Business Resiliency through COVID-19 seminar: legal aspects
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Hi, welcome to day two of three of our business resiliency theories that financial, legal and human impacts of navigating through COVID-19. This series will feature local experts that will share their professional experience and guidance on all things. COVID-19. Today we have Christian Rodriguez of trembly law walking us through some of the legal implications of COVID-19 My name is Denae Zamora and I’m a district manager for ADP total source. I’ll be your moderator for this series. I’ll begin by asking our experts some questions and we’ll end our program with a live q&a. As a reminder to please mute your phones and the chat features open for questions to be submitted and answered during the q&a. We kicked off our series on Monday with a CPA KSD team who shares some expert knowledge and key insights on the state of the federal programs available to businesses. Some key takeaways from Monday are that there are many resources and factors to consider.
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But three things really rang true. cashflow is a top priority. planning and forecasting is a must do for every business, and quality data and systems will be critical now as well as in the future. Our experts today comes from Crumbley law firm trembly law firms mission is to protect the economy one business at a time. Trembling law firm provides general counsel services to businesses and also practices in the areas of business law, employment law franchises, franchise law and litigation. I do need to share this brief disclaimer before we get started. Due to the unprecedented events, there are various and rapid changes in the law which may result in some of this information being outdated in the future. This information in this presentation is accurate as of April 8 2020 Trembley law firm is keeping up to date with rapid changes for the benefit of its clients. And that’s where our expert today’s expert is Christian Rodriguez Christian has successfully defended business owners in jury trials for various types of claims ranging from breach of contract to shareholder disputes to employment discrimination. He’s also helped several business owners negotiate and avoid potentially damaging business claims and employment cases. commercial lease disputes and ADA Title Three cases
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for four consecutive years he’s been selected as a rising star by Superlawyers. With that person, I’d like to welcome you to our series.
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Thank you very much for having me today.
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Great. Well, Chris, and I definitely want to get started with what’s the first question I asked KSTP on Mondays really what’s the most challenging part for businesses as a result of this pandemic? Sure. That’s a great question to start off. So I like to say that the COVID 19 pandemic is pulled off our cloak of invincibility. These are unprecedented times in modern world and a lot of people, you know, don’t believe that it was it was foreseeable, it doesn’t really, regardless of that is the truth of the matter is is the hardest state is going to be small businesses, especially the mom and pops. So, you know, I was I’ve heard a lot from clients in the past, I don’t need to worry about this or worry about compliance with this particular law, because I’ve been operating 20 years, and I’ve never had an issue. Well, now, I think that a lot of those types of businesses are going to realize that they have a lot more exposure now because of COVID-19 in these unprecedented issues that are coming up. And, you know, you just look to the government and the way they’re handling this and they’re scrambling, right because it is completely unprecedented. So you have them enact on March 18 2020, the families first Coronavirus response act, and then about a week later they
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they enact the Cares Act. And in between that, and since then there’s been numerous regulations by the Department of Labor’s Wage and Hour Division, the SBA and Treasury. And there’s overwhelming daily changes. I mean, while I was preparing the night before the presentation, just as I thought I was I was done reviewing everything SBA came up with, with the new FAQ and regulation about the paycheck protection loan. And so all the information that we had been interpreting up to that point, some of it had changed drastically. So, you know, I think that’s the greatest change is this,
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this environment of constant change and uncertainty. And that’s why it’s important to have, you know,
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professionals like ADP, like Trembley, Roth, and others that can help guide business or service or businesses definitely need to start somewhere. You know, it’s even though it’s a dynamic situation, you know, from your expert opinion, where did they get started so that they can prepare and they can overcome this whole situation? Like what sort of business gets started in preparation with Sure. And the key here is that businesses can overcome this. This will pass No, I mean,
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So any any experts, medical experts that you heard speak about this, they talk about the curve, and the curve will die down over time, and we will get back to business. But business will change, right. And so there are some key things that businesses need to do to make sure they overcome this COVID pandemic, right. So the first thing is they need to gather or hire. And this is an important thing, listen to a team of compliance professionals. And when I say compliance professionals, I mean, business and employees, ployment, lawyers, accountants, HR and payroll companies,
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benefits administrators. And the reason that this is so important is because businesses need to take reasonable and good faith efforts to comply with the laws to the best of their ability. And unfortunately, it’s not something that’s easy for businesses to navigate themselves. And that’s why you need these professionals for help you, because there’s a saying that an ounce of prevention is worth a pound of cure. And that rings true now more than ever.
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what it costs to take proactive measures is significantly less than trying to undo things later on. Okay.
