On May 15, 2020, the SBA released its PPP Loan Forgiveness Application. After the application generated much confusion, additional guidance was issued and published by the SBA. The additional guidance includes (1) Loan Forgiveness Requirements; and (2) SBA Loan Review Procedures and Related Borrower and Lender Responsibilities. As it stands, Congress is currently considering even more changes to the PPP loan forgiveness process that includes proposals such as doubling the loan forgiveness period. Putting aside the possibility of additional changes, the SBA Loan Forgiveness Application and subsequent guidance has given small business borrowers a lot to think about. A few key takeaways from the Application and subsequent guidance include the following:
• 75% of the PPP Loan still must be used on payroll costs. Total costs for interest, rent, and utility payments “cannot exceed 25% of the loan forgiveness amount.”
• After a borrower submits the Loan Forgiveness Application to its lender, the lender has 60 days to issue a decision to the SBA. The SBA will then have 90 days to review the borrower’s application and remit the appropriate forgiveness amount to the lender.
• Payroll costs paid or incurred during the eight consecutive weeks (56 days) covered period are eligible for forgiveness. The start date for payroll costs is either the date of disbursement of the borrower’s PPP loan proceeds from the lender; or the first day of the first payroll cycle in the covered period (the “alternate payroll covered period”).
• When calculating the average full-time equivalency (FTE) during the covered period, such calculation is based on a 40-hour work week. As set forth in the application, under a simplified method, an employer can treat an employee who works 40+ hours a week as 1.0 FTE and any employee who works less than 40 hours a week as 0.5 FTE.
• The interim final rule makes it clear that employee bonuses, hazard pay, or any compensation paid to a furloughed employee are all considered “payroll costs” for purposes of loan forgiveness. The only exception is that an employee who receives a form of additional compensation must not exceed an annual salary of $100,000 in order for such compensation to be forgiven.
• There are caps on the amount of loan forgiveness available for owner-employees and self-employed individuals.
• Advance payments of interest on mortgage obligations are not eligible for loan forgiveness.
• Subject to certain restrictions, a borrower’s loan forgiveness amount will not be reduced if the borrower laid-off or reduced the hours of an employee, then offered to rehire the same employee for the same salary and same number of hours, or restore the reduction in hours, but the employee declines.
Many borrowers plan to submit their Loan Forgiveness Applications within the next 2-4 weeks. As the deadline approaches, it will be important for borrowers to understand their Loan Forgiveness Application in order to maximize their chances for complete loan forgiveness.
Governor Beshear, during his 5:00 p.m. address, explained the Commonwealth’s Phase 2 plan for reopening the economy. The following dates represent target dates, all of which are contingent upon the evolution of COVID-19:
1. May 22, 2020:
• Restaurants will open a limited inside capacity (33%) and can offer unlimited outside capacity if proper spacing and social distancing guidelines are followed.
2.June 1, 2020:
• Movie Theaters; and
• Fitness Centers.
3.June 11, 2020:
• Reopen Campgrounds, both public and private.
4.June 15, 2020:
• A safe plan for childcare. Childcare centers will be highly monitored to ensure that children are in minimal contact with each other.
• Outdoor Youth Sports (no indoor sports).
All of the businesses that are allowed to open in Phase 2 still must follow and adhere to the following 10 rules: (1) Continue telework where possible; (2) Phased return to work; (3) Onsite temperature/health checks; (4) Universal masks and any other necessary PPE; (5) Close common areas; (6) Enforce social distancing; (7) Limit face-to-face meetings; (8) Sanitize/hand washing stations; (9) Special accommodations; and (10) Testing plan.
Governor Beshear reiterated that contact tracing rules and quarantine measures are still applicable during Phase 2. In other words, if you are a business that experiences a positive case of COVID-19 at your facility, several people at your business may be asked to quarantine for fourteen (14) days.
The Governor mentioned that Phase 3 will hopefully take place in July. Phase 3 will include the reopening of bars and allowing groups of at least 50 people to gather together.
