Category Archives: COVID-19

PPP Bonuses, Hazard Pay Count Towards Forgivable Payroll Costs, and Other New Guidance

On May 22, 2020, a week after issuing the application form for the CARES Act’s Paycheck Protection Program (“PPP”) loan forgiveness, the Small Business Administration (“SBA”) released the twenty-six-page interim final rules that provide formal guidance to accompany the application package.

Most of the interim final rules reiterate the substance of the PPP loan forgiveness application, but they also include new pieces of significant guidance such as the inclusion of employee bonuses and hazard pay as forgivable payroll costs when paid to employees earning less than $100,000 a year. Such payments are eligible for forgiveness because, as a supplement to salary or wages, they are considered compensation.

Some of the other significant new guidance includes:

  • a further cap on the forgivable payroll expenses of owner-employees, as not to be confused with self-employed individuals, in an amount that is the lesser of 8/52 of 2019 compensation or $15,385 per employee;
  • application of the above cap across all business, suggesting that someone with an ownership interest in multiple business will be subject to the overall limitation; and
  • safe harbors to protect borrowers from a reduction in full-time employees due to the employees’ actions.

Unsurprisingly, questions remain following the release of the rules, such as the definition of an “owner-employee.” No additional IRS frequently asked questions  have been released to supplement the interim final rules.

PPP Loans Less Than $2 Million Deemed Certified in Good Faith; Larger Loans Get Penalty Relief But Remain In Cloud of Repayment Uncertainty

On Wednesday, May 13, 2020, just a day before the deadline to recertify or repay Paycheck Protection Program (“PPP”) loans (previously discussed here), the Small Business Association (“SBA”) made good on its promise to provide further guidance as to what circumstances necessitate repayment with its release of FAQ 46. The new FAQ asks the following question:

“How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?”

The first part of the SBA’s answer reveals a safe harbor for borrowers of PPP loans with an original principal amount of less than $2 million. Borrowers who received loans below this threshold will be deemed to have certified in good faith that the loan was necessary, because they “are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans.” The SBA also admitted that it has bigger fish to fry, as removing these borrowers from the PPP loan pool will allow it to “conserve its finite audit resources and focus its reviews on larger loans.”

As for the $2 million-and-above borrowers, the FAQ goes on to say that they may still have an adequate basis for making the required good-faith certification depending on their circumstances. If, however, the SBA determines by its review that a borrower lacked an adequate basis for its PPP loan, the SBA will seek repayment of such loan and notify the lender that the borrower is ineligible for loan forgiveness. Further, the SBA will not take administrative enforcement action to collect repayment or make referrals to other agencies if the borrower voluntarily repays the loan after receiving notification from the SBA. The SBA did not offer a specific timeframe within which repayment would prevent administrative enforcement.

Borrowers who did receive loans of $2 million or more should consider setting aside enough funds to make a repayment should the SBA require it, though one wonders whether the SBA could use retention of such reserves as a basis to question the necessity—and hence the qualification—of the loan. That seems like an unfair catch-22, motivating “larger” small businesses to stop paying employees after the PPP measuring period ends. We hope the SBA will provide more clarification to help these businesses avoid that dilemma and to encourage businesses to continue deploying funds to keep their workforces in place after the PPP measurement period ends.

The SBA also released FAQ 47 later in the day on May 13, which automatically extends the repayment date to Monday, May 18, 2020. The stated reason for this extension is “to give borrowers an opportunity to review and consider FAQ 46.” The practical significance of FAQ 47 as it relates to the necessary-ness certification is unclear, given the penalty relief provided by FAQ 46.

PPP Repayment Deadline Extended But Confusion Remains

On May 5, 2020, the Small Business Administration (“SBA”) in consultation with the Department of Treasury (“Treasury”) announced in a new online FAQ that it is giving extra time for companies to repay loans they applied for and received in good faith under the initial guidance provided by the SBA to the Paycheck Protection Program (“PPP”). Originally set for May 7, 2020, the deadline to repay the loan without incurring penalties is now extended to May 14, 2020. The SBA also stated that it plans to issue “additional guidance on how it will review certification prior to May 14, 2020.” Continue reading

Florida’s Road to Recovery Begins

Late yesterday, on April 29, 2020, Florida’s Governor issued his Phase 1: Safe. Smart. Step-by-Step Plan for Florida’s Recovery in Executive Order 20-112 and clarifying FAQs, which will be effective 12:01 a.m. on May 4, 2020, until a new order is issued. Continue reading

SBA Issues Potentially Overbroad Guidance Narrowing PPP Qualification Standards

Lawyers have a saying, “Bad Facts Make Bad Law.”  Recent Small Business Administration guidance regarding the Paycheck Protection Program proves it true in one more case.

