COVID-19 Alerts

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Client Alert – New Jersey Governor Signs Additional Coronavirus/COVID-19 Emergency Related Bills Aimed at Public Employees and Public Contracts
Client Alert – New Jersey Governor Signs Additional Coronavirus/COVID-19 Emergency Related Bills Aimed at Public Employees and Public Contracts 150 150 walsh.law

On October 30, 2020 and November 9, 2020, New Jersey Governor Phil Murphy signed several bills into law relating to the Coronavirus/COVID-19 crises. The newly-enacted laws permit modification to contracts between non-profit organizations and State agencies for the failure to perform due to the COVID-19, and address hiring, retention, and benefits of certain public employees during the public health hazard posed by COVID-19. The Governor also vetoed a bill that was aimed at nursing home workers amid the crisis, citing recently introduced measures aimed at direct-care workers at long-term facilities.

S-2451: Allows for the waiver of contract penalties and the modification of contract terms with respect to public contracts between non-profit organizations and State agencies for failure to perform due to the COVID-19 pandemic. Under this legislation, a State agency that has awarded a contract to or entered into an agreement with a non-profit organization may grant a waiver of any penalty provided in the contract or agreement for the failure of the non-profit organization to fulfill the terms and conditions in the contract or agreement if the failure is due to the COVID-19 emergency declared by the Governor in Executive Order No. 103 of 2020, and the failure occurred during the period of the emergency or during the six-month period immediately following the end of the emergency.

S-2376: Provides for employment, retention, and benefits during public health hazard posed by COVID-19 of certain public employees. In pertinent part, this legislation allows for the temporary employment of former public employees who retired from the Public Employees’ Retirement System, the Police and Firemen’s Retirement System, or the State Police Retirement System, and are returning to work on a temporary basis in response to the Public Health Emergency or State of Emergency during the Public Health Emergency or State of Emergency declared by the Governor in Executive Order No. 103. The law also permits a public employee to be eligible for participation in the State Health Benefits Program immediately upon hire, provided such person is or was hired as a new employee on or after February 3, 2020 to provide services necessitated by the COVID-19 pandemic.

Finally, on November 9, 2020, Governor Murphy vetoed legislation (S-2788/A-4479) aimed at providing supplemental payments to long-term care facility staff providing direct-care services during COVID-19 pandemic. In so doing, the Governor noted that the administration recently introduced measures in September to ensure that direct-care providers at long-term care facilities are appropriately compensated for the critical care they provide.

For more information about the Governor’s newest legislation, please contact Hector D. Ruiz at hruiz@walsh.law or (973) 757-1019.

Walsh Pizzi O’Reilly Falanga LLP has prepared the content of this alert for general informational purposes. The content should not be considered advice, recommendations, or an offer to perform services. You should not act upon any information provided in this alert without seeking professional legal counsel from an attorney licensed to practice law in your jurisdiction. No representations are being made as to the completeness or accuracy of the information contained herein.

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NY Commercial Division Calls Upon Volunteer Lawyers In Response To Budget Cuts
NY Commercial Division Calls Upon Volunteer Lawyers In Response To Budget Cuts 150 150 walsh.law

On October 6, 2020, Justice Andrea Masley, of the Supreme Court New York County’s Commercial Division, issued an order in complex contract dispute denying appointment of a judicial hearing officer or court referee to supervise discovery in the two-year old case. While Justice Masley’s order recognized the “burden[]” of the “multitude of discovery issues” facing the parties, the reality facing litigants and the New York Courts is that budget cuts and hiring freezes have left the New York Courts understaffed with growing dockets. With a decreasing number of judges and no special referees, Justice Masley turned to the special discovery master program implemented by the New York County Lawyers Association back in 1976, through which attorneys may volunteer during times of economic crisis to serve the Office of Court Administration. Through this program, Justice Masley appointed a highly experienced senior lawyer as a volunteer special discovery master with all powers provided by CPLR 4201. A copy of the order can be accessed HERE.

Justice Masley’s Order was issued one day after Chief Judge Janet DiFiore posted a message to the state court website explaining that the economic fallout of the COVID-19 pandemic necessitated “a strict [judiciary] hiring freeze, deferral of [judiciary] raises, suspension of [the] JHO [(Judicial Hearing Officer)] program and other hard choices.” As a result, justices in the Commercial Division, established in 1995 as a specialized arm of the New York State court system to address highly complex Finance and business litigation, lack the bandwidth to handle discovery issues “without extraordinary impingement on the court’s regular business.” In this regard, the Commercial Division is not appreciably different from state and federal courts around the country: e-discovery disputes pose enormous challenges and require alternative methods of resolution for commercial cases to progress.

Justice Masley’s order recognized, however, that “justice delayed is justice denied” and reminded litigants that because of initiatives like the special discovery master program, “the Court is not without tools and volunteers to unburden parties as they labor toward a trial or resolution.” Justice Masley made sure to thank Mr. Alcott along with “the many other retired attorneys who volunteered” for the special master program.

