020, 1) non-essential retailers may be staffed on-site, provided that they may only offer remote ordering (e.g. phone, internet, mail, dropbox) and curb-side pick-up or delivery and 2) non-essential businesses and nonprofits to allow staff or third parties on site to the minimum extent necessary to provide security, maintenance and receipt of mail and packages. This includes, but is not limited to, auto, boat, bicycle, recreational vehicle, and all other vehicle sales, if conducted remotely.

To the extent possible, employees of Essential Businesses whose duties are not critical to an Essential Business function described below should telecommute or utilize any work from home procedures available to them.

Critical Infrastructure Sectors

Essential workers in the 16 critical infrastructure sectors defined by the federal Department of Homeland Security. You can read more on the Department of Homeland Security’s site here.

Healthcare/Public Health
Emergency Services – Law Enforcement, Public Safety, First Responders
Food and Agriculture
Nuclear Reactors, Materials & Waste
Energy
Water and Wastewater
Transportation and Logistics
Other Community-Based Government Operations and Essential Functions
Critical Manufacturing
Financial Services
Chemical
Defense Industrial Base
Communications
Information Technology
Dams
Commercial Facilities

Healthcare and related operations

biotechnology therapies
consumer health products and services
doctor and dentist offices
elder care, including adult day care
health care plans and health care data
home health care workers or aides
hospitals
manufacturing, distributing, warehousing, and supplying of pharmaceuticals, including research and development
medical marijuana dispensaries and producers
medical supplies and equipment providers, including devices, diagnostics, services, and any other healthcare related supplies or services
medical wholesale and distribution
nursing homes, or residential health care facilities or congregate care facilities
pharmacies
physical therapy and chiropractic offices
research and laboratory services, including testing and treatment of COVID-19
veterinary and animal health services
walk-in-care facilities

Infrastructure

airports/airlines
commercial trucking
dam maintenance and support
education-related functions at the primary, secondary or higher education level to provide support for students, including distribution of meal or faculty conducting e-learning
hotels and other places of accommodation
water and wastewater operations, systems and businesses
telecommunications and data centers
transportation infrastructure including bus, rail, for-hire vehicles and vehicle rentals, and garages
utilities including power generation, fuel supply, and transmission

Manufacturing

All manufacturing and corresponding supply chains, including aerospace, agriculture and related support businesses

Retail

appliances, electronics, computers and telecom equipment
big-box stores or wholesale clubs, provided they also sell groceries, consumer health products, or operate a pharmacy
convenience stores
gas stations
grocery stores including all food and beverage retailers
guns and ammunition
hardware, paint, and building material stores, including home appliance sales/repair
liquor/package stores and manufacturer permittees
pharmacies
pet and pet supply stores

Food and Agriculture

farms and farmer’s markets
food manufacturing, processing, storage, and distribution facilities
nurseries, garden centers and agriculture supply stores
restaurants/bars (provided compliance with all applicable executive orders is maintained)

Services

accounting and payroll services
animal shelters or animal care or management, including boarding, grooming, pet walking and pet sitting
auto supply, repair, towing, and service, including roadside assistance
bicycle repair and service
building cleaning and maintenance
child care services
critical operations support for financial institutions
financial advisors
financial institutions, including banks, credit unions, and check cashing services
funeral homes, crematoriums, and cemeteries
insurance companies
laundromats/dry cleaning
legal and accounting services
mail and shipping services
marinas and marine repair and service
news and media
real estate transactions and related services, including residential leasing and renting
religious services (subject to Executive Order 7D limiting gatherings to 50 people)
storage for Essential Businesses
trash and recycling collection, hauling, and processing
warehouse/distribution, shipping, and fulfillment

Providers of Basic Necessities to Disadvantaged Populations

food banks
homeless shelters and congregate care facilities
human services providers whose function includes the direct care of patients in state-licensed or funded voluntary programs; the care, protection, custody and oversight of individuals both in the community and in state-licensed residential facilities; those operating community shelters and other critical human services agencies providing direct care or support social service agencies

Construction

all skilled trades such as electricians, HVAC, and plumbers
general construction, both commercial and residential
other related construction firms and professionals for essential infrastructure or for emergency repair and safety purposes
planning, engineering, design, bridge inspection, and other construction support activities

Safety and Sanitation Services

building cleaners or janitors
building code enforcement
disinfection
doormen
emergency management and response
fire prevention and response
general maintenance whether employed by the entity directly or a vendor
home-related services, including real estate transactions, closings, appraisals, and moving services
landscaping services
law enforcement
outdoor maintenance, including pool service
pest control services
security and maintenance, including steps reasonably necessary to secure and maintain non-essential businesses
state marshals

Essential Service Vendors

Vendors that provide essential services or products, including logistics and technology support, child care, and services needed to ensure the continuing operation of government agencies and provide for the health, safety and welfare of the public including:

billboard leasing and maintenance
child care services
essential government services
government owned or leased buildings
information technology and information security
logistics
technology support

Defense

defense and national security-related business and operations supporting the U.S. Government or a contractor to the US government

Requesting Designation

If the function of your business is not listed above, but you believe that it is essential or it is an entity providing essential services or functions, you may request designation as an Essential Business.

Requests by businesses to be designated an essential function as described above, should ONLY be made if they are NOT covered by the guidance.

Restrictions on requesting designation as an Essential Business:

Any business that only has a single occupant/employee (e.g. attendant) is deemed exempt and need not submit a request to be designated as an Essential Business.

* * *

Despite the length of this list, many employers are asking if they are covered. In many cases we need to make an educated guess, but there is an alternative. As mentioned at the end of the legislation, like New York, Connecticut has created a service which allows employers to ask the State for guidance on the essential nature of their business (see link above). Additionally, the Governor has already issued a clarifying order for retailers (Executive Order 7J), which allows non-essential retailers to take orders remotely and sell products for curbside pickup and delivery, and allows other nonessential businesses to allow the minimum staff necessary on site to handle security, maintenance, mail, and other essential services

To help businesses in Connecticut navigate the COVID-19 crisis, DECD has established the COVID-19 Business Emergency Response Unit reachable at (860) 500-2333.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act: $2.4 Trillion Aid Package to Help Combat COVID-19’s Financial Impact

By Robert G. Brody and Mark J. Taglia

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which President Trump signed into law on March 28, 2020, is a wide-ranging economic rescue package for individuals and businesses.

The CARES Act provides, among other things, direct monetary payments to individuals, help for the unemployed (including freelancers and gig workers), and support for small businesses. The following is a brief summary of some of the key benefits employers should know.

Direct Monetary Payments to Individuals and Families
The IRS will send direct payments to families of up to $1,200 for individuals, $2,400 for couples, and $500 per child.

Single taxpayers with an adjusted gross income up to $75,000 will receive $1,200 in direct payments and joint filers with an adjusted gross income up to $150,000 will receive $2,400. As such individuals’ income increases, these benefits will decreases until eliminated for those individuals making more than $99,000 and $198,000 respectively. The IRS will use individuals 2019 tax filings to determine eligibility.

Help for Unemployed Individuals, Freelancers, and Gig Workers

The CARES Act provides increased unemployment benefits in two primary ways:

First, unemployed individuals eligible for state unemployment insurance will receive an additional $600 per week in federal aid for their first four months of unemployment.
Second, non-traditional employees, often referred to as “gig” workers and Freelancers, as well as individuals not able to work because of COVID-19, will be eligible to receive unemployment insurance. These workers will be entitled to receive half of their state’s average weekly unemployment benefit, plus the additional $600 federal benefit referenced above; provided their unemployment was related to COVID-19.

Small Businesses and Small Business Administration (the “SBA”) Loans
The CARES Act provides for $349 billion for SBA loan guarantees, which loans can be forgiven in an amount equal to the amount spent by a borrower, if the money is used for payroll support including employee salaries, paid sick and medical leave, health insurance premiums, mortgage, rent, utility payments, etc. This section of the Act is referred to as the Paycheck Protection Program (PPP). Under the Act, self-employed individuals, including, sole-proprietors and independent contractors are also eligible for loans. Brody and Associates will be publishing a new article specifically designed for clients looking to take advantage of the Paycheck Protection Program.

Additionally, the CARES Act provides for billions more in SBA emergency loans and grants through the emergency Economic Injury Disaster Loans (EIDL) and emergency Economic Injury Grants.

These grants, up to $10,000, are advances against the EIDL and do not need to be paid back, even if the borrower ultimately does not qualify for the underlying loan. This grant is designed to give immediate relief for small businesses to cover operating costs.

Meanwhile, the rates on EIDL are very favorable with an interest rate of just 3.75% (2.75% for non-profits) and a loan repayment term of up to 30 years. Brody and Associates will be publishing a new article specifically designed for clients looking to take advantage of Emergency Economic Injury Disaster Loan program.

Employee Retention Tax Credit
A big win for employers in the CARES Act is a refundable payroll tax credit equal to 50% of the wages paid by eligible employers to employees made during the COVID-19 crisis. To utilize this benefit, employers are not permitted to receive any SBA payroll support loans. The tax credit is limited to the first $10,000 of compensation paid to an eligible employee, including health benefits.