Even as Congress moves to approve additional funds to the Paycheck Protection Program, the SBA issued a new FAQ in response to news stories about public companies receiving PPP money.  The FAQ states that “a public company with substantial market value and access to capital markets” may not receive PPP funding.  While understandable with respect to the companies in the headlines, it is concerning that the SBA could apply the guidance more broadly.  Doing so would cause more delays or denial in funding for smaller enterprises, and defeat Congress’ intent to support employee retention by private employers.

This is the new FAQ:

  1. Question: Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?

Answer: In addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking 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 significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification. Lenders may rely on a borrower’s certification regarding the necessity of the loan request. Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.

We understand the political motivation behind the guidance.  We also believe applying a strict standard based on a company’s value or a company’s access to outside capital or “other sources of liquidity” is perverse.  Congress intended the PPP to motivate companies to retain employees.  Valuable companies with reserves and access to capital will still furlough or release employees, as demand for their services or products drops.  For even those companies, the PPP is therefore “necessary to support ongoing business operations,” because given the current economic landscape they would not deplete reserves or access other sources of liquidity to retain unprofitable employees.  Understanding Congress wanted employers to retain their employees, we interpret the FAQ narrowly.  We hope the SBA will as well.

Attorney James-Allen McPheeters contributed to this post. 

Governor Clarifies Florida Safer-at-Home Order

Late on Friday, Florida’s Governor issued clarifications through a List of FAQs regarding the Safer-at-Home Executive Order 20-91, which became effective at 12:01 a.m. April 3, 2020, as noted in our recent blog post and is currently scheduled to expire on April 30, 2020.

The FAQs explained that notwithstanding that persons in Florida who are senior citizens or individuals with a significant underlying medical condition are ordered to “stay at home and take all measures to limit the risk of exposure to COVID-19,” they may leave their homes as necessary to obtain or provide essential services or conduct essential activities, including but not limited to going to work at an essential service.

The Division of Emergency Management has posted and will maintain the Governor’s Executive Order 20-91 Essential Services List online. The FAQs remind businesses that if they are not an essential service, they must close their physical location to customers. However, non-essential businesses and their employees may continue their businesses by working from home, operating remotely, taking orders by telephone or online, and providing delivery or pick up.  Businesses that are essential services do not need any permit or documentation to remain open to customers pursuant to the Safer-at-Home Order. Likewise, individuals do not need a permit or documentation to leave their homes to go to an essential service or activity, although businesses may wish to provide a letter to employees to clarify that their business is indeed an essential service.

The FAQs also indicate that local law enforcement may enforce the Safer-at-Home Order and violation of the Order is a second-degree misdemeanor.

In compliance with the Safer-at-Home Order, Williams Parker remains dedicated to serving its clients and continues to advise and represent clients with respect to their legal matters. Our firm has launched a multidisciplinary task force of lawyers across the firm to advise on issues arising from COVID-19. This team is closely monitoring legal developments and guidance from federal, state, and local government and public health officials. For the latest updates, please visit our website.

Gail E. Farb
gfarb@williamsparker.com
(941) 552-2557

VIDEO: A Conversation on Federal Stimulus Assistance for Independent Contractors

Following is a video of a short conversation between Williams Parker attorneys Thomas B. Luzier and James-Allen McPheeters about federal stimulus availability for small businesses, independent contractors, and sole proprietorships.

For more information on these programs, please contact James-Allen. Keep in mind that aid currently available can be handled directly through the Small Business Administration or with your local banker.

For the latest developments on virus-related matters and the impact on businesses, visit our COVID-19 resource page, which is updated regularly.

Governor Issues Florida Safer-at-Home Order

 

An update to this post was published April 6.

Yesterday afternoon, on April 1, 2020, to continue efforts to slow the spread of COVID-19 and to make people in Florida safer, Florida’s Governor issued a Safer-at-Home Order (Executive Order 20-91).