As many states prepare to slowly reopen the economy, the widespread manufacturing, distribution, and use of antibody tests have recently undergone heightened scrutiny by the FDA. The initial FDA guidelines and standards regarding the manufacturing and distribution of antibody tests were very low. Essentially, the only initial requirement for companies to sell and distribute antibody tests was for such tests to be “internally validated.” After discovering a high percentage of inaccurate tests, the FDA recently decided that manufacturers must meet heightened standards and requirements if they wish to keep their product on the market. The FDA will continue to work closely with companies who are unable to meet the heightened standard in order to remove such tests from the market.
According to the CDC, antibody blood tests check a person’s blood for antibodies to determine whether a person has been previously infected by the virus. A positive antibody test may reveal (1) a previous infection, (2) possible immunity, (3) whether any additional Covid-19 diagnostic tests are necessary, and (4) whether a person may be asymptomatic. In addition to the tests being inaccurate, there are serious questions concerning whether a positive antibody test means that a person is immune to the virus. This, of course, is the million-dollar question, especially for those who are on the verge of reentering the workplace.
While a positive antibody test might mean that a person has been exposed to the virus, health experts are still unsure about whether a positive test means that a person has built up any sort of meaningful immunity. Stephen Hahn, the FDA commissioner, when addressing the affect a positive antibody test might have on workplace reintegration, stated, “whether this is the ticket for someone to go back to work, my opinion on that would be no.” In other words, Hahn has stated that both employers and employees cannot completely rely on the outcome of an antibody test to determine whether it is safe to “resume as normal.”
This is not to say, however, that antibody tests will not eventually be a useful and effective tool for determining COVID-19 immunity in the workplace. The medical research surrounding COVID-19 is very fluid, with new findings and contradicting evidence being published on a daily basis. As the medical research continues to come into focus, the use of antibody tests in the workplace could very well prove to be an additional tool for employers and employees to consider. Thinking creatively about how antibody tests could practically play out in the workplace over the next few months, and even years, may be an important piece to your businesses strategy and plan to return to a state of normalcy.
As Governor Beshear prepares to slowly reopen the economy, he has officially published and addressed the Commonwealth’s “phase-one” plan for reopening. Governor Beshear has set three specific dates for when he hopes certain businesses can reopen:
1. May 11, 2020:
• Vehicle or Vessel Dealerships
• Professional Services (50%)
• Horse Racing (No Fans)
• Dog Grooming / Boarding
2. May 20, 2020:
• Houses of Worship
3. May 25, 2020:
• 10 Person Social Gatherings
• Barbers, Salons, Cosmetology Businesses, and Similar Services.
This “phase-one” plan for reopening is contingent on whether the above-mentioned businesses can continue adhering to CDC guidelines. There are ten (10) rules that such businesses must follow upon reopening: (1) Continue telework where possible; (2) Phased return to work; (3) Onsite temperature/health checks; (4) Universal masks and any other necessary PPE; (5) Close common areas; (6) Enforce social distancing; (7) Limit face-to-face meetings; (8) Sanitize/hand washing stations; (9) Special accommodations; and (10) Testing plan.
Businesses should begin to consider how they can safely and effectively reopen while following the above-mentioned rules and procedures. Developing a business strategy/plan that complies with such requirements, as well as complying with other legal requirements, is important in getting your business back on track.