An employer’s eligibility is conditioned upon its operations being actually impacted by COVID-19.

For eligible employers with up to 100 full-time employees, all wages qualify for the credit, whether the employer is open for business or subject to a shut-down order.

However, for employers with more than 100 full-time employees, not all wages will qualify. For those employers, qualified wages are limited to the wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above.

Delay of Payment of Employer Payroll Taxes
CARES gives employers the option to postpone the payment of the employers share of payroll taxes, provided any deferred payment is paid over the following two years

We have only highlighted the relevant sections of the CARES Act we think are most relevant to our readers. Please click here for a link to the actual law to learn more about its details and other benefits not covered here.

The CARES Act has just been released and there is much still to learn about its applications and its practical impact. We suggest you seek qualified counsel to help guide you. Brody and Associates is here to assist.

Paycheck Protection Program under the CARES Act: Don’t Miss the Opportunity

By Robert G. Brody, John Woyke and Mark J. Taglia

April 16, 2020

Under the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act, the federal government is providing a wide array of programs designed to help small businesses, nonprofits and other employers, weather through the economic storm caused by COVID-19. Many of the programs have staggering amounts of funding but the funding is still running out. Additional funding is being discussed, but nothing is yet approved. Regardless of funding, the application process is brief and therefore we continue to recommend that everyone consider applying.

As we discussed in a recent article, a leading benefit of the CARES Act is the Paycheck Protection Program (the “PPP”). The PPP is a new program funded by the CARES Act and administered through the Small Business Administration (the “SBA”). It provides small businesses cash flow assistance through federally guaranteed loans in order to retain employees. PPP loans are 100% guaranteed by the federal government: business owners do not need to personally guarantee the loans or put up any collateral. More importantly, all or a portion of the loan is forgivable if certain criteria are met. We expect the vast majority of these loans will be forgiven. Finally, a PPP loan must be taken out before June 30, 2020 from a bank that is an authorized SBA lender.

Key Benefits of PPP Loans.

One of the most significant benefits of a PPP loan is the potential for complete loan forgiveness. If an employer uses the loan to primarily maintain its payroll, and pay other expenses like rent and utilities, the loan will be forgiven i.e., the employer will NOT need to repay the loan. By allowing this forgiveness, the federal government is hoping employers will keep workers employed, and put needed money (consumer spending) back into the economy.

In addition to forgiveness of up to eight (8) weeks of payroll and payroll related expenses, PPP loans have a host of other attractive terms. There are no SBA fees, a 1.0% interest rate on any amount not forgiven and at least six months of deferral before any repayment starts.

To qualify for loan forgiveness, an employer will have to provide documentation to confirm the calculation of the amount requested, how the loan was spent, what and how much of a salary reduction was imposed on any employees, and how has the employer’s employee headcount been impacted, if at all.

How much can be borrowed?

The maximum amount of a PPP loan is 2.5 times the average monthly payroll costs of the employer. Under the statute and the most recent guidance issued by the federal government on April 13, 2020 (the “Guidance”), this monthly average is based on the 12-month period prior to the date of the loan. However, in another part of the Guidance, and based on the PPP application, this monthly calculation is based on the 2019 calendar year. There is no answer to this controversy but we are using the 2019 calendar year. Beyond this controversy, there are special rules for seasonal employers and employers who were not in existence for either12-month period. A few important items employers should keep in mind when calculating the requested loan amount are:

•   Only the first $100,000 of annual compensation per employee can be counted;
•   Payroll costs include pay, benefits, state payroll taxes (but the employer’s portion of FICA taxes are not included), and severance pay; and
•   Independent contractors receiving 1099 forms can be counted as employees when calculating your headcount, but their compensation will not be an approved payroll expenditure. This seems inconsistent but it is another issue related to how the statute was drafted.

How to Qualify for Loan Forgiveness?

The portion of a PPP loan which can be forgiven are monies used to pay the payroll costs for the first eight (8) weeks after the loan is taken, plus the following expenses during the same 8-week period, to the extent these costs do not exceed 25 percent of total of the amount to be forgiven:

•   Interest on any mortgage obligation of the business;
•   Rent payments;
•   Utility payments;
•   Employee benefits (including healthcare and retirement);
•   State Payroll taxes (but not the employer’s portion of FICA); and
•   Certain other items not listed here.

Unfortunately for some small businesses, the amount of a PPP loan which can be forgiven can be reduced under the following two circumstances:

• If the pay of any individual employee has been reduced by more than 25% from what it was before the 8-week period; and
• If the employer has reduced the number of full-time equivalent employees prior to the 8-week period.

In certain instances, the reductions discussed above can be waived in whole or in part if the employer reinstates lost wages for affected employees and returns its number of full-time equivalent employees to the prior levels by June 30, 2020.

Does my business qualify for a PPP Loan?

Most businesses with 500 or fewer employees will qualify for this loan. The following requirements apply to qualify for the PPP SBA loan under the CARES Act:

•   Businesses and entities must have been in operation on February 15, 2020;
•   The business or entity must have been harmed by COVID-19 between February 15, 2020 and June 30, 2020;
•   Types of businesses:

Small business concerns, as well as any business concern, a 501(c)(3) nonprofit organization, a 501(c)(19) veterans organization, or Tribal business concern described in section 31(b)(2)(C) that has fewer than 500 employees;
Individuals who operate a sole proprietorship, as an independent contractor, and self-employed individuals.

We have only highlighted the relevant sections of the Paycheck Protection Program we think are most relevant to our readers. Please click here for a link to the law to read more about its details and other benefits.

In addition to the PPP loan available under the CARES Act, a small business can also receive a loan under the Economic Injury Disaster Loan (EIDL) provisions of the CARES Act, as long as the use of the funds is not for the forgiven payroll costs of the PPP. We will look more closely at the EIDL program of the CARES Act in the coming days.

The CARES Act and the Paycheck Protection Program have just been released and there is much still to learn about its applications and its practical impact.

Second Stimulus Package en Route to White House: Awaits President’s Signature

By Robert G. Brody and Mark J. Taglia
April 23, 2020

The second stimulus package designed to help stave off the pending financial crisis resulting from the COVID-19 pandemic has just been approved by both Houses of Congress and is ready for Presidential approval, which is expected to take place later today.

The new funding package includes $484 billion for additional COVID-19 testing, hospitals and small businesses. A big missing component to this latest legislation is aid for state and local governments. Congressional Democrats had pushed for inclusion of an additional $150 billion for state and local governments, but were forced to acquiesce in order to get the bill passed.

The new bill adds $321 billion to the Paycheck Protection Program (the “PPP”), of which $60 billion is earmarked for “underbanked” small businesses that had a difficult time getting loans in the first round of PPP funding (because they didn’t have regular relationships with traditional banks). The deal also includes an additional $60 billion for loans and grants to be made under the Economic Injury Disaster Loan program (“EIDL”). Both the EIDL and PPP loan programs ran out of initial funding last week. Finally, the bill contains $75 billion for hospitals and $25 billion to expand coronavirus testing.

Despite the addition of another $484 billion in economic stimulus, few insiders believe this will be sufficient to get the American economy over the current economic downturn. Additional funding is expected for states and local governments; a sentiment President Trump has supported in the past and agreed to address in future legislation. How much state and local funding will be made available will be hotly debated and could lead to protracted negotiations between both congressional parties and the President.

Two cornerstones of the new bill are the additional funding for the PPP and EIDL. We anticipate new guidelines to be released in the coming days on how the rollout of these funds may differ from the initial grant under the PPP and EIDL. A big criticism from the first round of funding was the difficulty smaller businesses had trying to access the loans. As a result, it is anticipated new rules will be implemented to help truly small businesses get their fair share of the latest installment of PPP funds. Already, Brody and Associates uncovered one interesting nuance in the bill involving the new restrictions applied to EIDL funds. Under the bill, EIDL funds must be used solely to “prevent, prepare for and respond to coronavirus.” Previously, EIDL funds had no restrictions. As a result of this new restriction, the usefulness of EIDL loans will dramatically be decreased.

Brody and Associates will continue to closely monitor the implementation of this new legislation and keep our readers informed.

New Guidance on How PPP Moneys Can be Spent- Know Your Rights and Limitations!

By Robert G. Brody and John Woyke
April 30, 2020

When the Paycheck Protection Program (the “PPP”) was enacted as part of the federal $2.4 trillion bailout program, Coronavirus Aid, Relief, and Economic Security Act, the terms of the program looked fairly clear; there were few restrictions on how PPP loan proceeds could be used (for a basic discussion of the PPP click here). Now, as we delve into this issue and new guidelines continue to be published, it becomes clear serious restrictions do exist.   If you don’t timely spend the money on approved expenses, you won’t have all or a portion of your loan forgiven (but you’ll still have two years to pay it back).   If you spend too much of your loan on unapproved items, your loan could be called at the end of 2020. And if you are guilty of fraud, personal liability and even jail time are possible. So let’s be clear on how to spend this money.

