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Paycheck Protection - Designed to Offer Small Business Owners Relief Over the Next Few Weeks

The CARES Act is a massive piece of legislation. The emergency loan or Paycheck Protection provisions are one component designed to assist small businesses and keep them afloat during the current crisis. The emergency loans will be made under the United States Small Business Administration (SBA) and are simply an expansion of its already existing 7(a) loan program. The loan process will be administered by the SBA through its local lending partners or approved SBA lenders. Over the next several days it is expected that the actual loan process will be further detailed by the SBA so that loans can be quickly processed.

The Paycheck Protection Provisions within the CARES Act are designed to get cash into the hands of business owners to help them survive the next several weeks. It is the intent of the legislation that the cash be used retain employees. A business receiving the funds that follows the rules laid out in the legislation can have the entire loan forgiven. 

Here are some of the basic components of the Paycheck Protection program:

  • Eligibility
    • Available for any business with 500 employees or less (includes certain nonprofit organizations, sole proprietorships, self-employed individuals or independent contractors)
    • The business must have been in operation on March 1, 2020
    • Had employees for whom the business paid salaries and payroll taxes
  • Amount of loan
    • Maximum loan amount available is the lesser of:
      • $10,000,000, or
      • 2 ½ times the average total monthly payments by the applicant for payroll, mortgage payments, rent payments, and payments on any other debt obligations incurred during the 1-year period before the date on which the loan is made. In the case of an applicant that is seasonal employer, the average total monthly payments for payroll shall be for the period beginning March 1, 2019 and ending June 30, 2019.
    • Permitted uses of loan funds
      • Payroll support, including paid sick, medical, or family leave, and costs related to the continuation of group health care benefits during those periods of leave
      • Employee salaries
      • Mortgage payments or rental payments
      • Utility payments
      • Other debt obligations incurred before March 1, 2020.
    • Payments deferred
      • Deferment of repayment of the loan for up to a year for loans made through June 30, 2020.
    • Loan forgiveness
      • An eligible recipient may have its loan forgiven up to an amount equal to:
        • The total payroll costs incurred from March 1, 2020 through June 30, 2020, and
        • The amount of payments made from March 1, 2020 through June 30, 2020 on debt obligations (mortgage, rent, utilities, etc.) that were incurred prior to March 1, 2020.
      • However, amount forgiven will be reduced:
        • If there was any reduction of the average number of current full-time workers over the period from February 15, 2019 through June 30, 2019.
        • If there was a reduction in excess of 25% of salary and wages in the most recent full quarter versus the prior year’s same period.
      • These reductions in the amount of the loan forgiven can be eliminated if the business rehires employees. Similarly, there will be no reduction if the business makes up any decrease in wages to employees in excess of the 25% threshold before June 30, 2020. These provisions are all designed to encourage businesses to retain employees, pay them the equivalent of their prior salary, and not penalize employers for reducing payroll prior to the CARES Act.
      • To fully take advantage of the loan forgiveness proper documentation will be critical concerning payroll expense, mortgage, rent, utility, and other eligible debt payments made.
      • To the extent any of the loan amount is not forgiven, any remaining balance will have a maximum maturity of 10 years and a maximum interest rate of 4%.

For more information or questions, please contact BMD Business & Corporate Law Member Blake Gerney at brgerney@bmdllc.com or 330.436.8905.

HHS Announces an Additional $20 Billion In Provider Relief Grants

The U.S. Department of Health and Human Services (“HHS”) announced an additional $20 billion in new funding for providers on October 1, 2020. Eligible providers include those that have already received Provider Relief Fund payments as well as previously ineligible providers, such as those who began practicing in 2020, and an expanded group of behavioral health providers confronting the emergence of increased mental health and substance use issues exacerbated by the pandemic. The new Phase 3 General Distribution is designed to balance an equitable payment of 2% of annual revenue from patient care for all applicants plus an add-on payment to account for revenue losses and expenses attributable to COVID-19.

DOL Proposes New Rule Regarding Independent Contractor Status - But How Will the Election Affect Its Future?

On September 22, 2020, the U.S. Department of Labor announced a new proposed rule regarding employee and independent contractor status under the Fair Labor Standards Act. The full text of the proposed rule is available here. The rule's drafters intend to reduce uncertainty and enhance the precision and predictability of the long-standing "economic reality" test, which currently relies on a multifactor balancing test.

Major Change to Franklin County, Ohio Eviction Process: Landlord Testimony Required

Although there is currently a nationwide temporary halt on all residential evictions through December 31, 2020 in place, the eviction process in Franklin County – which processes the highest number of evictions in the State of Ohio at approximately 18,000 a year – recently changed significantly.

UPDATE: Governor Dewine Signs HB 606 Granting Short Window of Immunity from COVID-19 Personal Injury Lawsuits

The Ohio General Assembly, in Am. Sub. H.B. No. 606, is in the final stages of passing a law that will prohibit lawsuits seeking damages from COVID-19. This includes injury, death, or loss to person or property if the lawsuits are based, in whole or in part, on the exposure to, or the transmission or contraction of the coronavirus, unless the defendant in the lawsuit acted intentionally or recklessly. In circumstances where this immunity does not apply, H.B. 606 prohibits such claims being aggregated and brought as a class action.

Revised Department of Labor FFCRA Guidance, Effective September 16, 2020

In response to attacks on the legality of the Department of Labor’s (“DOL”) Final Rule regarding the Families First Coronavirus Act (“FFCRA” or the “Act”), which took effect in April 2020, the Department of Labor issued new guidance on Friday, September 11th to formally address ongoing questions and concerns related to the COVID-19 legislation.