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The third thing that businesses need to be doing the security patch growth, that’s very important. That’s what Katie SP was talking about on Monday. And there’s numerous options out there. You know, from the paycheck protection programs with the economic injury, disaster loan programs, to bridge loans, tax credits, and other kinds of funding that businesses need to get their hands on to, to be able to pay for basic services to keep their business running. And the fourth thing they need to do is to prepare for the combat. So you got to keep the end in mind. What are you going to do once this pandemic is over? How are you going to get your business back? How are you going to avoid issues or address issues as they come up, because we are fully expecting that there’s going to be a wave of a lot of litigation and disputes once this is all done. And so the important thing for businesses to be doing is to make sure that they’re keeping the relevant documentation. And there’s a lot of it and things that we can go through as we go through this presentation. That’s actually not the first time I’m hearing you know, something to this effect. Christian, that’s such a great perspective. A business owner actually told me last week that every company can survive a strong economy, but those who right now are putting in the right strategies have the right team behind them, and ultimately, like the grip to adapt to what the future will be, are going to be the ones that weather the storm and come out better on top. So I guess with that you mentioned,
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you know, complying with the law, I know you’ve been guiding your clients a lot on that. What can you tell us about the families first Corona, virus response Act, the ffcra? Sure, and we’ll call it the ffcra, dislocated workers. That’s a mouthful of a title. So the ffcra was enacted on March 18 2020. Okay, and the intent of the law was to protect the employees of businesses that had less than 500 employees, and they call them small businesses, right. And many of you may think that a business that has 499 employees is a large business, but for purposes of this act, it’s considered a small business. And the Act creates two types of emergency leads. Okay, it creates emergency expanded FMLA. The FMLA a refers to the Family and Medical Leave Act, and it also creates emergency paid sick leave. Now, parts of the ffcra were amended by the Coronavirus, aid, relief and Economic Security Act, which we will call the Cares Act. And the other important thing to know is that the ffcra is a temporary law and went into effect on April 1, and it expires on December 31 of this year.
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And it’s being enforced by the Wage and Hour Division. And they have issued a rule that they will delay enforcement until April 7, as provided that employers engage in reasonable and good faith efforts to comply. But they have been very insistent that even though they’re delaying it until April 17, they will retroactively forsake going back to April 1. So compliance is a big concern here. You have to make sure you’re in compliance like employers going forward. And like Do you really think there’s going to take a lot of time enforcing this, especially with everything going on? It’s going to be interesting to see whether or not they they go ahead and they just start randomly enforcing this or if they’re going to wait for claims, right? Usually what initiates the Wage and Hour Division to
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To initiate an investigation as they receive some sort of claim or complaint from an employee. And the reason that you’re gonna probably see a lot of this is because as businesses, furlough employees as they lay off people, as they, you know, reduce hours, in my experience having defended wage claims are being defended.
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discrimination claims and various other employment actions is that the catalyst for those types of claims being brought in some sort of adverse employment action, because this is an emotional things that people are scared of, if and when you take away their ability in their mind to to
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earn a living and to get through this time.
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They react emotionally, right. And the first thing you do is say, I need to go talk to a lawyer. And when a lawyer is telling them, hey, I can possibly get your money out of this. And these people are desperate, you know, it’s very likely that they’re going to start making claims at that point. So the ultimate, you I hear a lot of businesses coming oh, well, I have a family relationship with my employees. It’s like a big family. And, you know, I tell them, that’s great. But I hear that a lot with with people when they get married, and it doesn’t turn out that was when they get divorced. Right. So the point
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the point is to be prepared. So
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how it affects employers. The first is, you know, from a cost perspective, right? So a lot of employers are are loading, they’re facing zero revenue or drastically reduced revenue, and they’re concerned, how are we going to pay for this? And that’s somewhat what some of what ADFD went into on Monday. Okay. There’s also compliance concerns, especially with telecommuting, or teleworking, and remote work, it’s changed the complete dynamic of the way things are normally done, right. And so you still have to comply with all of the other employment laws that exist on the books, it’s not just the ffcra, you still have to comply with the Fair Labor Standards Act overtime and minimum wage matters, you still have to comply with anti discrimination laws, with whistleblower laws. And so there’s a lot of potential pitfalls if you’re not properly prepared, if you don’t have your policies and procedures, and if you’re not trained as to how to avoid these issues. Because all of this, a lot of this stuff can be prevented with the proper preparation, right? So you got to make sure that you are avoiding waiting our enforcement actions, that you’re taking steps to avoid claims and lawsuits, and that you have all the proper documentation needs. And the other way that this is affecting employers is that it adds additional concerns when considering whether they can furlough layoffs, reduce wages, or reduce hours are their employees, and whether they should allow working.
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There’s even the consideration of what they’re calling intermittent leave under the ffcra. So it’s not something that employers should be navigating on their own. As you can see, no, I would totally agree it kind of sounds to me like the perfect storm, I have to say, even me working from home, there’s so much daytime TV, saying, hey, this, this happened to your work? Are you being paid for this? Did you get terminated something bad happened to you those adverse actions that you just referenced? And then they say, but do you want to sue your employer and definitely people who are at home today are seeing those commercials. So when I say it’s the perfect storm, it’s all of these additional layers of things businesses have to comply with on top of opportunity and the potential to get some sort of money from it at no cost to you. I definitely think it’s the time to double down on compliance and making sure you have the right team. No question who do these new laws and regulations apply to what companies are covered by the ffcra?
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Okay, so the ffcra applies to any companies or employers with less than 500 employees. If they have more than 500 employees, they’re not covered. And the Department of Labor has indicated that you’re supposed to use a live calculation, which is the number of employees on the day the employees leave which start there’s been some criticism that this requires some
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some sort of psychic ability on the beach on behalf of the employers to calculate this. But ultimately, the point is, is you just have to be keeping active records of how many employees you have, and the more employees the more important decisions. That’s not to say it’s not important if you’re a small companies.