75% of the Loan Must Be Spent on Payroll Costs

The new SBA Interim Final Rule (the “IFR”) (click here for link to text) clearly states 75% of the proceeds of the loan must be used for payroll costs and only 25% for “Other” purposes such as rent and utility payments (for a discussion of what is “payroll” and what is “other purposes” click here). If compliance is not reached by December 31, 2020, the loan could be called and repayment demanded immediately. Given the formula used to derive the loan amount -2.5 times average monthly payroll– this compliance should be easy for on-going businesses.

While “payroll purposes” is defined, issues may still arise.   If you make an honest mistake, which seems understandable given the constantly changing landscape we face regarding these new laws, you’ll likely only lose some forgiveness of the loan. But if you intentionally use the 75% for non-payroll items, that is fraud. Most importantly, this is a criminal act and jail time is possible. Also, the SBA can pierce the corporate veil and require repayment from a shareholder, member or partner, even though loans up to $200,000 do not require personal guarantees.

Calculating Forgiveness of the Loan

The law states that amounts used for appropriate purposes during the first eight weeks after the loan is made will be forgiven. No further requirements are written into the law. The IFR however, require at least 75% of the amount forgiven must have been used for payroll costs during that eight week period. This means the amount used for non-payroll costs during the first eight week period can be no more than one third of the amount used for payroll costs (25% is one third of 75%). Therefore, if the borrower doesn’t use the full 75% for payroll, the borrower can’t use the full remaining 25% for “Other” costs.

Furthermore, as has been well reported, the law includes other restrictions on the amount forgiven. These restrictions reduce the amount forgiven based on reductions in headcount of the borrower and individual employee pay reductions of more than 25%. These reductions are applied to the amount of payroll costs that could be forgiven. This in turn reduces the amount of “Other” costs allowed. For example, if a borrower claims it paid $100,000 in payroll costs but due to headcount and individual pay rate reductions, the borrower lost $10,000 of forgiveness, the payroll expense would now be $90,000.   In turn, the 25% for “Other” costs will be based on $90,000, not $100,000, so the maximum forgiveness of “Other” expenses will be one third of $90,000 ($30,000) not one third of $100,000 ($33,333).

When your lender audits how you spent your funds, which we expect to happen within a few months after your eight week period ends, make sure your presentation/analysis complies with these rules. If you have any questions, check with qualified legal counsel.

Brody and Associates will continue to closely monitor this issue and keep our readers informed.

The subject matter discussed in this article can be very technical. It is an evolving area of law and very fact specific. Our goal here is to simply alert you to some of the key issues involved. We urge you to seek competent legal counsel before applying these ideas to your specific situation. Brody and Associates stands ready to discuss your particular needs.

New Requirement – To Qualify For PPP Loan, It Must Be Necessary!

May 7, 2020

In a Notice released May 3, the SBA added a new requirement for borrowers applying for Payroll Protection Program (“PPP”) Loans; the borrower must certify in good faith that their PPP loan is “necessary in order to support the ongoing operations of the Applicant.” In making this certification the borrower must take into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations “in a manner that is not detrimental to the business.”

The exact form this certification will take is not explained. The ultimate effect of this certification is difficult to ascertain, but it will certainly vary from business to business. For most businesses that have had major reductions in revenue, we believe this requirement will be simple to satisfy. For those businesses where COVID-19 has had a minor or no impact on revenue, this is a major challenge. As with all COVID-19 guidance, more regulations are regularly issued and may change what prior guidance suggested. If this is an issue for your loan application, please contact Brody and Associates for further information and analysis.

SBA Explains Impact On PPP Loan Forgiveness Of Employee’s Refusal To Return To Work

By Robert G. Brody and Mark J. Taglia

May, 10, 2020

Earlier this week, the SBA answered the question: will a borrower’s PPP loan forgiveness be reduced if a laid off employee declines an offer of reinstatement? The answer is No!

The SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. To qualify for this exception, “the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower.” Employers must also advise “employees who reject offers of re-employment [that they] may forfeit eligibility for continued unemployment compensation.”

If this is an issue for your business, please contact Brody and Associates for further information and analysis.

The Time to Re-Open is Days Away: You Must Be Ready or Stay Closed! We Can Help

By Robert G. Brody and Mark J. Taglia

May 14, 2020

Last week, Connecticut’s Governor Ned Lamont announced guidelines for the Phase 1 reopening of certain businesses beginning May 20th. These business sectors include:

Offices (click here to link to specific protocols for this sector),
Restaurants (click here to link to specific protocols for this sector),
Hair Salons & Barbershops (click here to link to specific protocols for this sector),
Museums & Zoos (click here to link to specific protocols for this sector), and
Retail & Malls (click here to link to specific protocols for this sector),

Connecticut is one of the most recent states to put forth their Phase 1 reopening guidelines. Like most states, the guidelines demand compliance or prohibit reopening. Brody and Associates has been closely studying these requirements and is here to assist our clients.

What might be most striking to employers is the fact that “employees are encouraged to continue to work from home where possible” as it will be extremely difficult for businesses to create a completely safe work environment at this time and work from home remains the safer alternative. Additionally, the Governor explained businesses DO NOT need to reopen on May 20^th just because they are in a covered sector. This is a choice for each business owner.

For those businesses that choose to bring employees back on May 20^th, anytime thereafter, and for those businesses already opened, they must following guidelines. If you have questions about how your business can meet these mandates, Brody and Associates, can help. The following are some of the guidelines offices must follow if they are opened.

Provide Personal Protection Equipment (“PPE”) to its employees. If a company cannot provide PPE’s for its staff it will not be permitted to reopen;
Provide formal training to employees about working in a COVID-19 world (Brody and Associates can help you with this);
Post signs in the office detailing safety protocols and procedures which are to be followed;
Require six feet of distance between work areas with demarcations of these areas;
Limit the use of common areas and meeting rooms as well as the use of shared office equipment. Can you justify the use of common meeting rooms rather than electronic conferences;
Clean the office prior to reopening, as well as ongoing cleaning requirements of bathrooms and workspace; and
Obtain and post a REOPEN CT badge to verify the business has satisfied the State’s reopening standards. This self-assessment must be done through Connecticut’s Department of Economic Development. This on-line service is expected to be available by May 18, 2020.

The State is expected to supplement these initial mandates as time to reopening draws near and possibly thereafter. Further, we anticipate other states to closely follow the framework outlined in Connecticut’s guidance.

To help our clients get back to work in a safe and legally compliant manner, Brody and Associates has put together a Back to Business Assessment and Legal Advisory Plan for COVID-19. Some of the more challenging issues you will possibly face and which the State Guidelines don’t address are outlined below.

Unfortunately, business conditions may not warrant all employees being brought back to work at this time. If challenged, Employers will need a legitimate business justification for who was returned and who was not.
For those employees who are not recalled, which unemployment program is best? Shared Work programs are often the best but they are only available if you apply first.
What do you do if an employee refuses to return to work? Do you fire him or her?
What accommodations must you give employees due to COVID-19 related issues?

We encourage you to call now to schedule your Back to Business Assessment and Legal Advisory Plan for COVID-19 in anticipation of reopening your business, whether it be in Connecticut, New York, New Jersey or elsewhere. We are here to help.

SBA Explains “NECESSITY” Provision for PPP Borrowers – But Not Really!

By Robert G. Brody and Mark J. Taglia

May 14, 2020

Two weeks ago, the SBA announced Paycheck Protection Program (“PPP”) borrowers must show “necessity” before they will be allowed to get/keep their PPP loans. This spawned the question, how will the SBA review borrowers’ required good-faith certification concerning the necessity of their loan request? Yesterday in a “Release” issued by the SBA we got some guidance and some assurances, but few answers.

Answer from the SBA: Any borrower that, together with its affiliates received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

Brody and Associates believes this gives blanket protection to borrowers who applied in good faith and without fraud, and who borrowed less than $2,000,000. So, even if your business has lost no revenue due to the COVID-19 pandemic and incurred no increased costs, as long as you believed the loan was necessary, the SBA will not question the necessity of the loan. Great news for these borrowers but it still leaves necessity undefined.

The Release further provides borrowers with loans greater than $2 million must have an adequate basis for making the required good-faith certification, based on their individual circumstances, but begs the question of what this actually means! The Release is also not clear on what happens if the loan is exactly $2,000,000. Finally, the Release explains if you can’t show necessity, your loan will be recalled and no forgiveness provided. Here is exactly what the SBA said;

Answer from SBA: If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness.

However, if the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.

If this is an issue for your business, please contact Brody and Associates for further information and analysis.

The subject matter discussed in this post can be very technical. It is an evolving area of law and very fact specific. Our goal here is to simply alert you to some of the key issues involved. We urge you to seek competent legal counsel before applying these ideas to your specific situation. Brody and Associates stands ready to discuss your particular needs.

The ABC’s of BPP for your PPP and BBA

By Robert G. Brody and Mark J. Taglia
May 21, 2020

One more result of the COVID pandemic is an outbreak of abbreviations. Please forgive us as we try to put some levity in the unimagined world we all now face.

