March 30, 2020 Coronavirus Update – by John L. Senft, Esq.
Friends, changes in the Coronavirus landscape have been arriving at a breakneck pace. I know that many of you have been attending webinars, reading articles, and gathering information over the past several days. I wanted to provide you with a summary of various items which may be helpful to you as you manage your businesses and navigate your personal lives.
STAY AT HOME ORDER
As you all undoubtedly know, most of Central Pennsylvania’s citizens are now under a “Stay at Home” Order issued by Governor Wolf (Adams and Franklin Counties being a current exception for now). The Stay at Home Order requires citizens to stay at home except for certain essential activities and work to provide life-sustaining business and government services. Essential activities include items such as: obtaining medicine or medical supplies; visiting a health care professional; getting food and household consumer products, pet food, and supplies necessary to maintain the safety, sanitation, and essential operation of residences; engaging in outdoor activity, such as walking, hiking or running; and performing work at a life-sustaining business. Since the Governor had already ordered the closing of non-essential businesses on March 19, the new Stay at Home Order has not resulted in any material changes to business operations; life-essential businesses may continue their activities within the framework of the Governor’s March 19 Order, and telework remains an option for all businesses to the extent feasible.
EMERGENCY LEAVE FOR EMPLOYEES
When I sent my last e-mail, the Federal Government had just passed the Families First Coronavirus Response Act), which requires Companies with less than 500 employees and governments to provide paid emergency leave and emergency Family Medical Leave to their employees. The law becomes effective on April 1, although the U.S. Department of Labor has indicated that it will not seek to initiate any enforcement actions until April 18. Late last week, the DOL issued guidance intended to answer common questions about the administration of the leave provisions, which can be found here: https://www.dol.gov/agencies/whd/pandemic/ffcra-questions. Among other things, the Guidance confirmed that the Act does not apply retroactively (i.e., any paid time off made available to employees prior to April 1 will not count toward a Company’s obligations); that an employee who is laid off is not entitled to the emergency benefits made available by the Act; and that an employer may not require an employee to supplement FFCRA pay with paid leave that the employee may have available through the Company’s paid leave policies.
The Department of Labor has also issued a poster which notifies employees of their rights under the FFCRA. You can access the poster here: https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf. Employers must post the Notice in a conspicuous place on its premises. An employer may also satisfy this requirement by emailing or direct mailing this notice to its employees, or by posting this notice on the Company’s internal or external website.
Late last week, Congress passed, and President Trump signed, the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act makes various relief packages available to Companies whose businesses have been impacted by the Coronavirus.
One of the primary loan options under the CARES Act is a “Paycheck Protection Loan”, which is available through the Federal Small Business Administration to businesses with less than 500 employees. Qualifying businesses may apply for loans up to 2.5 months of the Company’s payroll costs up to $10 million. Most fees are waived and personal guaranties are not required. There is a maximum term of 10 years, and the interest rate is not to exceed 4 percent. Proceeds of the loan may be used to cover payroll costs, mortgage payments, rent, and other debt services requirements.
A Paycheck Protection Loan also offers partial loan forgiveness. More specifically, borrowers can apply to the lender for forgiveness in an amount equal to the sum of the Company’s qualifying costs during the eight-week period during the origination date of the loan. Qualifying costs include payroll, mortgage interest, rent, and certain utility payments.
Another option is an “Economic Injury Disaster Loan”. Loan amounts through this program may be for up to $2 million, with a 30-year term and an interest rate not to exceed 3.75%. This program provides for an emergency advance of up to $10,000 to injured businesses within three days of applying for the loan through the SBA. To access the advance, an employer must first apply for an EIDL and then request the advance. The $10,000 advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, or pay business obligations such as debts, rent and mortgage payments.
Information on these programs is available here: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
Finally, the Commonwealth of Pennsylvania has made aid available to impacted businesses through a COVID-19 Working Capital Access Program administered through the Pennsylvania Industrial Authority. This program provides working capital loans of up to $100,000 to companies with less than 100 employees. These are zero interest loans, with a term of three years, amortized over 12, with no payments due in the first year. More information concerning this program can be found here: https://dced.pa.gov/programs/covid-19-working-capital-access-program-cwca/. The State Industrial Authority also has other types of business loans available.
Please feel free to get in touch if I can answer questions about any of these items. Stay safe, everyone!
John L. Senft, Esquire