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Now the following employees may be excluded from the by an employee or by an employer, health care providers and emergency responders because they’re critical.
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employees that need to be working.
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And you also, when you’re calculating this 500 employee cut off, you have to consider if you’re a joint employer, and the department of labor issues of frequently asked questions. And And question number two goes into a little bit of an explanation of what kind of factors that department will look at to determine whether you’re a joint employer. And this is most common when you have a business that owns multiple franchise locations. Right? So let’s say that you are a business owner and you decided to buy two different UPS locations, one in Miami and one in
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Broward, let’s say, right. And you have employees that work at both locations because they need additional hours. Well, now you got to, you got to do the analysis to see if that changes, whether you’re joining Florida and whether you hit that 500 employment really interesting. So it sounds like a lot of companies and not a lot of exceptions. That’s who this wouldn’t apply to. So there’s a lot of entitlements that sounds like employees are going to be getting and things that employers need to cover. I guess those two types of leaves that you shared, let’s start with that emergency FMLA leave what are those employees entitled to under the emergency FMLA looks first if it okay, let me explain who qualifies for it. Right. So an employee is entitled to ffcra, expanded FMLA when they have worked at least 30 calendar days with the company, and they are unable to work or telework, due to care for minor children if a school or childcare has been rendered unavailable, because COVID. Right. So that was what ffcra stated the Cares Act also expanded this so that the following employees would also be entitled. And those are employees who were laid off by the employer after April 1 2020 had to work for the employer for at least 30 of the last 60 calendar days prior to the layoff and were rehired
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using that, and or were we hired by the board. So the this is a drastic change from the traditional FMLA leave under the traditional FMLA leave, they have to have worked on least 12 months prior to leave at least 12 1250 hours during this period, and worked at a location where the employer had 50 or more employees with us within 75 miles. None of that applies to this looks like there’s a lot more people who fall into the bucket of qualifying for this, what did they get, they are entitled to 12 weeks of emergency FMLA leave. Now, a very quick caveat to this. You are entitled to a total when you combine emergency expanded FMLA leave and traditional FMLA leave a total of 12 weeks of leave in a 12 month period. That’s important because let’s say earlier in the year, you took six months because of a medical procedure. Right? Well, then under the emergency FMLA under the ffcra, you will only be entitled to 12 weeks of this additional lead. I mean, excuse me for six weeks as additional leads. And the way that believe works is that the first 10 days are unpaid. And you can the employee can use CTO during these 10 days, but the employer cannot force them to use it.
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Now, after the 10 days are over, the Department of Labor’s FAQ indicate that for FMLA leave, that if there’s the existing PTO, or leave that you that the employer can require the employee to use their existing paid leave concurrently with the benefits they’re going to receive for the last 10 weeks. So
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the next part of this is after those first 10 days passed. Thereafter, the employee is entitled to two thirds of the regular pay rate up to $200 a day and $10,000 in the aggregate. And the other important thing to note is that once this leaves is completed once they’ve finished their 12 week leave, that the employer has to provide respiration of the same or equivalent position. And the exception to that is if you have less than 25 employees, and the position no longer exists because COVID-19 required you to change your business practices or to get rid of that position.
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So I can imagine, as some businesses are navigating today, like what my employees are entitled to what I need to give them what what x they belong to. Not only
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Do they need to have a plan today? How they’re gonna get it right but even decisions in the future, they have to have a system that basically tests it against how all of these, you know in employee entitlements factor in. What about the emergency paid sick leave? Can we jump into that one? Yeah, of course. So the emergency paid sick leave, employees qualify if they meet one of the six categories. Number one is being subjected to quarantine or isolation order, and the Department of Labor’s FAQs have indicated that shelter at home orders may be sufficient to trigger this. Category number two is being advised by a health care provider to self quarantine. Category number three is experiencing symptoms of Coronavirus and medical diagnosis. Category number four is caring for an individual that is subject to quarantine or isolation order or has been advised by a healthcare provider to self porn. Real quick point on that. If you decide on your own to self quarantine, that doesn’t trigger any of these categories, you have to have an order from a healthcare provider to sell for in category number five, caring for a child whose school or place of tears clothes are no longer available due to Coronavirus. And for purposes of this one, the Department of Labor has indicated even if your
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your child’s school is still doing
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classes over the internet, right? That that’s still considered school being closed because the physical location of clothes. And number six is suffering any other substantially similar conditions specified by Health and Human Services, in consultation with the Secretary of Labor and treasurer. So this is just a catch all in case if the virus mutates, and they and they want to be able to include those people in these categories. What will those employees be entitled to if they do fall into one of these six categories? That’s a great question. So depending on the category that the answer is, it depends on the category, right? So if you’re qualified for reasons,
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or categories, one through three, you’re entitled to up to 80 hours of regular rate of pay to two weeks, have at $511 per day, or $5,110 in total. On the other hand, if you’re qualified for categories, or reasons, four through six, you are entitled to up to 80 hours at two thirds of your regular rate of pain, and your tax of $200 per day or $2,000. Total. Now you’re also in even though under normal, paid sick leave regulations, you are not entitled to job protection. The Cares Act does require that an employer provide job protection for an employee that is getting emergency paid sick leave.