Earlier this year Brody and Associates introduced its Business Preparedness Program (the “BPP”) to its clients. The BPP helps our clients address the impact COVID-19 has had on their business by offering our services at a significantly reduced rate. BPP participants can purchase 1 – 2 hours of legal services per month at the rate of $315/hour – a reduction of 47.5% off our founding member’s standard rate. We hope this will enable more of our clients to get the assistance they need.

Since its launch, our clients have successfully taken advantage of our BPP and had Brody and Associates help them navigate through the complicated and contradictory Paycheck Protection Program (the “PPP”). We have helped calculate loan amounts, forgiveness strategies, and adjust headcount through reductions in force utilizing shared work programs and partial unemployment benefits. We have also created a system to track and manage PPP expenses to maximize loan forgiveness and prepare for potential U.S. Treasury, SBA and/or Bank Audits.

Our clients have found the BPP an excellent complement to their PPP loans and we are glad we can help. To that point, we are pleased to announce we are continuing to offer the BPP through the end of this year as our clients continue to suffer from the financial impacts of COVID-19.

Finally, as we have guided our clients through the PPP process and the painful impact COVID-19 has on their businesses, we have come across many common themes and challenges. This has led us to formalize what we have learned in our Back to Business Assessment and Legal Advisory Plan (the “Back to Business Assessment” or “BBA”).

The BBA is a program designed to evaluate a client’s current situation in order to make meaningful recommendations on how they can reopen their business in a legally compliant and cost effective manner while avoiding any personnel pitfalls. As you re-engage your teams, the Back to Business Assessment can also help you make sure you are bringing back the right folks at the right time.

These programs are additional ways we hope to give our clients a place to turn in these challenging times. Together we can navigate these constantly changing laws and chart a successful course to the other side of this pandemic while providing some peace of mind.

Please contact us if you are interested in participating in one or both of these programs or if we can help you in any other way. Stay safe and thank you.

It is a New Ball Game for PPP Forgiveness: Paycheck Protection Program Flexibility Act of 2020

By Robert G. Brody and Mark J. Taglia
June 4, 2020

Yesterday, the Senate unanimously voted to approve the Paycheck Protection Program Flexibility Act of 2020 (H.R. 7010) (click here to learn more), a bill designed to help fix many of the problems that have burdened the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid Relief, and Economic Security Act (the “CARES Act”). The bill now heads to the President for his signature as early as later this week. The President is expected to sign it. Not coincidentally, this move comes just in the nick of time for many early PPP borrowers whose initial eight (8) week forgiveness period is just about to expire.

As our readers will recall, on March 27, 2020, the CARES Act was signed into law by President Trump (click here to learn more). The $2.3 trillion relief package was headlined by the PPP which was designed to help millions of American small businesses stay afloat during the COVID-19 pandemic.

The PPP made available nearly $600 billion for small business owners to pay payroll and other essential expenses; however, the lack or structure and ever changing guidance has made the PPP the bane of many small business owners existence. It went from a program designed to provide “forgivable” money to those small businesses that needed it most, to a logistical nightmare of confusing hurdles and protocols that needed to be strictly followed or risk having the loan not forgiven and potentially called back by banks for non-compliance.

Hopefully, later this week, with the signing of H.R. 7010, significant relief will be provided to the millions of small business owners PPP loans. While this is great news, it also will likely cause many owners to largely redesign their strategy for using these funds. Starting this week, we will share with our clients some of the key ways this new legislation could change your PPP strategy.

Key Highlights of H.R. 7010

Easier Forgiveness Terms

The key benefits, for most borrowers, under H.R. 7010, is the significantly increased ability to have PPP loans forgiven. H.R. 7010 does this in several ways:

Extended Forgiveness Period

H.R. 7010 extends the time period during which owners can spend PPP proceed and have these expenses forgiven for eligible expenses from the initial eight (8) week period to the earlier of twenty-four (24) weeks or December 31, 2020. This additional time is critical, especially for non-essential small businesses (like restaurants, bars, salons, gyms, retail, hotels, etc.) which are just now beginning to ramp back up with the re-opening of their states. This one change may drastically change how borrowers plan to spend their loan proceeds.

More Flexibility to Spend on Non-Payroll Costs

H.R. 7010 raises the 25% forgiveness cap on non-payroll “other” expenses to 40%. Thus employers now have an additional 15% of their loans to spend on other expenses like rent and utility costs and up to 24 weeks to incur these costs. Again, this change can dramatically change how employers plan to spend their PPP money.

This good news does come with a catch. Previously, PPP borrowers were required to spend 75% of the loan on payroll expense and thus non-payroll expenses were capped at 25%. If a borrower exceeded the 25%, the only penalty was a reduced amount to be forgiven based on the final ratio of payroll vs. non-payroll expenses. However, H.R. 7010 adds a dangerous twist, as it appears to create a cliff for borrower’s who fail to spend at least 60% of the loan on payroll costs.

H.R. 7010 states, “to receive loan forgiveness under this section, an eligible recipient shall use at least 60 percent of the covered loan amount for payroll costs….” Experts read this language to mean if a borrower fails to achieve the 60% threshold NONE of the loan will be forgiven.

More Time to Replace Lost Employees

In the wake of COVID-19, many small businesses reduced headcount. These actions were permitted under the initial terms of the PPP without risking loan forgiveness, provided head count was restored by June 30, 2020. Unfortunately, many small businesses are not close to being back to pre-COVID-19 levels and as a result will not restore headcount by the June 30 deadline. Thankfully, H.R. 7010 extends this deadline to December 31, 2020 to avoid reductions to forgiveness amounts.

More Headcount Relief

H.R. 7010 creates additional loan forgiveness protections for small businesses which are unable to return to pre-COVID-19 employment levels prior to the new December 31, 2020 deadline. For these borrowers, no reduction of forgiveness will occur if they can in good faith show any of the following:

1.   An inability to rehire prior employees;
2.   An inability to hire similarly qualified employees for vacated positions; or
3.   An inability to return to the same level of business activity the company had on February 15th resulting from complying with governmental requirements established related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirements.

Exception 3 above is critical for small businesses which continue to feel the effects of COVID-19 at the end of 2020. It allows businesses (like restaurants, bars, salons, hotels, retail, gyms, etc.) which are not able to fully re-open due to government orders, not to have their forgiveness negatively impacted because of reduced FTE’s in their loan forgiveness calculation.

Longer Loan Term for Unforgiven Amount

The loan term will be extended from two (2) years to five (5) years for any amounts that are not forgiven. Critics argue this technically only applies to loans made after H.R. 7010 is signed into law, and not for prior PPP loans; however, most believe the intent is for banks to work with existing borrowers to extend all existing loans for the full five (5) years. Banks will likely not be happy with this change as they generally find the interest rate is just not profitable and extending the term could cause hardship down the road when loan rates return to more realistic levels.

Longer Deferment Period

Initially the period of deferment before repayment obligations commenced was six (6) months from the time the loan was taken. Under H.R. 7010, the deferral period will be extended until the time the lender receives the forgiveness amount from the SBA, which is expected to be significantly longer than the initial six (6) month period.

Two Year Payroll Tax Deferral

The final change provided for in H.R. 7010 is to allow borrowers to defer payment of their share of Social Security payroll taxes (6.2%). Such deferment is being made available to all borrowers whether the loan is forgiven or not. Fifty percent could be deferred until 2021, with the remaining 50 percent due in 2022.

Conclusion

H.R. 7010 will go a long way in helping small businesses maximize the benefits of the PPP.

Unfortunately, the complexity of the program still remains the biggest problem for PPP borrowers as many small business owners will continue to need the assistance of lawyers and accountants to fully understand its nuances and to abide by its ever changing rules and regulations. This is especially true for the proper calculation for loan forgiveness, the uncertainties of future SBA audits, and the new “cliff” on forgiveness being introduced for borrowers who fail to spend a minimum of 60% on qualified payroll expenses.

As with the initial legislation, we expect continued guidance from the SBA on how these new rules will be applied. As such guidance is provided, we at Brody and Associates will continue to keep you updated. Good luck and get ready to re-evaluate your PPP strategy!

Phase II on Schedule for June 17 Re-Opening

By Robert G. Brody and Mark J. Taglia
June 10, 2020

Last week Connecticut’s Governor Ned Lamont announced the Phase II reopening of Connecticut businesses would be moved up from the scheduled June 20^th to June 17^th. This news was met with much enthusiasm by Connecticut businesses, employees and residents, but with it brought many questions.

Business covered under the Phase II reopening include:

Restaurants (outdoor, indoor, no bar areas) (click here for sector rules)
Hotels/Lodging (click here for sector rules)
All personal services (click here for sector rules)
Indoor recreation (click here for sector rules)
Sports, Sports clubs & complexes, Gyms, Fitness centers, Pools (click here for sector rules)
Outdoor arts, Entertainment, Events (limited capacity) (click here for sector rules)
Amusement parks (click here for sector rules)
Libraries (click here for sector rules)
Museums, Zoos, Aquariums (click here for sector rules)
Social clubs (Social Clubs to follow all rules applicable to their operation (e.g. Restaurant, Pool))

Many of the reopening guidelines required in Phase II closely resemble those required of other Connecticut businesses which have already been granted reopening privileges. Guidelines include (i) the requirement for businesses to obtain a reopening certification badge from the Connecticut Department of Economic and Community Development, indicating compliance with state guidelines (link provided), (ii) social distancing, (iii) cleaning and PPE usage, (iv) signage, and (v) capacity limitations.

