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FFCRA Amnesty, the CARES Act Paycheck Protection Program & the Small Business Viability Exemption Provide Options for Employers

Client Alert

Over the past few days, employers have received options beyond terminating employees (RIFs, layoffs, furloughs, temporary terminations, etc.) in response to COVID-19 and leave concerns.

Amnesty for Employers under FFCRA

For employers with cash flow concerns, the Department of Labor, Wage and Hour Division, has already implemented an amnesty program to assist in alleviating the disruption of an immediate run on Emergency Paid Leave. 

“If employees got money for limping, everyone would walk with a limp.”

As a brief recap, the FFCRA generally provides employees up to 80 hours of paid leave totaling up to $2,000 or $5,110 under the Emergency Paid Sick Leave Act (EPSLA), and up to 12 weeks and up to $10,000 of paid leave under the Emergency Family and Medical Leave Expansion Act (EFMLEA). These are both referred to as Emergency Paid Leave. As discussed in our webinars, we have been receiving preliminary indications that numerous employees are planning to take advantage of the Emergency Paid Leave in the first two weeks of April 2020. 

In an internal memorandum from its Wage and Hour Division, the DOL Field Assistance Bulletin No 2020-1 discusses the non-enforcement of the FFCRA for the period of March 18 through April 17, 2020. 

The DOL will not enforce FFCRA violations through April 17, 2020, if an employer makes reasonable, good faith efforts to comply.  These efforts include three (3) prongs: 

  1. The employer remedies violations “as soon as practicable.”
  2. The violations were not willful.
  3. The employer agrees to comply in the future. 

The key is “as soon as practicable.” The DOL elaborates that “For purposes of this non-enforcement policy, employers who are eligible for tax credits but who have insufficient cash flow should make payment of sick leave or family leave wages as soon as possible, but not later than seven 7 calendar days after the employer has withdrawn an amount equal to the required paid sick leave and expanded family and medical leave wages from the employer’s Federal payroll tax deposits or, to the extent such deposits are not sufficient, has received a refund of the credit amount from the IRS to cover the required wages.” 

What does this mean for employers?

This eliminates the major headache facing cash-poor employers of having to pay for Emergency Paid Leave on an initial rush of use by employees. Those employers can essentially wait until they have the cash available through credits and refunds before paying for Emergency Paid Leave used by employees from April 1 to April 17.

CARES Act – Paycheck Protection Program

The Paycheck Protection Program of the CARES Act provides up to $349B to help keep small businesses operating and keep their workers employed. The terms are complex, and a much more detailed analysis is on the BMD Resources page, including a comprehensive recap. The general highlights for employers are as follows: 

  • Small businesses and nonprofits with fewer than 500 employees are generally eligible (as are the self-employed)
  • Loans up to 2.5 times the average monthly payroll costs over the trailing twelve months preceding the loan, up to $10M
    • Payroll costs include: wages, tips, vacation, family leave and sick pay, severance comp, group health care contributions, payment of retirement benefits, and state and local tax payments.
    • Payroll costs exclude: compensation of individuals in excess of $100,000 (calculated on a prorated basis), taxes withheld or paid for income tax or FICA, and paid sick leave or paid family medical leave under FFCRA.
  • No personal guarantees, no collateral, no recourse
  • Loans are 100% guaranteed by SBA
  • Loan forgiveness equal to the amount spent on payroll (up to monthly comp of $8,333.33 per employee), rent, mortgage interest, and utilities for the first eight (8) weeks from the date of loan origination.
    • Forgiveness is reduced in proportion to a reduction in workforce or a reduction in employee pay over 25%
  • To encourage rehiring, provisions are retroactive to February 15, 2020 and cover loans to June 30, 2020.
  • Simplified terms on loans:
    • 10-year maturity period from date of loan forgiveness (to the extent not completely forgiven)
    • Not greater than 4% interest
    • All borrowers are deemed as having been impacted by the COVID-19 and include automatic deferment from 6 months to 1 year.
    • No collateral required
    • No penalty for prepayment 

What does this mean for employers?

The “loan” is actually more of a “grant” for the strategic employer. Granted, this is a brief evaluation, but some employers may obtain forgiveness of the entire loan.  Employers can even implement pay reductions of up to 25% while still maintaining the benefits of the loan forgiveness. An employer will not be penalized for employees terminated between February 15, 2020 to April 26, 2020, if the employee is rehired by June 30, 2020. This allows employers to implement short-term measures and revisit them later to maximize the loan incentives. 