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And one thing important to note is that category number five, the childcare one is the same
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qualifying event for the emergency Family and Medical Leave Act leads. So there if you have if you are having to take leaves because your your child schools closed, or because you don’t have childcare, do you have COVID 19, you could qualify for both the emergency FMLA leave, and the emergency paid sick. Those are some great points on both of those different types of leaves, it sounds like such an equation to see where people fall into what they’re entitled to, and probably administering these to all the different individuals in your company because they may the rules that apply to one person aren’t necessarily necessarily going to carry through to every individual that brings the need to take leave to HR, it’s gonna be different. It sounds like for everybody. You know, one thing I want to jump over to sorry for cutting you off
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is you know, a lot of businesses are considered maybe like a non essential business and their employees. Are they entitled to leave when they’re not even open or bringing in any sort of revenue? Sure. So before I go to that question, I just want to make a quick illustration. That’s the last point you made, which I thought was very important to each. The way I look at it is each business is a puzzle. And each of the employees is a different puzzle. And not each puzzle piece is going to be the same and it’s not going to fit the same. So you have to treat each one individually. Okay, so it’s not a simple answer for oh, you have 50 employees, here’s what you can do for all of them. Right? You have to actually look at each employee individually. Now it’s your second so the next question you had asked if a business is closed because they’re a non essential business, and there’s a local state or or because they just don’t have the business while that
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worksite is closed, you don’t have to provide leads, right? Because, and they even go so far, when I say the Department of Labor, it goes so far to say that even if you have an employee that is receiving leave, while during the time when you close, you only have to pay them up to the time that you close. So only for the time you were Oh, and their position is that when it does close and the lease end that employees can apply for unemployment insurance, and under the Cares Act, they actually expanded
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was eligible for unemployment to furloughed employees and to self employed person. Interesting point there. I want to say the world of pre COVID We rarely heard the word furloughed, usually only in maybe a school term or government term we ever heard the word furlough, can you share a little bit about like the difference between a furlough and a layoff and how a business kind of lays out the two for themselves? Yeah, of course. So a furlough is a mandatory unpaid time off from work. And the key characteristic of a furlough is that the employer employee relationship continues during the firm. And therefore, once the furlough end, people who are furloughed can expect to return to their job. Now, the duration of a furlough depends entirely on the employer. And the other thing that’s important to note is that in some circumstances, if the employer provides benefits to an employee, like group health insurance, or an IRA, program or retirement, in certain circumstances, the employee can still collect certain benefits during the furlough period. But if there’s any contributions that are required by the employee, then you the employee may have to continue making those contributions. So this is one of the reasons that I said at the outset, that it’s important to have a benefits administrator on your team of compliance professionals, because you don’t want to be getting into issues regarding any benefits law, or ERISA law, which is, you know, very, very specific and niche area of law. Contracts are expensive. 120 Absolutely. You don’t want to even go near there because you not only can you get in trouble with on the legal side, but you know, your your your benefits program may have certain penalties written into it that you the employer have to now in turn, right. So it’s just additional costs that you’re not even anticipating and you don’t want any surprise costs during this time. So contracts a furlough with a layoff. A layoff is when an employer dismisses employees, and the main difference here, and the main characteristic of a layoff is that a layoff terminate the employer employee relationship, and there’s no expectation to return to work. So
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the question I’ve gotten from a couple people is oh, so once I terminate the relationship, that means I don’t have to, I don’t have to worry about a Benefits Administrator. That’s not correct, you still have to talk to them. For example, if you
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if you are providing group health insurance and health insurance, you may have there may be Cobra obligations. And there may also be continuing obligations through a certain pay period. So you need to make sure that you’re doing things aboveboard at all times. So it doesn’t come back to bite you. And you don’t want the Department of Labor going in to investigate a wage and hour claim, and then also realize that there’s ERISA issues, it’s just not worth it. Yeah, it’s actually coming from the world of told us or here at ADP, those are some of the areas where we’ve been busier than ever, helping existing clients navigate these things, because we help them not only when it comes to compliance from the traditional, pre COVID world, everything from state regulations, federal regulations, but now that they need to issue, you know, mass Cobra notifications, or communicate with their employees. So those are those types of things we’ve been able to help with. And I have to say, the feedback from clients is, it’s been brilliant. And it’s been such a peace of mind for them, because, you know, outside of total force, they would have been googling as their, you know, future HR department and who knows what they would have been subjected to, you know, something I’m curious of now with the ffcra. If an employer wanted to take any of these actions, whether it be furlough, layoffs, maybe reduced hours, you know, can they even do any of those things? Or, or how’s that? What’s that relationship? Like? There’s usually two questions that I get asked related. The first part of it is Can Can the employer do is and then a lot of times I get the second question, which was supposed
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To show that, you know, a lot of small businesses are not doing this to hurt employees. Right? They’re doing it because they are, they’re terrified, and they don’t know how they’re going to be able to pay them. So the second question they always ask me related to this is what I’m not going to say always been most of the time asked me is, will it hurt our employees the ability to get unemployment?