The above links should get all Phase II business started on their reopening plans. We urge you to plan now so you can focus on reigniting your business and not be bogged down by these regulations If you have questions, seek competent counsel. Brody and Associates continues to closely monitor reopening guidelines across the Tri-State and is ready to assist business owners in their re-opening efforts in a compliant and efficient manner.

Employers Have More Breathing Room; Must Factor Need & Unemployment Benefits

By Robert G. Brody and Mark J. Taglia
Originally published in the Rockland County Business Journal on June 9, 2020

Late last week President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020 (H.R. 7010).

H.R. 7010 makes sweeping changes to the way the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act works and the way business owners should think about how to use their remaining proceeds.

Some PPP borrowers have used a majority of their loan proceeds, while some are just beginning. In either case, it is critical for borrowers to rethink how to deploy their remaining funds, and how and when they want to ramp up their business. The time to quickly spend the money to ensure forgiveness is over.

Initially, for most business owners, the PPP was a gift from the federal government they needed to spend or lose. Businesses received forgivable loans which would be forgiven only if they used them the right way over a very short period of time. As a result, businesses rushed to spend money on employees, keeping them employed even if there was no business need. That was the right strategy but now the law has changed again and what was right has become wrong!

Three key components of H.R. 7010 are (i) the extension of time during which you can spend your forgivable loan proceeds from eight weeks to twenty-four weeks, (ii) the reduction of the amounts needed to be used for payroll from 75% to 60%, and (iii) extension until December 31, 2020, the day employers need to return to full staffing levels and the creation of new safe harbor rules in the event business owners are not able to return to full staff levels despite making good faith efforts to do so.

Three points to consider

Re-Evaluate the Timing for Rehires

Since you now have 24 weeks to spend your loan proceeds, don’t rush. Re-evaluate the best way to return to your February staffing level. As business demand dictates your hire needs, respond accordingly. But remember, how you choose who returns and who does not is a legal issue. Ensure you have a legitimate business justification to explain your actions. Also, if you are not back to full employment by early December, evaluate the impact on your forgiveness. Finally, see if the safe harbor rules will excuse your reduced staffing levels. Be sure to follow the safe harbor requirements precisely.

Watch Out for that Cliff

As good as H.R. 7010 is for borrowers, it does have one major drawback – the new “cliff” it imposes on payroll related expenditures. Previously, if a business failed to use 75% of its loan towards approved payroll expenses, the business would face a reduction in the amount of forgiveness. With the passage of H.R. 7010, if you don’t meet the new lower threshold of 60% on payroll expenses, none of your loan will be forgiven. This cliff provides dire incentives to ensure at least 60% of the proceeds go towards payroll expenses.

An Unintended Consequence

Finally, you must consider an unintended consequence of H.R. 7010 – its potential short term increase on unemployment claims. Before this bill was signed, many were surprised that America’s unemployment numbers went down and took that as a sign the economy is recovering. An alternative explanation, and perhaps a little pessimistic perspective, is these numbers are not an indicator of economic strength, but rather just the necessary rehiring of staff (by June 30) to ensure forgiveness was earned. Time will tell which explanation is right.

With the pressure to recall all staff by June 30^th removed, it remains unclear what impact this will have on payrolls and employment in the coming months. However, it does not have to negatively impact your business. It may not even be a negative for some of your employees.

Employers now have the freedom to ramp staff back up on their own timeline and not one imposed upon them by the federal government. This will allow them to make decisions based on their particular business needs.

And some employees, many of whom are receiving a financial windfall from being on enhanced unemployment ($600 per week from the federal government) are in no rush to return. In fact, the enhanced federal supplement will continue though July 31. Minimum wage workers and even those earning substantially more, will be financially better off if they remain on enhanced unemployment. Thus, employees and employers may both receive some unintended benefits from the new law.

What happens on August 1 is the next quandary. If the federal unemployment subsidy is continued than nothing may change. If it ends, than most employees will be financially better off employed and a closer examination may be needed that includes a new employee impact analysis. Such analysis should include not only the proper timing for bringing back furloughed employees, but the utilization of state job share and partial unemployment programs, which would allow employees to receive partial unemployment benefits while returning to work part time.

Conclusion

H.R. 7010 can be a saving grace for many small business owners as it will afford them the opportunity to maximize their PPP loan forgiveness and give them time to make better business decisions. However, the simple passage of H.R. 7010 is not enough. It is imperative that employers do not waste this opportunity and make proactive decisions to reap its intended benefits.

Robert G. Brody is Founder and Managing Member and Mark J. Taglia is Counsel at the law firm Brody and Associates, LLC. rbrody@brodyandassociates.com and mtaglia@brodyandassociates.com (203) 454-0560.

Back to Work: Special Accommodations For People Over 65 and Those With Underlying Medical Conditions

By Robert G. Brody and Mark J. Taglia
June 16, 2020

The Center for Disease Control and Prevention (the “CDC”) has determined older adults and people of any age who have serious underlying medical conditions might be at a higher risk for contacting severe illness from COVID-19. Therefore, these people are entitled to special accommodations under the Americans with Disabilities Act (the “ADA”).

Individuals in this group include the following (especially if their conditions are not controlled):

•   People over 65
•   People with chronic lung disease or moderate to severe asthma
•   People who have serious heart conditions
•   People who are immunocompromised

Many conditions can cause a person to be immunocompromised, including cancer treatment, smoking, bone marrow or organ transplantation, immune deficiencies, poorly controlled HIV or AIDS, and prolonged use of corticosteroids and other immune weakening medications

•   People with severe obesity (body mass index [BMI] of 40 or higher)
•   People with diabetes
•   People with chronic kidney disease undergoing dialysis
•   People with liver disease

As such, an employee, or her doctor, has the right to inform her employer that she needs an accommodation for a medical condition that puts her at higher risk as it relates to COVID-19. This request can be made in writing or verbally. The employee/doctor does not need to reference the ADA or the term “reasonable accommodation.” Finally, the underlying condition need not, and should not, be specifically referenced.

The request should include the fact the employee has a medical condition that necessitates special treatment to meet a medical need. As with all reasonable accommodation requests, the employer may seek medical documentation and ask questions to ascertain if a need exists, and if a reasonable accommodation can be made without “undue hardship” to the employer.

Reasonable accommodations include, having the employee work from home, relocation of the employee within the office, and providing additional personal protective equipment (PPE). If more than one accommodation is effective, “the preference of the individual with a disability should be given primary consideration. However, the employer providing the accommodation has the ultimate discretion to choose between effective accommodations.” 29 C.F.R. pt. 1630 app. §1630.9 (1997).

What if a high risk employee does not request a reasonable accommodation, but her employer knows the employee falls into a high risk category?

In such an instance, the ADA does not require an employer to take any action. In fact, employers are not allowed to take any adverse action (including sending the employee home) unless a reasonable accommodation was requested which cannot be granted without causing an undue hardship. Even though the employee has a higher risk for severe illness if she contracts COVID-19 that is not sufficient for the employer to take action. The employee must raise this issue.

An interesting argument could be raised by an employer if it claimed these employees pose a “direct threat” to themselves by coming to work. While the creation of a direct threat is a reason for an employer to take unilateral action, the current thinking is this doesn’t apply in this instance. We believe the explanation for this is the fact the direct threat is not clear, since merely coming to work does not necessarily expose the employee to COVID-19. Over the coming weeks and months, we will see if the government’s position on this issue changes. Stay tuned!

SBA And Treasury Eliminate The 60 Percent Cliff

By Robert G. Brody and Mark J. Taglia
Originally published in the Rockland County Business Journal on June 18, 2020

In a previous article reported last week, we talked about the Paycheck Protection Program Flexibility Act (the “Flexibility Act”), which was designed to improve the initial Paycheck Protection Program (the “PPP”), which became law in March of 2020. One of the more controversial provisions of the Flexibility Act was its 60 percent “cliff.”

The cliff mandated 60 percent of the loan be spent on payroll expenses or no forgiveness would be granted.

But yet again, the Small Business Administration (the “SBA”) and the Treasury Department (the “Treasury”) have quickly done an about-face; the cliff is gone!

The SBA and Treasury now make clear that forgiveness under the new 60 percent payroll related usage requirement will be applied proportionately if it is not fully met, and not as a draconian cliff.

One of the key provisions of the Flexibility Act reduced the threshold PPP borrowers need to spend on payroll expenses from 75 percent to 60 percent. However, with the reduced threshold, many legal scholars believed it came with a steep cost which would completely eliminate loan forgiveness if a borrower failed to meet the minimum 60 percent payroll spending requirement.

Under the original PPP, a borrower’s inability to reach the 75 percent threshold would have merely caused a proportionate reduction in forgiveness. For example, If a borrower spent 50 percent of its loan proceeds on approved payroll costs, the borrower would have 50/75 of the total loan amount forgiven, assuming all other requirements were met.