In a previous post, we explained how Kentucky Senate Bill 150 (“SB 150”) attempts to bring economic relief and public health improvements to the Commonwealth. It has been almost one month since SB 150 was officially signed into law, and we have witnessed the beneficial effects that it continues to have across our State. The following provision of the bill, however, is likely to become a contentious issue for many patients and their health care providers over the coming weeks, months, and even years:
“A health care provider who in good faith renders care or treatment of a COVID-19 patient during the state of emergency shall have a defense to civil liability for ordinary negligence for any personal injury resulting from said care or treatment, or from any act or failure to act in providing or arranging further medical treatment, if the health care provider acts as an ordinary, reasonable, and prudent health care provider would have acted under the same or similar circumstances. The aforesaid defense under this paragraph shall include a health care provider who:
1. Prescribes or dispenses medicines for off-label use to attempt to combat the COVID-19 virus, in accordance with the federal Right to Try Act, United States Public Law 115-176, and KRS 217.5401 to 217.5408;
2. Provides health care services, upon the request of health care facilities or public health entities, that are outside of the provider’s professional scope of practice; or
3. Utilizes equipment or supplies outside of the product’s normal use for medical practice and the provision of health care services.”
Kentucky is not alone in trying to add an extra layer of protection for its health care providers. Other states, such as Illinois and New York, have also taken additional steps to provide a formidable defense to the increase in civil liability suits that are expected to take place against health care providers because of COVID-19.
Several health care providers and medical experts are currently reporting that patients are suffering from non-COVID-19 related health issues because of the added anxiety and precautions that many are taking to avoid medical treatment. In other words, COVID-19 is not just a deadly disease in and of itself, but it has also created a situation where people are afraid or unable to seek medical treatment for other serious health problems. Given the limitations surrounding in-person health care, telehealth visits, telephone calls, and other virtual health care processes are bound to open the door to a host of potential legal issues.
Whether you are a patient or a health care provider, understanding the “COVID-19 standard of care” will be important as our society attempts to navigate and make sense of the “new normal.”
As the country begins to slowly open back up the economy, several companies and small businesses will soon begin to resume operations. However, until a safe and effective vaccine becomes widely distributable, businesses will have to implement new practices and procedures. These new procedures are what many are referring to as the “new normal.” As strict quarantine, stay-at-home orders begin to be lifted over the next few weeks, employees and employers must recognize that confronting COVID-19 in the workplace will become more and more likely. Therefore, small business owners should make sure that they understand the new employer paid leave requirements that are currently in effect until December 31, 2020.
On April 1, 2020, the U.S. Department of Labor explained how both employers and employees will benefit from the Emergency Paid Sick Leave Act and the Family and Medical Leave Expansion Act, which are both part of the Families First Coronavirus Response Act (FFCRA). The FFCRA attempts to prevent the spread of COVID-19, while also providing economic incentives to the workplace.
The FFCRA applies to certain public employers, as well as private employers with fewer than 500 employees. For small businesses with fewer than 50 employees, certain provisions regarding paid leave for school closings or childcare unavailability may not be applicable.
Paid Leave Requirements
Subject to certain exemptions, the FFCRA generally provides paid sick leave to all employees. More specifically, employers are required to give employees two weeks (up to 80 hours) of paid sick leave if the employee is unable to work because (1) the federal or state government, or their local health care provider told them to quarantine; and/or (2) they are experiencing COVID-19 related symptoms and are seeking a medical diagnosis.
In addition, the FFCRA provides two weeks (up to 80 hours) of paid sick leave at two-thirds of an employee’s regular rate of pay if the employee is unable to work because (1) of the need to care for another individual who is subject to quarantine, or (2) they need to care for a child whose school or child-care provider is closed because of COVID-19. Subject to certain exemptions, if you are a covered employer and have an employee who has been employed for at least 30 days, then the employer must provide up to an additional 10 weeks of “paid expanded family medical leave” at two-thirds of the employee’s regular rate of pay.
Employers who grant their employees paid sick leave pursuant to the FFCRA will qualify for dollar-for-dollar reimbursements through tax credits. The FFCRA has not only allowed employers to receive a monetary incentive, but it has also incentivized employers to create a healthy and safe workspace for themselves and for their employees. It will be important for employers to take the time to talk with their employees about how the new paid leave requirements might apply to them.