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Right. And they’re concerned about their employees. So the first part of that first question is, can the employer do? The answer is generally, yes. So long as there’s a legitimate business reason, that is not discriminatory and not retaliate. And you can look at the answer to questions 25 and 43, from the Department of Labor’s FAQs. Now, just before we continue real quick note on the FAQs, okay. They’re good information. And, you know, I encourage business owners to read it. But what I don’t encourage business owners to do so trying to navigate these laws just based on those FAQs, or to try to interpret them completely on their own, because a lot of attorneys in there, and a lot of the analysis and rules that they refer to also reference to other laws, other regulations, and case law, which the average person is not, is not going to know how to interpret, right. And you may be taking the word or phrase phrased in a colloquial sense, not realizing that it has a very different meaning in terms of these regulations. So even though it seems like oh, this is easy, I can do it myself and save money. Don’t do it. Remember, an ounce of prevention is worth a pound of cure. So going back to what I was saying,
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while at the answer is that generally less it generally, yes, they can do furloughs, layoffs, reduction of hours or wages, right. It’s a case by case basis, you have to document everything. And you also have to be aware that there could be potential consequences for other laws. For example, if you reduce someone’s wages, and they were considered an exempt, employee, under the FLSA, you need to make sure if you want to keep that exemption, that you meet the minimum a threshold, and that you’re also not changing substantially the duties of what they’re doing. And like that, there’s many other
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potential pitfalls you have to be aware of. So when I say that it’s a case by case basis, I kind of look at it as a two part analysis, right. First is, is the employee entitled to any leave under the assets yard. And, and an attorney can help you a knowledgeable attorney can help you to sign for them, if you see that there is an employee that is entitled to leave, right? And that that person has requested leave or is receiving leave, you just have to make sure that when you implement this furlough layoff or reduction of hours, that you’re documenting, in legitimate business reason for doing these things, because if not, you can fully expect we were talking about the emotional reaction, right? One of the things that one of the prohibitions in the ffcra is that you cannot retaliate against someone for requesting this leave or taking this leap. And the timing is important. If they request this leave, and then you subsequently lay them off or furlough them, then they will try to argue that or they can try to argue that it was retaliation. Right, right. And I would say, when you bring up that point of you can’t retaliate and Wait, someone even tried to see or, you know, communicate that they are entitled to leave, I would say, a lot of employers that I’ve talked to that are essential and are so operational, they’re already so frustrated by trying to navigate these things, but taking action. It’s just a big headache to figure out what they’re entitled to and not having a reaction if they are frustrated. So I think having a third set of eyes, per perspective would definitely be a value especially, not only are the employees emotional, but I would say most business owners right now are emotional. Oh, absolutely. I mean, especially when you’re talking about a small business, you know, many of these business owner started off just them themselves, and maybe a family member helping them out. And now they’ve grown to six or seven employees or employees. And so they put in a lot of work, they probably put in a lot of money and time. And now they’re worried about losing their investment on so yeah, absolutely.
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So going back to the second part of that analysis, so can the employer do this analysis? So the first part was is the employee entitled to a leave under the ffcra and the second part of it is
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Even if an employee is not entitled to any benefits under the FLSA tra, are they doing this in a way that complies with all other employment laws? Right. And there’s a lot of them. So you just need to go through the analysis and have some avenue that knowledgeable employment attorney to guide you with how to do it. Right. The other thing you have to be wary of remember I said that there were some points collateral consequences? Well, if you’re applying for a paycheck protection loan, and you want the forgiveness, right, they the paycheck protection program reduces the amount of your forgiveness if you reduce your workforce. And if you reduce your workforce his wages by more than 25%. So you also want to keep that in mind. If you are looking to maximize the amount of forgiveness you get under the paycheck protection program. Sounds like a full minefield, any action that you take has a reaction on the other side that has to be considered.
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Question as you know, employers get in that position where they do need to take some sort of adverse action. You know, I think most want to put their employees in a position where they’re able to, you know, get unemployment insurance. How would that be possible? What would be the best way to do that if it’s a furlough or layoff, the Cares Act has extended the unemployment insurance of furloughed employees and layoffs and laid off employees are traditionally entitled to unemployment insurance, for reduction of wages are hours if there’s no loss of time that entitles
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like I mentioned, if the reduction of wages or our is more than 25%, it will affect your CPP loan forgiveness, and may result in losses of FLSA exemptions. And remember, FLSA, the Fair Labor Standards Act, which governs overtime and minimum wage requirements. You also need to make sure that if you’re reducing wages or hours, that you’re not going to load up the federal or state minimum wage.