Viability Exemptions for Employers with Fewer than 50 Employees

The Viability Exemptions are broad. Employers, including religious or nonprofits, with fewer than 50 employees are exempt from providing either or both Emergency Paid Leave and Emergency Childcare Leave to employees if it would jeopardize the viability of the small business. 

To claim the exemption, an authorized officer of the business must determine one of the following:

  1. That granting the Emergency Paid Leave would result in expenses and financial obligations exceeding available business revenues and cause the business to cease operating at a minimal capacity;  
    1. The absence of an employee or all employees requesting Emergency Paid Leave would be a substantial risk to the financial health or operational capabilities of the business because of their specialized skills, knowledge of the business, or responsibilities; or  
    2. There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the same work of the employee or employees requesting Emergency Paid Leave, and the provision of that work is necessary for the small business to operate at a minimal capacity. 

What does this mean for small employers?

It means that an authorized officer (undefined term) should be involved in the decision to grant or deny Emergency Paid Leave. These employers can deny Emergency Paid Leave requests to one, some, or all of the employees, depending upon the business justification at the time the request was made.

Caution:  Just because you can deny a request for operational reasons does not mean that you should deny all requests. Some employees will have legitimate COVID-19 illnesses or exposures. Denying Emergency Paid Leave to those employees and having them show up to work may result in the spread throughout the entire workforce. 

To see BMD's recap of the CARES Act and how it could impact your business, click here.

Please contact Jeffrey Miller 216.658.2323 or jcmiller@bmdllc.com for additional information, or any of the L+E Team of attorneys at BMD.


Valley National Bank/Trulieve Loan: A Big Step Out of the Shadows

In a late December press release, Trulieve announced that it had secured a $71.5 million commercial bank loan. In addition to the amount of the loan, which may be the largest commercial bank loan to date to a cannabis company, the release prominently identified Valley Bank and featured both a quote from Valley’s Senior Vice President, John Myers, and a description of the Bank’s service platform and commitment to the cannabis industry.

The End of Non-Competes? The Impact It Will Have on the Healthcare Industry

On January 5, 2023, the Federal Trade Commission (“FTC”) announced a proposed rule that, if enacted, will ban employers from entering into non-compete clauses with workers (the “Rule”), and the Rule would void existing non-compete agreements. In their Notice, the FTC stated that if the Rule were to go into effect, they estimate the overall earnings of employees in the United States could increase by $250 billion to $296 billion per year. The Rule would also require employers to rescind non-competes that they had already entered into with their workers. For purposes of the Rule, the FTC has defined “worker” to also include any employees, interns, volunteers, and contractors.”

2022 Healthcare Recap and 2023 Healthcare Check-Up

As the country begins to return to a new “normal” following the COVID-19 pandemic, there are many healthcare rules changing on both the federal and state levels as a result. Thus, it is important for healthcare providers and their employers to be aware of these changing rules, and any implications they may have on their practice. Look back on healthcare in 2022 and find a checklist for 2023.

Direct Support Professional Retention Payments

On December 15, the Ohio Senate and House passed House Bill 45, which authorizes the Department of Developmental Disabilities (DODD), in conjunction with the county boards of developmental disabilities, to launch their initiative to issue retention payments to Direct Support Professionals (DSPs). These retention payments will be distributed quarterly to participating home and community-based waiver providers to address the workforce crisis in the direct provider sector. Governor DeWine needs to sign the Bill to begin the payments, but he is expected to do so by the end of 2022.

Real Estate Investors Position for 2023 Opportunities

Real estate investors weathered another year in a post-pandemic world, with the year closing with yet another interest rate increase coupled with both uncertainty and heightened interest carrying into 2023. Just last Wednesday, the Federal Reserve raised its benchmark interest rate 0.50 percentage points, shifting the target range to 4.25% to 4.50%. The new level is the highest the fed funds rate has been since December 2007 and marks the seventh rate hike this year. So what does this mean to investors, brokers, lenders, and others in the real estate world? Read a few perspectives below from stakeholders familiar with our BMD clients and the markets in which they do business.