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Updated Client Alert – The Paycheck Protection Program Loan Program Extended and Loan Data Released
Updated Client Alert – The Paycheck Protection Program Loan Program Extended and Loan Data Released 150 150 walsh.law

This memorandum updates our previously published Client Alerts concerning relief for small businesses impacted by the COVID-19 pandemic (available here and available here).  On June 3, 2020, the Senate approved the House-passed Paycheck Protection Program Flexibility Act of 2020 (the “Act”),[i] which the President signed into law on June 5, 2020.  The Act, discussed further below, dramatically alters some of the key provisions of the U.S. Small Business Administration’s (“SBA”) recently-enacted Paycheck Protection Plan (“PPP”).  On July 4, 2020, the President signed a new law extending the deadline for applying for a PPP loan from June 30 to August 8, 2020, after both houses of Congress approved the extension unanimously earlier in the week.

By way of background, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)[ii] became law on March 27, 2020, affording small businesses an opportunity to borrow an amount equal to two and one-half times its monthly payroll.  The PPP provided that the borrowed sum may be forgivable if certain employee retention and other criteria are met.  Due to overwhelming demand, PPP funding was exhausted around mid-April of 2020.  On April 24, 2020, the Paycheck Protection Program and Health Care Enhancement Act (the “Enhancement Act”),[iii] a second round of emergency economic stimulus funding, became law.  The Enhancement Act, a $484 billion economic relief package, included replenishment funds for the PPP, the Economic Injury Disaster Loan (“EIDL”), emergency grant programs, and also earmarked funding for healthcare providers to assist in treating and testing for COVID-19.

The Paycheck Protection Program Flexibility Act provides new flexibility to borrowers.  Some of the Act’s key provisions include:

  • Extension of Deadline to Use Loan Proceeds: The Act changes the “covered period” which borrowers are able to use PPP loans to qualify for loan forgiveness from 8 weeks after the loan is disbursed to 24 weeks from loan disbursement, or December 31, 2020, whichever comes earlier.
  • Uses of Loan Proceeds: The Act provides that 60% of loan proceeds must be used for payroll costs to qualify for loan forgiveness, thereby raising the cap on the amount of forgivable loan proceeds that borrowers may use on non-payroll expenses from 25% to 40%.
  • Additional Time to Replace Full Time Employees/Restore Salaries: Loan forgiveness remains subject to reduction with respect to reduction of employees or salary cuts.  However, the Act will extend the CARES Act’s June 30, 2020 deadline to rehire employees and reverse salary cuts of greater than 25% to December 31, 2020.
  • Loan Maturity: The Act extends the minimum loan term for any portion of the loan that is not forgiven, from 2 to 5 years.  The change applies to any PPP loans disbursed after the Act’s enactment; however, nothing in the Act prohibits lenders and borrowers from mutually agreeing to modify the maturity terms to match the permitted 5-year period.
  • Payroll Tax Deferral: PPP fund recipients are allowed to defer 2020 Social Security payroll taxes obligations into 2021 and 2022, even if the loan is forgiven on or before December 31, 2020.

 

While the Act aims to address certain borrower frustrations, it is expected that further guidance on the Act will be provided by the Department of the Treasury and the SBA.  Indeed, since enactment of the Paycheck Protection Program Flexibility Act, the SBA issued a number of Interim Final Rules addressing, among other things, loan forgiveness.[iv]

On July 6, 2020, the SBA and the Treasury Department released the complete database of all PPP loans issued to date.  In a July 6 press release issued by the SBA, Treasury Secretary Steven T. Mnuchin stated, “The average loan size is approximately $100,000, demonstrating that the program is serving the smallest of businesses.”[v]

For more information regarding options for your business during this unprecedented time, please contact Hector D. Ruiz at hruiz@walsh.law or (973) 757-1019, Christopher Hemrick at chemrick@walsh.law or (973) 757-1033, Sydney Darling at sdarling@walsh.law or (973) 757-1034, or Joseph L. Linares at jlinares@walsh.law or (973) 757-1025.

 

  • [i] Paycheck Protection Program Flexibility Act of 2020, H.R. 7010, 116th Cong. (2020).
  • [ii] Coronavirus Aid, Relief, and Economic Security Act, H.R. 748, 116th Cong. (2020).
  • [iii] Paycheck Protection Program and Health Care Enhancement Act, H.R. 266, 116th Cong. (2020).
  • [iv] Interim Final Rule on Revisions to Loan Forgiveness Interim Final Rule and SBA Loan Review Procedures Interim Final Rule (posted June 22, 2020).
  • [v] Press Release, SBA and Treasury Announce Release of Paycheck Protection Program Loan Data (July 6, 2020).

 

 

Walsh Pizzi O’Reilly Falanga LLP has prepared the content of this alert for general informational purposes. The content should not be considered advice, recommendations, or an offer to perform services. You should not act upon any information provided in this alert without seeking professional legal counsel from an attorney licensed to practice law in your jurisdiction. No representations are being made as to the completeness or accuracy of the information contained herein.