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And you need to make sure that you’re in compliance with your policies and procedures. So, you know, ideally, each business that operates and has employees as employment manuals, employment policies and procedures, before you take any actions, we need to look through them, and have your employment attorney, look through them and make sure that whatever actions we take are in compliance with your own policies and procedures. Otherwise, that could come back and research. So you know, not only for reduction of wages or hours, not only can it hurt to from not only can it hurt you, the employer if you don’t do it correctly, but it also
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can hurt your employee to the extent that the employee can’t get unemployment insurance. Now, what I have seen is that when they reduce wages or hours, sometimes they allow the employee to supplement
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with their existing paid
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PTO or paid sick leave under the employer’s plan. But every no employer is required to do that. It’s just I’ve seen that happen. So many pieces are interesting options. Anybody who maybe can apply for like an exemption from the ffcra puts any options, they’re the only one that I’ve seen so far, is a business with less than 50 employees, they can request an exemption from the Department of Labor from providing either type of leaves. And if you remember, there was a six categories for for the emergency paid sick leave. And I noted that category number five, was the same qualifying event for the expanded FMLA leave. And that was if your child’s school is closed, or you no longer have childcare available because of COVID-19. Right? So it doesn’t apply to all those other the remaining six, five of the six categories. And in order to get this exemption, and authorized officers of business X determined that one of the following applies. Number one is that providing lead with cause the business’s expenses and financial obligations to exceed its revenues and cause the business to cease operating at a minimal capacity. Or number two, the employee’s absence would entail a substantial risk to the business’s financial health or operational capabilities because of specialized skills, knowledge of the business or responsibilities employees possesses. Or number three, there are insufficient workers who are able, willing and qualified to perform the labor or services provided by the employee requesting childcare leave. And these labor or services are needed for the business to operate at a minimum, absolute. Now, they have not the department has not yet issued regulations as to how to apply
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I have for this, they’ve only said, of your authorized officer of the business, make one of these findings in writing, and do not mail it to us hold on to it. Because when the application process starts, then we’ll tell you to go ahead and great, great recommendation there. When it comes to the leave, since some of that is paid, and businesses are looking for some financial support when it comes to the paycheck protection program.
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Can we talk a little bit about this and the key aspects of this loan? Yeah, stick to the paycheck protection program is that it was created by the Cares Act, to promote employers not to terminate jobs and to help pay for ffcra leads,
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the borrower will have up to eight weeks to use that loan. And that’s called the coverage period. And it can be used for payroll costs, rent, mortgage interest, utilities and interest on debts acquired before February 16 20. Now, the Cares Act did away with traditional loan requirements, you don’t have to prove the ability to pay back this loan, you don’t have to give a personal guarantee, you don’t have to give collateral.
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And the I think the most attractive feature of this loan for people is that it’s forgivable up to the amount of the principal and accrued interest. So the initial term of this loan will be for two years. And it will have an initial interest rate of 1%.
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After you apply for forgiveness, whatever amount is not forgiven, will have an interest rate of up to 4%. And the maturity date that lasts no more than 10 days, 10 years from the date of the application. Now, if you’ve ever applied for traditional line of credit, you know that the average interest rates for lines of credit are between five to 7%. So a loan at 4% and up to 10 years and maturity is really not a bad deal.
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The important thing to note is that there are many businesses that are also applying for economic injury disaster loans, the eidl. And initially, it was understood by everyone. And then it was reported that you could apply for both the eidl and PPP, the paycheck protection most well on April 2 At night, the FDA issued in a rule, which indicates that after April 3 borrowers cannot apply for both the E ideal and
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so that’s made a significant change. And if you go to the next slide, we can talk a little bit about the criterias. So
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to be eligible for the paycheck protection program, you have to be a business with less than 500 employees that was in operation on or before February 15 2020. You can also be considered, you can also be eligible if you’re considered a small business concern under the SBA rules. And under those rules, businesses would be even with more than 500 employees may be entitled.
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In addition to that nonprofits with less than 500 employees, as well as self employed self proprietors and independent contractors will be eligible. And you need to sign there’s a bunch of certifications, including certifications that you were an operation on February 15, that the funds will be used only for the approved uses end to retain workers
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acknowledging that
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a maximum 25% can be used for nonpayroll if you want maximum loan forgiveness, and that you can only receive one paycheck protection loan under the program. You also cannot be in the process for applying for another loan for the exact same purpose and you cannot be taking
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the benefit of the employee retention credit under the Cares Act. So are the ffcra So there was a tax credit which you can your your accountant can explain better to you. But it allows employers to retain certain aspects of
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the employer’s payroll contributions and to use that money instead a for payroll expenses and other qualified expenses. But if you do take advantage of that, then you can do the CDC more. So how do you calculate the amount so the amount is the lesser of a million or 2.5 times the average monthly payroll costs? And payroll cost is defined in the app. So you should look up that definition because there are certain things that are included and are not generally what is included is wages salaries.
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missions, bonuses, non cash benefits, like group health insurance, or employer contributions to
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two retirement plans and payments for PTO, what is not included in payroll costs, federal taxes, FICA, the employers contribution that’s not included in the payroll costs of taxation. Nor is any cash compensation in excess of $100,000. Right? So the example I give is, let’s say that you have an employee that earns $120,000 a year, but benefits. Well, when you’re doing the calculation, you can only
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account are included in the calculation up to $100,000 of the cash salary. But you can also add to that the non cash benefits, right, the any employer contributions to retirement plans are through health insurances.
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And with the new rule,
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the interim rule that the FDA issued, they clarified independent contractors will now have to fall for their own paycheck protection loan. And employers cannot include any wages paid to someone as a 1099, independent contractor in this calculation. So as you can see, there’s a lot of nuances to this. For sure, I can imagine, as you’re calculating not only the amount that you do, we talked about the leads that people are entitled to, and the whole relationship between any action a company takes and how this how everything is really related. I can imagine everyone pursuing this paycheck protection program is going in with the intention of wanting to make sure they do the right thing to get it forgiven. Can we walk through some of the how the loan forgiveness works, because I think that’s a pretty unique program that will be new to a lot of companies. Yeah, it essentially turns just loan into a grant up to 100% of the loan, even though a lot of people will probably see a substantial forgiveness portion, but maybe not 100%. We’re waiting to see how it’s gonna work out. But like I mentioned before, it’s forgivable to the amount of the principal, as well as any accrued interest. And whatever amount is forgiven is not taxable income, any expenses can be deducted. Now, the expenses should be lower, because the fees should be paid out, or amortized into the loan of waiting to see how that’s going to play out when we start processing.
