US Paycheck Protection Program (PPP) Extended

If you have been following Legal Bytes, then you know we have been following developments related to the various relief, incentive and stimulus programs being enacted and signed into law in the US (See Congress Provides Additional PPP Flexibility which includes links to many of the prior postings).

After Congressional passage of the legislation earlier last week, over this past July 4th weekend, President Donald Trump signed into law an extension of the application period for the Paycheck Protection Program (PPP) until August 8, 2020 and this morning applications were once again being accepted for the loans.  According to the SBA, there is still over $130 billion available in the fund.

We will continue to provide updates as they become available and as always, if you need more information or assistance you can always contact me, Joe Rosenbaum, or the Rimon Law lawyer with whom you regularly work. Stay safe, stay well!

Congress Provides Additional PPP Flexibility

H.R. 7010, the Paycheck Protection Program Flexibility Act of 2020, passed by Congress on June 3rd, was signed by the President and became effective on June 5. 2020. The legislation makes some significant changes to the Payroll Protection Program (PPP). For our previous posts on the subject go to our most recent post on the subject PPP Loan Forgiveness Application which has links to all our prior postings.

If you want to read the entire text of the new law, you can read or download a personal copy Paycheck Protection Program Flexibility Act of 2020 , but in short (OK, it’s actually not that short) here goes:

Loan Maturity:  PPP loans made on or after June 5th will have a maturity of at least five years up to a maximum of ten years from the date  the borrower applies for forgiveness.  Although the new law only applies to loans made after June 5th, it does allow borrowers who received loans prior to that date to mutually agree to modify the maturity dates and conform to the extended time periods;

Covered Period Extended:  Under the new amendment, for both existing and new loans, in order to determine the amount to be forgiven, the period will now start on the origination date of the loan (i.e., the date the funds are disbursed per the SBA) and ending either 24 weeks (168 days) after the loan origination date, or December 31, 2020, whichever is earlier.  If you received a PPP loan before June 5, you can decide to use the 8 week period under the original CARES Act if you prefer;

Reduction of FTE/Salaries Safe Harbor Deadline Extended:  The new deadline for restoring FTE and salary/wage levels to their February 15th status, originally required by June 30th has now been extended to December 31, 2020.  In addition, the recently enacted amendment to the CARES Act provides that the amount of the loan that will be forgiven will be determine without regard to any reductions as a result of: (a) an inability to rehire individuals who were employees on February 15th and to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or (b) the inability to come back to the level of business that existed before February 15th in order to comply with requirements or guidance from the Secretary of Health and Human Services, the CDC, or OSHA, from March 1st until December 31, which inability is related to requirements needed to maintaining standards applicable to COVID-19 for health, sanitation, social distancing or other worker or customer safety.  PPP borrowers should be prepared to substantiate (document) their good faith inability to hire/re-hire or return to pre-February 15th business levels and it is likely that information will be requested with any applications for forgiveness.

Using Loan Proceeds:  For both existing and new PPP loans, the new legislation provides that at least 60% must be used for covered payroll costs and up to 40% can be used to pay covered non-payroll costs (e.g., timely payment of interest on covered mortgage loans, covered lease, rent and utility payments.

Payment Deferral Period Extended:  Payments of principal and interest on PPP loans will be deferred until SBA determines the amount of the loan that will be forgiven and pays that amount to the lender.

If a Borrower Doesn’t Apply for Forgiveness: If a borrower does not apply for PPP loan forgiveness within 10 months after the end of that borrower’s “covered period,” payments of principal and interest will begin at the end of that 10-month period.  If a borrower has a pre-June 5th PPP loan who choose to continue to use the 8 week covered period under the original CARES Act, if the borrower hasn’t applied for forgiveness, those payments will begin 10 months after the end of that 8 week period.

Employer Payroll Taxes:  Under the new law, even if a Borrower receives forgiveness of the PPP loan, they can still defer paying employer payroll taxes as permitted by the original CARES Act.

While it is likely there will be additional clarifications and updated or revised guidelines as new questions arise, the new law provides welcome relief by extending deadlines, especially how forgiveness rules will be interpreted and applied.  We will keep you posted, but as always, if you have questions or need more information you can contact me, Joe Rosenbaum, or any of the legal professionals with whom you regularly work at Rimon Law.

 

PPP Loan Forgiveness Application

Following up on our previous posts (Paycheck Protection Program & Disaster Relief Loan Information Released (Updated) and Paycheck Protection Program (Updated FAQs)) this past Friday (May 15th), in consultation with the Department of the Treasury, the Small Business Administration (SBA) released the Paycheck Protection Program (PPP) Loan Forgiveness Application with detailed instructions explaining how to apply for forgiveness of PPP loans, consistent with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).  The announcement also states the SBA will also issue regulations and guidance to further assist borrowers as they complete their applications, and provide lenders with guidance on their responsibilities. Here are copies of the Press Release, as well as the PPP Loan Forgiveness Application with detailed instructions, you can read and download directly.

We will post further information as it becomes available.