On April 21, 2020, the U.S. Senate passed and approved what many are referring to as the “COVID-19 3.5” relief package. More formally known as the Paycheck Protection Program and Health Care Enhancement Act (“PPP & HCE Act”), this economic relief package is worth nearly $500 billion. The primary purpose of this package is to allocate more money to the Paycheck Protection Program, provide additional funding to hospitals and healthcare providers, and increase COVID-19 testing, especially in rural health clinics that have experienced a lack of testing capacity.
The proposed PPP & HCE Act authorizes the Small Business Association (“SBA”) to spend over $300 billion to help fund small business Paycheck Protection Program loans (“PPP loans”). This additional funding nearly doubles the original amount of funding that was allocated to provide economic relief to small businesses. In addition to helping replenish the PPP loan program, the proposed PPP & HCE Act seeks to provide $75 billion to support local hospitals and health care providers. This is good news for local hospitals and other health care providers who have suffered severe COVID-19 related expenses. As far as increasing the testing capacity for rural hospitals, the proposed PPP & HCE Act seeks to provide $25 billion to aid in the process of expanding COVID-19 testing to all individuals who need it.
If you are a small business owner, the fact that the Senate has passed and approved the PPP & HCE Act is good news. A significant number of small business owners who applied for a PPP loan did not have their application officially approved by the SBA before the program ran out of money last week. If you are a small business owner who applied but did not receive a PPP loan, it is important to call your bank to make sure that they still have all the financial documentation and information that they need in case the additional funding is ultimately approved. If you have not submitted a PPP loan application to your local bank, you should still consider it, especially in light of the PPP & HCE Act that will hopefully pass through the House this Thursday.
In an article published by Harvard Law Today, Urs Gasser, the Executive Director at the Berkman Klein Center for Internet & Society, explains the role data collection plays in the fight against COVID-19. Specifically, Gasser explains the importance of “location data,” and he articulates how public health officials and epidemiologists use such data in an attempt to better understand the virus and track how the virus spreads (also known as “contact tracing”).
Location data can be collected by epidemiologists and public health officials in a number of different ways. Gasser explains that location data can be collected through analyzing digital devices, surveillance cameras, cellphone towers, Bluetooth connections, smart thermometers, and even applications on our smart phones. While the collection of data may seem necessary in order to protect the health and safety of individuals, the collection, sharing, and analyzing of such data may blur the lines to a variety of ethical issues and considerations. How should our health experts balance a person’s own individual privacy concerns with the broader health concerns of the general public? What steps and safeguards can individuals and businesses take to secure their data during the COVID-19 pandemic? While these are complex, fact-sensitive questions, understanding how COVID-19 may impact data-driven privacy rights over the next few months is a concept with which we must become familiar.
Gasser then compares the glaring differences between European laws and United States laws as it relates to data privacy. The former has a robust legal and regulatory framework for maximizing a person’s personal data privacy, while the latter leaves open “massive privacy gaps” and only provides limited privacy protections for individuals. Gasser even goes so far as to say that the COVID-19 pandemic has proved the need for “comprehensive federal privacy legislation.”
A case study of location data can be seen through Apple’s use of “mobility data.” In an article that was recently published, Apple announced that it is making mobility data available to aid COVID-19 efforts. Apple recognized that mobility data could help public health authorities and epidemiologists track the movement of people, whether it is by car, public transit, or even walking. The article quickly points out, however, that the Maps application “does not associate mobility data with a User’s Apple ID.” Therefore, a person’s privacy is substantially protected even while using the application, and even though their mobility data is being collected and used by local governments and public health experts.
Consumer data, and specifically location data, will continue to play an integral part in the fight against COVID-19. Understanding the statutory, regulatory, and/or contractual restrictions on data collection and processing is important during the COVID-19 pandemic. Perhaps even more importantly, it is critical to know the risks associated with data collection and processing in an ever-increasing digital world.
The legislative intent of the Paycheck Protection Program (“PPP”) is to provide economic relief to small businesses. While small business owners have faced plenty of challenges as it relates to this program, sole proprietors and the self-employed have faced even greater obstacles. The first obstacle, of course, was the later application date. The window for sole proprietors to submit their PPP loan applications began on April 10, 2020, a full week later than the April 3, 2020 application start date for small business owners.