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And the amount of the loan forgiveness is the total costs incurred and payments made during the forgiveness period, right? Remember, we say it was the coverage period was eight weeks access and loans. And the costs that you can include in this calculation are a row costs, mortgage interest, rent, and utilities. Now, note that I said mortgage interest not mortgage principle, okay. And the law also allows you to include certain debts the company owes that were incurred before February 16 2020. Now, the important thing, like I said before, is that
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the SBA has issued in their interim rules, or requirements, that for to get the maximum amount of forgiveness, not more than 25% of the loan amount can be used for non zero cost expenses. And I anticipate that, you know, they’re probably going to be some litigation on this issue later, because the law itself doesn’t impose such a restriction. And under Basic separation of powers doctrine,
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the argument can be made that the SBA administrator doesn’t have the right to change the laws written. So I fully expect that as soon as people start getting denied for their,
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for portions of loan forgiveness, because of this arbitrary 25% number that you’re going to start seeing lawsuits being filed. Right.
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The other thing that’s important to know is you have to document or provide documentation of authorized uses that will support the loan forgiveness amount, and the lender will have 60 days to provide you with a decision on your application. And if you took out the $10,000 Emergency grant, under the economic injury, disaster loan, then your loan forgiveness will be reduced by that point about documentation of authorized uses. That’s now the second time they’ve heard this on Monday. They really dove into wanting to make sure employers knew this. There’s so much potential
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Get this forgiven if you’re doing all the right things, it doesn’t mean go buy a boat. What it means is use this to keep the business sustain,
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and employees as whole as possible. And it means being responsible as far as tracking where these funds are going that they’re in the right percentages. So again, it definitely seems like a time where experts should be leaned on trial and error isn’t going to work, because there’s so much to jeopardize, if you do the wrong things and aren’t able to get the maximum amount of forgiveness, and we walk through a little bit more about those requirements for the loan forgiveness, one of the requirements to maximize your loan forgiveness amount is that you have to maintain your current your levels of employment and compensation as meaning wages the same as the time that you apply for the loan. So if you reduce staff or decreased compensation between February 15 2020 and April 26 2020, then the forgiveness amount will be reduced. And unless they are rehired, or your compensation is raised back to regular levels, by June 30 2020, if you do it by that date, you will be able to you will have a loan reduction. The other caveat of that is that if you are going to reduce rate wages, you can’t reduce it more than 25% year over year.
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The only exception to that is employees making more than 100 grand, right? So if you’re making more than 100 grand, you’ve already seen twice a central cut off number. What about like, you know, a lot of people on the call, anticipate they’re going to be able to weather the storm? What are some things from your expertise and you’ve worked, you know, in the legal field for so long, you’ve seen situations like this before, what are things employers need to be thinking about as they prepare for the new normal? One thing is, you know, we’ve seen tough times, I think this is somewhat different from the things that I’ve seen before. But it’s not so drastically different than we don’t have an idea what to do, right, the same type of principles apply. People always try and compare this to the economic downturn back in 2008, and 2009, with the mortgage bubble burst. But it’s strikingly different in a lot of ways. But the important thing to remember, and I saw this quote somewhere the other day, it made me kind of laugh. But you know, there has to be a little bit of levity in this, you know, but
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says this too shall pass, you may pass like a kidney stone, but it will pass. And if you’ve ever had a kidney, so we know that it hurts.
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And you know that it’s difficult while you’re while you’re passing it. But after you pass it after you get back to normal, you almost forget what it was right? I’ve heard the same thing about childbirth. But I couldn’t even begin
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to pretend that I know that I said this is the beginning. And I’ll say it again, you need to lean on a team of compliance professionals. All right. And there’s a cost benefit analysis that people are worried Oh, well, I don’t want to spend my money. Right?
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If there’s anything I can tell you to spend your money on payroll, your your necessary expenses, and are those necessary expenses includes compliance professionals, because they will get you help you get through this and help you mitigate a lot of damage. And a lot of costs later on the cost of litigation can be astronomical, because the legal system here and a lot of benefits, but actually, there’s a lot of criticism about access to justice, right, or access to the court, because the cost
53:38
of litigation can be astronomical for some businesses. If you’re taking a case all the way to a jury trial, for example, a business can fully expect to spend six figures on that just an attorney’s fees. Right. And when you consider that one litigation by itself could cost you six figures. And you could get combined professionals involved for low five figures. I mean, it’s just a basic business analysis, right, a basic business decision. And when I say low, five figures, I’m talking about everybody, you know, find trying to work together trying to figure out what’s the most economical way to get people involved. So you get your compliance professionals, you got to make reasonable good faith efforts to comply with the laws. You got to secure your cash flow and you gotta prepare for the combat. You got to be proactive, right? Ignorance of the law is not a defense. So just telling the Department of Labor or telling a judge Oh, I didn’t know that what I did was wrong or that it was illegal. Listen, the judge and Department of Labor are not right. They’re gonna say listen, there were webinars everywhere. There were articles all over the place. You just decided to stick your head in the sand that’s not okay. And this is this has been a long standing tenant in the law way before this has ever happened wavy.