First, the Safer-at-Home Order mandates that senior citizens and individuals with a significant underlying medical condition (such as chronic lung disease, moderate-to-severe asthma, serious heart conditions, immunocompromised status, cancer, diabetes, severe obesity, renal failure and liver disease) stay at home and take all measures to limit the risk of exposure to COVID-19.

Next, the Safer-at-Home Order requires that all persons in Florida limit their movements and personal interactions outside of their home to only those necessary to obtain or provide essential services or conduct essential activities.

I. Essential Services

For purposes of the Order, “Essential Services” means:

  • those services listed in the U.S. Department of Homeland Security’s Guidance on the Essential Critical Infrastructure Workforce, v. 2 (March 28, 2020) (“DHS Guidance”) and any subsequent lists published; and
  • those businesses and activities designated by the Governor’s earlier Executive Order 20-89 and its attachment which consists of a list propounded by Miami-Dade County in multiple orders (“Miami-Dade Orders”).

The “Essential Services” definition may be amended to add other services and will be maintained online at the Division of Emergency Management and the Florida Department of Health.

Note that the Safer-at-Home Order also specifically encourages individuals to work from home and for all businesses or organizations to provide delivery, carry-out, or curbside service outside of the business or organization, of orders placed online or via telephone, to the greatest extent practicable.

DHS Guidance

The DHS Guidance breaks down essential workers into the following industries:

  • Healthcare/Public Health
  • Law Enforcement, Public Safety, and other First Responders
  • Food and Agriculture
  • Energy
  • Water and Wastewater
  • Transportation and Logistics
  • Public Works and Infrastructure Support Services
  • Communications and Information Technology
  • Other Community- or Government-Based Operations and Essential Functions
  • Critical Manufacturing
  • Hazardous Materials
  • Financial Services
  • Chemical
  • Defense Industrial Base
  • Commercial Facilities
  • Residential/Shelter Facilities and Services
  • Hygiene Products and Services

Included in the DHS Guidance’s extensive list of essential services are restaurant carry-out and quick serve food operations; residential and commercial real estate services, including settlement services; banks; assisted living facilities and nursing homes; property management; certain contractors and builders, those responsible for the leasing of residential properties; staff at government offices who perform title search, notary, and recording services in support of mortgage and real estate services and transactions; educators supporting public and private K-12 schools, colleges, and universities for purposes of facilitating distance learning or performing other essential functions; and many others.

Miami-Dade County Orders

The Governor’s Executive Order 20-89, issued on March 30, 2020, designated essential services pursuant to the guidelines established by several Miami-Dade County Emergency Orders.

Such list of essential services includes, but is not limited to, grocery and pet supply stores; car dealerships and auto-repair; businesses supplying office products needed for people to work from home; taxis and other private transportation providers; child care; home based care; senior living facilities; open construction sites (irrespective of the type of building); and hotels, motels, and other commercial lodging establishments; factories and manufacturing facilities; office space and administrative support necessary to perform listed essential services; and any business that is interacting with customers solely through electronic or telephonic means and delivering products via mailing, shipping, or delivery services.

We encourage you to review the complete list of essential services identified in the DHS Guidance and Miami-Dade County Orders as they are exhaustive and cumulative.

II. Essential Activities

Essential Activities” are currently defined as the following, although this list may be amended:

  • Attending religious services conducted in churches, synagogues and houses of worship.
  • Participating in recreational activities (consistent with social distancing guidelines) such as walking, biking, hiking, fishing, hunting, running, or swimming.
  • Taking care of pets.
  • Caring for or otherwise assisting a loved one or friend.

However, the Safer-at-Home Order clarified that a social gathering in a public space is not an essential activity, and that groups of people greater than ten are not permitted to congregate in any public space.

The Safer-at-Home Order will be effective from 12:01 am on April 3, 2020, through April 30, 2020, unless extended by subsequent order.

Not affected by the Safer-at-Home Order, Williams Parker remains dedicated to serving its clients and continues to advise and represent clients with respect to their legal matters. Our firm has launched a multidisciplinary task force of lawyers across the firm to advise on issues arising from COVID-19. This team is closely monitoring legal developments and guidance from federal, state, and local government and public health officials. For the latest updates, please visit our website.

Special thanks to attorney Nicole F. Christie for her assistance with this blog post.

Gail E. Farb
gfarb@williamsparker.com
(941) 552-2557