Unfortunately, the results in the above example were nullified with the passage of the Flexibility Act when the following language was added:

“To receive loan forgiveness… an eligible recipient shall use at least 60 percent of the covered loan amount for payroll costs, and may use up to 40 percent of such amount for (any other approved non-payroll expense).”

The legal community took this new language to mean the federal government was not simply intending to replace 75 percent with 60 percent as the new threshold, but rather it was creating a cliff that if not met would eliminate all loan forgiveness.

Now, under the Flexibility Act, the same borrower as illustrated above would be left with no loan forgiveness. If a borrower spent 50 percent of its loan proceeds on approved payroll costs, the borrower would fail to meet the 60 percent minimum requirement and would have none of its loan forgiven.

Concerns spread quickly from one PPP borrower to the next, and the SBA and Treasury were forced to clarify (backtrack) quickly to alleviate growing unease.

As a result, the SBA and Treasury issued the following guidance late last week:

“While the Flexibility Act provides that a borrower shall use at least 60 percent of the PPP loan for payroll costs to receive loan forgiveness, the Administrator, in consultation with the Secretary, interprets this requirement as a proportional limit on nonpayroll costs as a share of the borrower’s loan forgiveness amount, rather than as a threshold for receiving any loan forgiveness. This interpretation is consistent with the new safe harbor in the Flexibility Act.”

This new guidance is a major relief to many PPP borrowers, but the need for it marks just another example of how the federal government, SBA and Treasury Department have been playing catch up every step of the way with the administration of the PPP as a whole.

The PPP was intended to help millions of borrowers stem the tide of financial ruin brought on by COVID-19, and now with this new guidance, the Flexibility Act will help ensure that it does.

Robert G. Brody is Founder and Managing Member and Mark J. Taglia is Counsel at the law firm Brody and Associates, LLC. rbrody@brodyandassociates.com and mtaglia@brodyandassociates.com (203) 454-0560.

Employers Are Not Allowed To Test Employees For COVID-19 Antibodies – Testing Sick Employees Is Permitted

Originally published in the Rockland County Business Journal on June 26, 2020

The Equal Employment Opportunity Commission (the “EEOC”) has clarified its current position on COVID-19 testing in the workplace (click here to review updated guidance), confirming it is unlawful for employers to test employees for COVID-19 antibodies as a condition to return to work. But the Commission maintains that testing sick employees for COVID-19 (i.e. viral testing) is still permitted.

What does this mean for employers and why did the EEOC make such distinctions between the two seemingly related tests?

Previously the EEOC ruled an employer can require an employee to take a COVID-19 test before being allowed to return to work in order to determine if the employee has an active case of COVID-19 without running afoul of the Americans with Disabilities Act (the “ADA”). In its most recent guidance the EEOC confirmed its prior position:

The ADA requires that any mandatory medical test of employees be “job related and consistent with business necessity.” Applying this standard to the current circumstances of the COVID-19 pandemic, employers may take steps to determine if employees entering the workplace have COVID-19 because an individual with the virus will pose a direct threat to the health of others. Therefore an employer may choose to administer COVID-19 testing to employees before they enter the workplace to determine if they have the virus (excerpt from latest EEOC Guidance).

Although the EEOC has authorized the active viral testing outlined above, it has come down much differently on permitting employers to test for the COVID-19 antibody as a condition for employees to return to work:

An antibody test constitutes a medical examination under the ADA. In light of CDC’s Interim Guidelines that antibody test results “should not be used to make decisions about returning persons to the workplace,” an antibody test at this time does not meet the ADA’s “job related and consistent with business necessity” standard for medical examinations or inquiries for current employees. Therefore, requiring antibody testing before allowing employees to re-enter the workplace is not allowed under the ADA.

So why the divergent positions?

If an employer learns an employee has COVID-19, it can take action to protect others – it can refuse to return the employee to work. But if the employer learns the employee HAD COVID-19, there is nothing the employer can do to improve safety. Until science proves that having had COVID-19 means those employees can be treated differently than those who haven’t had the disease, anti-body testing will remain illegal. The EEOC will continue to closely monitor the Centers for Disease Control and Prevention’s (the “CDC”) recommendations, and may update its position over time.

Viral testing can be an important part of the reopening plans for impacted businesses; however, it is important for employers to remember that a viral test is just a snapshot in time of your employee’s health. An employee who tests negative in the morning, may be positive in the afternoon based upon new exposure to the virus. Therefore, viral testing should only be a small part of a comprehensive plan to keep your employees safe.

Employer Ordered to Pay Employee’s Covid-19 Paid Sick and Family Leave

July 13, 2020

Employer’s take note. The U.S. Department of Labor (the “DOL”) Wage and Hour Division recently commenced an action against healthcare service provider, Consumer Medical, for its failure to pay wages under the Emergency Paid Sick Leave Act (the “EPSLA”) and the Emergency Family and Medical Leave Expansion Act (the “EFMLEA”). Both EPSLA and EFMLEA are laws created under the Families First Coronavirus Response Act (the “FFCRA”), which went into effect on April 1, 2020. As a result of the DOL’s action, Consumer Medical has agreed to pay its employee back wages in the amount of $3,076. What is important for employers to note is not the amount of the back wages, but rather the action itself. The DOL’s willingness to enforce these two new acts is a wakeup call to all employers.

The DOL’s action stemmed from Consumer Medical’s denial of emergency paid sick leave for an employee’s COVID-19 like illness in violation of EPSLA. Additionally, Consumer Medical denied the same employee leave to care for her child during the child’s school’s COVID-19 closure in violation of EFMLEA. As we have previously written about here (click here to read related article), the FFCRA requires certain employers to allow employees to take paid sick leave and family and medical leave for a variety of COVID-19 related reasons.

We believe this case is the tip of the iceberg. The federal DOL, and private attorneys are gearing up for such litigation. It is critical for employers to take all necessary measures to ensure compliance with the FFCRA. This includes your employees’ right to take paid sick time to care to for family members and themselves. If you need assistance in determining whether your company falls under the requirements of the FFCRA or if your employees are eligible for its benefits, Brody and Associates is here to help.

We have attached a link to the DOL’s FFCRA poster for our clients to reference (click here). It is both a good summary of the law, and all employers’ obligation to post.

Say Good Bye to the PPP and Hello to PPPP!

July 24,2020

Loan submissions under the Paycheck Protection Program (the “PPP”) officially came to an end on June 30^th, but in reality submissions had all but dried up weeks ago. When the final numbers are crunched, over 4.7 million businesses availed themselves of the program borrowing in excess of $500 billion. The average loan was just over $106,000. However, there remains over $130 billion left in the program and many existing borrowers are clamoring for access to these additional funds. Enter the Prioritized Paycheck Protection Program or what you will soon be called the “P4.” The P4 is a bipartisan bill introduced a few weeks back which has been receiving growing support in Washington. The idea is to extend the deadline for PPP loans and offer additional PPP type loans to a subset of existing small PPP borrowers hardest hit by COVID-19.

The need for P4 is becoming apparent as 48 of 50 states face increases in COVID-19 cases causing twelve states to press pause on reopening plans and an additional five states to actually take a step back with their reopening initiatives.

Get to know the P4

Under currently proposed P4 legislation, the deadline for new PPP loans would be extended to December 31, 2020, and certain prior small PPP borrowers who are hardest hit by COVID would be eligible to receive additional funds.

The P4 is not yet law and remains subject to change as it goes through the legislative process of both the House and Senate before receiving presidential approval; however, here is what we now know:

New P4 loans are available to only smaller businesses with 100 or fewer employees (the original PPP permitted companies with fewer than 500 employees to participate).
No public companies (the original PPP allowed publicly traded companies to participate).
Borrowers must be able to show they have exhausted their initial PPP loan or are on track to do so.
Borrowers must be able to show COVID-19 caused lost revenue of 50 percent or more (the original PPP only required borrowers show they expected their business to be harmed by COVID-19).
Up to $25 billion being earmarked for businesses with 10 or fewer employees.
Borrowing amounts would be capped at $2 million (the original PPP permitted borrowings up to $10 million).
Borrowing amounts would be capped at 250 percent of monthly payroll costs (about the same limit as under PPP).

When can we expect passage of the P4?

Many Washington insiders believe the P4 will be wrapped into a fourth stimulus package. This package is currently under consideration but no vote is expected until after Congress returns from its summer recess in late July.

In the background of all of this is a possible interim step. Last week the Senate passed a proposed extension to the PPP, which would extend the deadline for filing an initial loan application from June 30^th to August 8^th, presumably this extension is designed to cover any gap that will exist while P4 is pending. This proposed extension is itself still pending approval from the House and the President.

The more targeted approach of the P4 is designed to help the most needy businesses and is what main street businesses need in Q3 to help see them through to the other side of the pandemic. Brody and Associates will continue to monitor the P4 legislation and keep our clients updated.