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Before I was even born way before many of my friends, alright, don’t assume that you can just say I don’t have to worry about it because I can just say I didn’t know you need to be organized, need to be prepared. And you need to have a plan. You talk about, you know, a team being in place and wanting to have things organized. And it makes total sense with every thing that’s going on. One of the things I really want to ask you, is there any type of lawsuit that you’re expecting, you know, as an aftermath of COVID-19? How much time do you have?
55:35
I mean, look,
55:37
it depends on on what we’re getting into here. Because I think what you’re going to see if you’re going to see a stream of of contractual cases, you know, you’re going to see cases about breach of contracts, you’re going to see lease, commercial lease disputes, you’re going to see from the employment realm, a ton of cases, and they’re going to all vary, right? So I fully expect that you’re going to see, you know, wage and hour claims coming from a lot of people that are being furloughed or laid off, because like you mentioned, this is the perfect storm. They’re the attorneys, his website is here, your box, you know, imagine on the one hand, you’re being told, Look, we have to let go, you’re not going to get paid. You go then to apply for unemployment, the unemployment system is down. So you’re trying to figure out how you’re going to pay for food on your table, here comes this attorney thing, I’ll get to money, of course, people are going to take them up on that. So you’re going to see Wage and Hour claims. It’s going to be interesting to see what rules telework plays into this because
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teleworking or remote work, you still have to comply with the FLSA overtime requirements. And part of those requirements are that you have to keep accurate and reliable timelines, you need to also make sure that in addition to the employees taking writing down their time and keeping the speed records, that they’re also logging any breaks, because they’re not supposed to be working more time be just because they’re at home. Otherwise, what happens is that you end up potentially not paying overtime, or not realizing that you will overtime because you’re not keeping good record. And then later on that just gives an attorney like to hear your boss attorney leverage to try and get money from your business. I guess I’m curious, like, what are some things that company can do to get ahead of some of these things as they’ve sent people home to do teleworking? or work from home? You know, pretty rapidly, what are the things they could do even today that gets them prepared for, you know, protecting themselves from some of these claims? Yeah, sure. So. So I’m going to talk generally, and a lot of these things will apply to telework also. But the main thing is, when I say this, the Department of Labor and the Wage and Hour Division is very clear that employers need to take reasonable and good faith effort to comply with the law. I’m not just talking about the SF TRA. I’m also talking about FLSA. And in addition to that, economic is only when an opportunity commission EEOC
58:12
is similarly investigating discrimination claims and retaliation. Right. So the way you do this is to implement or update your policies and procedures to effectuate all of these laws, including the asset Tre. And you’ve got to train your officers, your executives, managers and supervisors on this law, and on how to communicate with the employees, how to implement these policies and procedures, what record keeping needs to be done, and how to deal with these inspections and investigations. Because even before this all occurred, I had clients in the past that would call us reaching out saying, Oh, the Department of Labor just showed up, they’ve been with my employees for the last hour, what do I do, and I feel like telling them, you know, you rewind the clock an hour and used to call me immediately.
59:05
And you know, the same employee, remember, I was saying at the beginning that people have this feeling that there was just this concept that they had this close ability, a lot of these clients with the same clients that we spoke many times, listen, let us do a training let us help you understand what your what your people need to do. And a lot of them didn’t want to spend the money. And this goes back to my point. It’s a cost benefit analysis. You don’t want to be caught unprepared. You want to have your people trained, you want the people to know what they’re supposed to do in your circumstances and to mitigate the potential risks your business. It’s a no brainer. Yeah, I mean, at ADP we have like over 40 different solutions. That’s everything from like record keeping training, compliance, really trying to do those proactive measures as well. People are always so surprised to hear that ADP you think of it as this big powerhouse when it comes to pay
1:00:00
Overall, but that’s only actually less than 30% of our revenue as a company comes from payroll related services. The rest is compliance, human capital support, trainings, record keeping. That’s where for 65 years we’ve been the leading expert in all of these areas. You know, and I definitely want to thank you for your time today.
1:00:22
And we’re really lucky to have someone of your caliber share all of this insight with our market I’m sure the business owners I speak for them as well. A big thank you as they we all try to navigate next steps and making sure we’re taking care of each other or business and
1:00:39
planning for the future. I think everything you shared will be a big help in on your behalf you know, I invite everyone on the call to contact Trombley law for no further personalized guidance they you can visit their website at trembling law.com And they can also be reached even now all working teller remotely at 30534315678 Christian again thank you so much for your time today created a text line it for people who need to contact us and do better a texting you can tax P P P health right EPP like the paycheck protection program. So P P P health to 31996. And then someone from our team can get a hold of you and get in touch with you promptly. So thank you so much for having us. And I really appreciate Vinay I’m sorry, I really appreciate it and I really appreciate this partnership with ADP and and thank you to everyone who’s
1:01:40
who’s been part of this and participated in this presentation. Thank you for your time and thank you for your attention.