As always, if you need more information or assistance you can contact me, Joe Rosenbaum, or any of the lawyers at Rimon with whom you regularly work. Stay safe!

 

Paycheck Protection Program & Disaster Relief Loan Information Released (Updated)

Following up on our post yesterday (US Chamber of Commerce Issues Coronavirus Small Business Guide), you can find the Paycheck Protection Program (PPP) Information Sheet for Lenders and the Paycheck Protection Program (PPP) Application Form (and accompanying instructions) just released by the US Small Business Administration.

The SBA has established a streamlined process for disaster loan assistance that you can access online at COVID-19 ECONOMIC INJURY DISASTER LOAN APPLICATION.

As noted previously, the lawyers at Rimon Law are following these developments closely and while you may already be deluged with summaries, information bulletins and alerts, we are and remain available to help any time across a broad spectrum of businesses, industries, relationships, activities and transactions that have been affected by the COVID-119 pandemic.

 

US Dept. of Labor Issues FFCRA Guidance

The U.S. Department of Labor’s Wage and Hour Division released its initial guidance providing information describing how to take advantage of the protections and relief offered by the Families First Coronavirus Response Act (FFCRA) which takes effect April 1, 2020. The guidance includes links to information for employees and employers, as well as links to questions and answers and other useful information about the FFCRA.  The DOL has a separate Coronavirus Resources webpage, providing a large number of references and links to additional information.

The US DOL has also released an FFCRA Poster that every covered employer must post in a conspicuous place on its premises, although the guidance does allow an employer to satisfy this requirement by emailing or directly mailing the notice to employees or by posting the notice on an employee information internal or external website.  Although there is no legal requirement at this time to post the notice in other languages, DOL is currently working on translating the notice.

The legal professionals at Rimon are available to help and as always, if we can’t help you – especially in these challenging times – we will assist you in finding someone who can!  Stay safe and following the recommendations of your national, state, provincial and local authorities to keep yourself, your family, colleagues and friends healthy and prevent the spread of this infection.

California Employment Agreements – Choice of Law? Venue: Think Again!

by Thomas M. White

California’s Labor Code was amended effective January 1, 2017, to require that employment disputes regarding California resident employees be subject to the substantive law of California and that the arbitration or litigation of such matters be held in California.  These requirements will have a significant effect on how out-of-state employers negotiate and draft employment, separation and confidentiality agreements. Moreover, some of the statutory language is subject to interpretation and may result in violations of law by unsuspecting employers.

By way of background, in drafting employment agreements, employers typically identify one state whose substantive laws apply and require all disputes be litigated or arbitrated in a venue where the business operations are centered.  First, employers with employees spread across several states want the certainty and uniformity in their business arrangements. Second, the substantive law of a particular state may be more amenable to employer concerns. Third, employers may wish to inhibit litigation or arbitration by requiring employees to travel to another state to assert or defend contractual rights. These factors, already under assault in California, are expressly given no weight in the new statute.

The new statute, effective January 1, 2017, with respect to employees who primarily reside and work in California, will apply to all new employment agreements and also covers agreements that are extended or modified after that date.  Under the new law, injunctive relief is available and reasonable attorneys’ fees may be awarded.  However, the new law does not apply to contracts where the employee was represented by an attorney during the negotiation of the agreement.

Several of the above statutory features require additional consideration:

  • On its face, the new law does not apply to independent contractors. However, if such a contractor were to be deemed an ‘employee’ in the context of disputes involving other matters (e.g., tax, employee benefits, etc.), they may well also be held covered under the new law as well;
  • The law does not specify what is meant by an employee that lives and performs services “primarily” within California. You might want to keep records of employees in case a dispute arises. The answer may well mean the difference between the application of this new law and not;
  • It is not clear whether a contract is “extended” or “modified” if there is an automatic rollover or extension provision? What if there is a finite term and then the contract continues month to month, subject to termination at-will? Is that an ‘extension’ for purposes of the new statute?  Similarly, if the employee is entitled to a set of fringe benefits available to similarly situated employees and a new benefit is added January 1st –  is that a “modification”?

Although there is an exception for agreements negotiated by counsel, most employees don’t typically have the funds necessary to engage counsel. Consider this: it may be worthwhile for an employer to reimburse an employee for attorney’s fees in certain situations where the benefit of employment limitations outweighs the additional cost. Note, where this exception is intended to be relied upon, it is wise for the agreement to specify it has been negotiated by counsel, including the name of the attorney and the firm. Given the many choice of law considerations that arise in litigation, it should not be assumed non-California choice of law and venue provisions will be upheld simply because the employee retained counsel during negotiations.

What should you do now?  Any business that has current employment agreements with employees (and independent contractors) living and working in California, should carefully review those agreements in light of the need to comply with the new law. Where concerns may arise – in the language or the interpretation, counsel should be engaged to assure that relevant consideration is given to applicable factors.

For more information, contact Thomas M. White, a Partner specializing in the full scope of human resources management and employment law, including employee benefits, executive compensation and healthcare.  Of course, you can always contact me, Joe Rosenbaum, the Editor, or the attorney you normally work with at Rimon.