Travel Bans and Self- Quarantine

August 24, 2020

Late last month, Connecticut’s Governor Ned Lamont issued an Executive Order regarding travel into the State of Connecticut. Pursuant to the Governor’s Executive Order No. 7III, anyone traveling into Connecticut from a state that has a new daily positive test rate higher than 10 per 100,000 residents or a state with a 10% or higher positive test rate over a 7-day rolling average are directed to self-quarantine for a 14-day period from the time of last contact within the identified state. However, this rule only applies if you have spent over 24 hours in that state.

Additionally, the Executive Order requires anyone entering from one of these identified states to fill out a travel health form upon arrival in Connecticut. Travelers can fill out the form online at ct.gov/travelform.

The list of identified states and U.S. territories is regularly updated online and currently stands at 35. As of August 18, 2020, the following locations meet the travel ban criteria and are included in Connecticut’s travel advisory:

Alaska, Alabama, Arkansas, Arizona, California, Delaware, Florida, Georgia, Hawaii, Iowa, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Mississippi, Montana, North Carolina, North Dakota, Nebraska, Nevada, Oklahoma, Puerto Rico, South Carolina, South Dakota, Tennessee, Texas, Utah, Virgin Islands, Virginia and Wisconsin.

Many employers have asked if there is a way around the automatic self-quarantine in order to get employees back to work sooner. Connecticut has provided the following guidance:

Can travelers be tested for COVID-19 instead of self-quarantine? In general, no. The narrow exemption exists only for a traveler who is unable to self-quarantine for the required fourteen (14) day period. In such a case, a traveler may be exempted from the self-quarantine requirement provided that the traveler has (1) had a negative test result for COVID-19 in the seventy-two (72) hours prior to arriving in Connecticut and (2) provided written proof of such test result to the Commissioner of Public Health via email to: COVID-Travel@ct.gov or via facsimile to: (860) 326-0529. If a test was obtained in the seventy-two (72) hours prior to returning to Connecticut but the result is still pending at the time of arrival in Connecticut, such traveler shall remain in self-quarantine until the test result is received and, if such test result is negative, the result is submitted to the Commissioner of Public Health. If the test result is positive and the traveler is asymptomatic, he or she shall self-isolate for ten (10) days from the date of the test; if symptomatic, he or she should seek medical assistance. Travelers who test positive for COVID-19 prior to traveling to Connecticut should delay such travel and consult with a medical professional.
What does “unable to self-quarantine” mean? The term “unable to self-quarantine” applies in very rare circumstances (e.g., coming to Connecticut for a funeral, an end-of-life visit to a relative). Returning to work is not a justification for being unable to self-quarantine. Individuals who plan voluntary travel to affected states should make arrangements with their employer to be self-quarantined for the two weeks after they return.

As you can imagine, these restrictions place quite a burden on employers with workforces that are returning from out of state vacations. We encourage employers to work with employees in advance to minimize the impact employees’ vacations will have on business operations. In some cases, employers may consider the quarantine period when deciding if the vacation request is granted. While this is not a popular idea, it may be necessary to ensure the business is adequately staffed.

It is important to note that New York and New Jersey have implemented similar travel restrictions. It is also important to note that states can be added to this list while an employee is on vacation, which will also impact their return to work. If you have questions on how these restrictions impact your business, Brody and Associates can assist.

NLRB Favoring Employers in Recent COVID Advice Memoranda

August 30,2020

Earlier this month the Advice Division (Advice) for the National Labor Relations Board (the Board) released five new Advice Memoranda. The advice showed strong support for employers who took action against employees in workplace disputes arising from the COVID-19 pandemic. The advice covered topics ranging from employees being terminated after raising COVID safety concerns to employers refusing to engage with unions over COVID-19 related employment decisions. In each instance, the General Counsel recommended dismissal of the Charges against the Employer. This pro-employer stance in the face of the COVID-19 is a one of the few positives employers have had during the pandemic.

None of this advice creates new law. Rather, it demonstrates the bent of a Trump Board (and General Counsel, the Board’s lead prosecutor). The current Board finds no protection for employees who likely would have been protected under an Obama Board. Consider the following examples.

In one case, a New York based nursing home, Hornell Gardens, fired a nurse who had previously complained with two of her fellow nurses that they had not received adequate amounts of personal protective equipment to perform their jobs. Advice found these complaints were not “concerted” activities under the National Labor Relations Act (the Act) because they failed to rise to a group complaint. Advice found there was no evidence of “prior or contemporaneous discussion of the concern between or among members of the workforce.” Rather, the complaints simply reflected individual griping, and that the complaints were not intended as an attempt to bring a group concern to the attention of the company’s management. Advice reached this conclusion despite the fact the nurses tried to educate their coworkers on the risks associated with COVID, wrote letters to management, refused to work under such conditions, and attempted to hold a protest in the parking.

In each instance, Advice found the nurses’ actions failed to raise to the level of concerted or group activity and they were all individual actions not warranting protection. “The employees here never took their concerns to management as a group,” concluded the NLRB attorney issuing this Advice. It is hard to imagine a Democratic Board reaching the same conclusion.

In another case, Advice found the contract prohibited mid-term bargain involving issues related to COVID-19. To reach this conclusion, Advice found the parties intended to waive such bargaining in the face of an unanticipated world-wide pandemic. Again this is not new law but rather a more pro-management perspective than we have seen since the last Administration.

This is the second set of pro-management Advice Memoranda issued regarding the COVID-19 pandemic. It is our belief that more will follow. As long as this Administration controls the White House, we expect more of the same. Of course, who will be on the podium come inauguration day, is the $64,000 question. By late this year, we believe we will all have an answer to this question and will know if this trend of Advice will continue.

COVID-19 Lawsuits and the Workplace: What Employers Need to Know

September 10, 2020

Earlier this month, the Workplace Policy Institute (the “WPI”) released its annual Labor Day Report. This year’s report focused on the impact the COVID-19 pandemic has had on employers and employees, and the litigations between them which have been prompted by the pandemic. The WPI reported that as of the end of August, there has been nearly 600 employee initiated lawsuits (including 70 class action) as a result of COVID-19. The majority of these cases have centered around terminations, exposure to the virus, and other workplace health and safety issues. However, it is anticipated that in the coming months more suits will follow surrounding sick leave, whistleblower complaints, disability accommodations and violations of the Worker Adjustment and Retraining Notification (“WARN”) Act resulting from mass layoffs as the pandemic continues. Until the United States has widespread inoculation of American workers with a COVID-19 vaccine, we see no end in sight to this uptick in lawsuits. Therefore, we believe employers need to be extra vigilant in their approach to employees during these uncertain challenging times.

Many of these initial COVID-19 related lawsuits have been brought against employers providing healthcare services. This makes sense as these organizations were for the most part the largest employers that remained open during the start of the pandemic. We anticipate employers from other industry sectors will be next as the economy continues to reopen and employees return to work.

To date, the most common COVID-19 related claims have been for:

Wrongful termination;
Breach of contract;
Retaliation;
Workplace safety;
Bias based on disability/age; and
Violations of various federal and state leave laws.

We feel, as the authors of the report predicted, as more employers come back online, new litigations brought by employees will be directed at wage and hour claims and violations of the WARN Act. Here are some thoughts for you to consider.

Wage and hour concerns include the misclassification of employees stemming from the growing number of “Gig workers” entering the economy because their more traditional jobs have been eliminated as a result of the pandemic. Courts will be faced with identifying the proper classification of these individuals as independent contractors or employees (see previous Brody and Associate article on this topic). The liability for misclassification can be dramatic.

Other wage and hour concerns include:

Time keeping obligations (e.g., failure to properly track work time and specifically meal and rest breaks, for employees working from home during the pandemic);
Reimbursement for certain expenses an employee incurs while working at home when the incurred expense would cause the employee’s wage to drop below minimum wage;
Reporting time pay: certain jurisdictions require reporting time pay for employees who report to work and are sent home before the end of a shift and even when no work is performed at all during a scheduled shift. Issues regarding reporting time pay may also arise at the start of furloughs or an unforeseen office closure resulting from the pandemic; and
Compensable work time and the compensability of pre-shift activities incurred as a result of the pandemic (e.g. temperature checks and other health screening activities).

Under the WARN Act and corresponding state laws, employers are required to give employees advance notice of mass layoffs and closures. During the outbreak of a pandemic such as COVID-19 this timely notice obligation can be difficult, if not impossible, for employers to meet. The WARN Act does provide exceptions to this notice requirement for business circumstances that were not reasonably foreseeable at the time notice was to be provided. This exception may give cover to employers who failed to give timely notice to employees at the onset of the pandemic; however, the valid use of this exception loses some merit as the pandemic continues and businesses are able to give thoughtful planning to what their future workforce will look like. Thus failure to provide timely notice is a likely focus for disgruntled employees.

Brody and Associates is a boutique, management side employment law firm that is well versed in all the employment issues employers are now being faced with as a result ofCOVID-19. Not only can we represent your company should you be the target of one of these types of lawsuits by your employees, but just as important, we can work prospectively with management on a daily basis to help avoid these types of actions in the first place. If we can assist you, we are here to help.