The SBA issued additional guidance on April 14, 2020—four days after the application window opened—regarding PPP loan details for sole proprietors and the self-employed. According to the interim-final rule, individuals with self-employment income are eligible to apply if: (1) you were in operation on February 15, 2020; (2) you are an individual with self-employment income (such as an independent contractor or a sole proprietor); (3) your principal place of residence is in the United States; and (4) you filed or will file a Form 1040 Schedule C for 2019.
The fourth eligibility requirement is the most burdensome for sole proprietors and the self-employed. The U.S. Treasury Department is requiring that these applicants have their Form 2019 IRS 1040 Schedule C of their 2019 tax return when they apply. This of course means that self-employed individuals seeking a PPP loan will have to first finish their 2019 tax returns before applying for a loan.
Determining the maximum loan amount is important in completing your PPP loan application. If you are self-employed and have no employees, the maximum loan amount will be determined by your 2019 IRS Form 1040 Schedule C line 31 net profit amount. If this amount is over $100,000, then it must be reduced to $100,000. An applicant will then divide this number by 12 (to get average monthly profit), multiply that number by 2.5, and then add any outstanding amount you might have from an Economic Injury Disaster Loan made between January 31, 2020 and April 3, 2020. If you have employees, then additional numbers must be considered that include, but are not limited to, 2019 gross wages and tips, fringe benefits, employer health insurance contributions, and state and local taxes. To see the full breakdown, review pages 6-8 of the SBA interim-final rule.
The calculation of loan forgiveness is also different for self-employed applicants. In order to prevent the PPP loans from unfairly benefiting individuals who have little to no overhead costs, the Administrator, in consultation with the Secretary, has limited the loan forgiveness for any self-employed individual to eight (8) weeks of net profit from the owner’s 2019 Form 1040 Schedule C.
If you fall into the class of a sole proprietor or the self-employed, it is important to understand that the rules and requirements for obtaining a PPP loan are substantially different than the rules and requirements that are applicable to other small business owners.
Forbes recently published an article that explains how COVID-19 has disrupted the operations of several offshore financial data collection services. This is a significant development—and a very serious problem—because without accurate and timely data collection, American investors will be unable to make informed investment decisions amid an already volatile market. Since most prominent financial institutions have business process outsourcing (BPO) operations in foreign countries that are currently experiencing lock-down or stay-at-home orders, the virus is preventing many employees from being able to carry out their typical data processing job functions.
The potential shortage of foreign workers in this field has affected—or very well could affect—thousands of Wall Street professionals, and other investors, who heavily rely on this financial data in order to make informed investment and financial decisions. While a country’s decision to implement a lockdown may be necessary for the health and safety of its people, the decision has come at an unfortunate time from an economic standpoint. The Forbes article goes on to explain that many companies who have a 12/31 or 1/31 fiscal year-end date recently filed their 10-Ks and will have to file their 2020 first quarter earnings and their 10-Qs over the next few weeks. The reporting and collection of accurate financial data is arguably more important now than at any other time during the calendar year.
Since stay-at-home and lockdown orders have become a normal part of life for most of the world, there is no clear solution for data collection operations. While relocating to “on-shore” operations may serve as a short-term solution (assuming such services would be deemed “essential”), the cost-saving component of offshore financial services might not be an advantage that financial institutions are willing to cede. Moreover, a significant push for domestic business processing services may overwhelm the existing workforce in the United States, causing delays.
How this will play out is difficult to predict. Deadlines to file tax returns have already been extended, and perhaps regulatory filing deadlines will be as well, but this may not be feasible when investors rely upon up-to-date quarterly and annual financial information. Lenders and accredited investors as well typically rely upon up-to-date quarterly and annual financial information when performing their underwriting and due diligence processes, and information delays may very well result in delays obtaining much-needed financing.