14 Day Quarantine No Longer Required in All Cases: COVID-19 Travel Advisory Update

September 21, 2020

Last week Connecticut’s Governor Ned Lamont issued Executive Order 9B (click here to read the Executive Order), which calls for a welcome COVID-19 testing alternative to mandatory self-quarantine for those individuals coming into Connecticut from states and US territories on Connecticut’s Travel Advisory list (click here to see Connecticut’s current Travel Advisory list). As we wrote previously (click here to read article), prior to Executive Order 9B, almost all individuals coming into Connecticut from a state or US territory on the Travel Advisory list had to self-quarantine for 14 days. There were only narrow exceptions to self-quarantine, including individuals traveling due to an emergency and individuals not staying in the foreign state for more than 24 hours.

Now everyone can test out of Connecticut’s mandatory 14 day self-quarantine requirements through two options. First, get tested within 72 hours before entering the state and receive a negative test result (until you get the results you must remain quarantined). Alternatively, be tested in Connecticut after entering the state and receive negative results. Again, you must remain quarantined until you get the results. Employees and employers should be aware the state is currently only accepting results for nucleic acid COVID-19 tests, such as reverse transcriptase polymerase chain reaction (RT-PCR) tests.

Executive Order 9B does provide a carve out for “Essential Workers” traveling to, or returning to, Connecticut from states on Connecticut’s Travel Advisory list when such travel is related to their work. However, if such travel was non-work related (e.g., vacation), such workers shall be required to follow the self-quarantine/testing procedures detailed above.

Executive Order 9B also covers individuals coming into Connecticut from countries on the CDC’s Level 3 Travel Health Notice. We urge all Connecticut employers to review Executive Order 9B for specific testing and reporting requirements.

The subject matter of COVID-19 posts are often very technical. It is also an evolving area of law and very fact specific. Our goal here is to simply alert you to some of the key issues involved. We urge you to seek competent legal counsel before applying these ideas to your specific situation. Since March, we have had a team of attorneys focusing on COVID-19 related developments and they continue to stand ready to help you with any issues involving the pandemic.

Can Employees Use Federal Leave to Care for Children Studying At-Home Because of COVID-19 – Yes (and No)

September 21, 2020

After traversing a very windy road, the federal COVID-19 leave law has been determined to allow employees paid leave if their children are forced to learn remotely. Here’s the back story.

As summer came to an end and children returned to primary school, employees were faced with hard decisions regarding childcare if their children were learning remotely on a daily basis or through a hybrid model. While the hybrid learning model means different things in different school districts, the one thing they all have in common is attending school part time in the classroom and part time at home. Remote learning raises serious questions and concerns for both employers and employees. The most critical of which is whether employees are entitled to federal paid leave under the Families First Coronavirus Response Act (the “FFCRA”)? If so, is it available for children studying from home full time and is it available on an intermittent basis for children who are required to work from home under the hybrid model?

Initial guidance from the federal Department of Labor (the “DOL”) gave us an answer. This guidance provided that employers are to consider schools closed on the days students are required to be at home; thus federal leave for childcare was available.

The next logical question and one which several of our clients have recently asked is whether or not employees can use intermittent leave under the FFCRA on the days children are required to learn from home? Although the FFCRA does not address this question, the DOL did in its implementing regulations, which allow for the use of intermittent leave in such cases but only with employer consent. As one can imagine, this DOL regulation did not sit well with many employees and state governments. One of the leading states in this fight was New York, whose Attorney General sued the Department of Labor in the case, New York v. United States Department of Labor.

As part of the decision, the judge vacated the regulation requiring employer consent for an employee’s use of intermittent leave. In recognition of this adverse decision, the DOL issued new guidance allowing the use of intermittent leave without employer approval (click here to read DOL regulation).

Thus, employees have the right to use intermittent leave on the days their children are learning remotely. However, if parents voluntarily choose to keep their child home for a completely remote learning model, an employer is not to consider the school closed for FFCRA purposes. Therefore, these parents/employees are not able to avail themselves of FFCRA leave at all.

It is important for employers to keep in mind how the FFCRA and the childcare provisions of its components (the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act) interact with the employer’s own current leave policies and state and local leave laws. Brody and Associates is well versed in the employment laws surrounding COVID-19 and is available to assist you should you have any questions or concerns on how this or any other recently enacted COVID-19 law applies to your business.

INTERVIEWS/SEMINARS

Fairfield and Hartford County Medical Associations

On March 27, 2020, Brody and Associates participated in a Zoom conference on Unemployment Laws and Benefits to the Fairfield County Medical Association and Hartford County Medical Association.

LCM247

On April 3, 2020 Brody and Associates was interviewed regarding Covid-19 and its impact on small business.

LINKS TO PRIMARY SOURCES ON COVID-19

FACTS OF THE DAY

Fact 1: With clear, calm and wise thinking (and a little luck), we will get through this pandemic. While no one will be unscathed, getting through this challenge is attainable.

Fact 2: Paid leave – an option, not a legal obligation. As long as you are even handed, you are allowed to send all similarly situated employees home for lack of work or because you are otherwise closing your doors – for any period of time. Currently, a few states like New York mandate paid leave of a limited duration if schools and businesses are shut down. If your business is closed due to an Emergency Executive Order of the Government based on the Coronavirus, your employees likely will be entitled to this benefit. But, if this does not apply to your employees, unemployment is an option.

Fact 3: Maintain a safe workplace – distribute health and safety guidelines. OSHA mandates you maintain a safe workplace. Given the uncharted territory of COVID-19, specific compliance guidelines may not exist for your industry. However, there remains the General Duty Clause by which OSHA mandates every employer create a safe and healthy workplace. Until specific regulations are issued, the best idea is to look to the CDC and NIH. The CDC and NIH both have extensive guidelines on how to stay safe and minimize the spread of Coronavirus. Distribute the guidelines to every employee. Over educate. Then check OSHA’s website for new guidance that may impact your business. Click here for the general guidance issued by OSHA.

MUSING OF THE WEEK

Musing 1: Looking for the new normal. This isn’t the new normal; we’re not there yet. For your business to succeed you need to be flexible and creative. So plan for the unexpected – an oxymoron but true. At any cost but health, find new ways to keep your business safe and successful, so when the new normal is here, you’ll be better than before.

I Have Management Questions For A Management Lawyer.

OVERVIEW

ARTICLES SUMMARIZING COVID-19 LEGISLATION

Covid-19 Federal Paid Sick Leave Legislation Just Passed: What Employers Are Obligated To Do

New York State Executive Order 202.8 Shuts Down Many Businesses

New Amendment to Mandatory Connecticut Unemployment Form

Emergency Relief Available for Your Business

Recommended Strategies to Help Curtail the Spread of COVID-19

State Of Connecticut Executive Order 7H “Stay Safe, Stay Home” Campaign Shuts Down Many Businesses

DECD GUIDANCE ON ESSENTIAL BUSINESSES

Critical Infrastructure Sectors

Healthcare and related operations

Infrastructure

Manufacturing

Retail

Food and Agriculture

Services

Providers of Basic Necessities to Disadvantaged Populations

Construction

Safety and Sanitation Services

Essential Service Vendors

Defense

Requesting Designation

Restrictions on requesting designation as an Essential Business:

The Coronavirus Aid, Relief, and Economic Security (CARES) Act: $2.4 Trillion Aid Package to Help Combat COVID-19’s Financial Impact

Paycheck Protection Program under the CARES Act: Don’t Miss the Opportunity

Second Stimulus Package en Route to White House: Awaits President’s Signature

New Guidance on How PPP Moneys Can be Spent- Know Your Rights and Limitations!

New Requirement – To Qualify For PPP Loan, It Must Be Necessary!

SBA Explains Impact On PPP Loan Forgiveness Of Employee’s Refusal To Return To Work

The Time to Re-Open is Days Away: You Must Be Ready or Stay Closed! We Can Help

SBA Explains “NECESSITY” Provision for PPP Borrowers – But Not Really!

The ABC’s of BPP for your PPP and BBA

It is a New Ball Game for PPP Forgiveness: Paycheck Protection Program Flexibility Act of 2020

Phase II on Schedule for June 17 Re-Opening

Employers Have More Breathing Room; Must Factor Need & Unemployment Benefits

Three points to consider

Back to Work: Special Accommodations For People Over 65 and Those With Underlying Medical Conditions

SBA And Treasury Eliminate The 60 Percent Cliff

Employers Are Not Allowed To Test Employees For COVID-19 Antibodies – Testing Sick Employees Is Permitted

Employer Ordered to Pay Employee’s Covid-19 Paid Sick and Family Leave

Say Good Bye to the PPP and Hello to PPPP!

Travel Bans and Self- Quarantine

NLRB Favoring Employers in Recent COVID Advice Memoranda

COVID-19 Lawsuits and the Workplace: What Employers Need to Know

14 Day Quarantine No Longer Required in All Cases: COVID-19 Travel Advisory Update

Can Employees Use Federal Leave to Care for Children Studying At-Home Because of COVID-19 – Yes (and No)

INTERVIEWS/SEMINARS

LINKS TO PRIMARY SOURCES ON COVID-19

Department of Labor

Connecticut Department of Labor

Primary Sources

Federal Sources

FACTS OF THE DAY

MUSING OF THE WEEK

Resources