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Updated Client Alert – The Paycheck Protection Program and Health Care Enhancement and Loan Forgiveness
Updated Client Alert – The Paycheck Protection Program and Health Care Enhancement and Loan Forgiveness 150 150 walsh.law

This memorandum updates our previously published Client Alert concerning relief for small businesses impacted by the COVID-19 pandemic (available here).  The Paycheck Protection Program and Health Care Enhancement Act (the “Enhancement Act”)[i] is a second round of emergency economic stimulus funding that became law on April 24, 2020.  The Enhancement Act is a $484 billion economic relief package which includes funding to replenish the U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”); the Economic Injury Disaster Loan (“EIDL”); emergency grant programs; and also earmarks funding for healthcare providers to assist in treating and testing for COVID-19. On May 15, 2020, the SBA released the Loan Forgiveness Application and accompanying instructions for the forgiveness of loans under the PPP.

Background
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)[ii] became law on March 27, 2020, and offered small business entities an opportunity to borrow an amount equal to two and one-half times monthly payrolls and obtain forgiveness of that loan amount provided certain employee retention and other criteria are met under the newly-announced Paycheck Protection Program.  Due to overwhelming demand, funding was exhausted and on April 15, 2020, U.S. Treasury Secretary Steven T. Mnuchin and SBA Administrator Jovita Carranza issued a statement that the SBA was not able to issue new loan approvals once appropriations for the program lapsed.  The Enhancement Act replenished funding for the PPP and EIDL.

Paycheck Protection Program and EIDL Program
The Enhancement Act does not change the framework of the PPP or EIDL programs (discussed here).  For example, PPP applications are funded on a first-come, first-served basis, borrowers are still required to use at least 75% of the loan proceeds for payroll costs for loan forgiveness purposes, and borrowers must use the funds within the eight-week period from the disbursement date of the loan.  The latest guidance includes an interim final rule issued on April 24, 2020 (found here), and the most recent Frequently Asked Questions on the Paycheck Protection Program (found here).

The Enhancement Act provides a second round of roughly $310 billion in funding to replenish the PPP, of which $60 billion are earmarked for small and medium lenders, and lenders in minority, underserved and rural communities.  The Act also allocates an additional $60 billion for the EIDL Program and SBA’s emergency grant program.

Loan Forgiveness
The recently issued Loan Forgiveness Application provides detailed guidance for borrowers concerning the calculation of PPP loan forgiveness.  The application consists of the following: (1) the PPP Loan Forgiveness Calculation Form; (2) PPP Schedule A; (3) the PPP Schedule A Worksheet; and (4) an PPP Borrower Demographic Information Form.  In sum, the Loan Application and instructions provide guidance on the determination of costs eligible for forgiveness, addressing issues including eligible payroll and non-payroll costs, calculating full-time equivalency (FTE) employees, forgiveness standard, FTE and salary reduction, and employer contribution to benefits, among other things.  Further guidance from the SBA on loan forgiveness may be forthcoming.

For more information regarding options for your business during this unprecedented time, please contact Hector D. Ruiz at hruiz@walsh.law or (973) 757-1019, Christopher Hemrick at chemrick@walsh.law or (973) 757-1033, or Sydney Darling at sdarling@walsh.law or (973) 757-1034.

  • [i] Paycheck Protection Program and Health Care Enhancement Act, H.R. 266, 116th Cong. (2020).
  • [ii] Coronavirus Aid, Relief, and Economic Security Act, H.R. 748, 116th Cong. (2020).

 

Walsh Pizzi O’Reilly Falanga LLP has prepared the content of this alert for general informational purposes. The content should not be considered advice, recommendations, or an offer to perform services. You should not act upon any information provided in this alert without seeking professional legal counsel from an attorney licensed to practice law in your jurisdiction. No representations are being made as to the completeness or accuracy of the information contained herein.

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Client Alert – New Jersey Governor Signs Executive Order Permitting the Resumption of Non-Essential Construction
Client Alert – New Jersey Governor Signs Executive Order Permitting the Resumption of Non-Essential Construction 150 150 walsh.law

This memorandum updates our previously published Client Alert concerning guidance for construction companies relating to the COVID-19 pandemic (available here).  On May 12, 2020, New Jersey Governor Phil Murphy signed Executive Order No. 142 (2020), permitting the resumption of non-essential construction effective 6:00 a.m. on May 18, 2020, among other things.  All construction projects must comply with the social distancing, safety, and sanitization requirements that are outlined in detail in the Executive Order.

Noting that “construction sites are generally limited to workers, rather than customers and other members of the public, and so involve less risk of significant transmission of COVID-19 in the community,”[i] Executive Order 142 directs businesses engaged in construction projects, notwithstanding whether the projects were deemed as essential under Executive Order 122 (2020), to comply with the following requirements:[ii]

  1. Prohibit non-essential visitors from entering the worksite;
  2. Engage in appropriate social distancing measures when picking up or delivering equipment or materials;
  3. Limit worksite meetings, inductions, and workgroups to groups of fewer than 10 individuals;
  4. Require individuals to maintain six feet or more distance between them wherever possible;
  5. Stagger work start and stop times where practicable to limit the number of individuals entering and leaving the worksite concurrently;
  6. Identify congested and “high-risk areas,” including but not limited to lunchrooms, breakrooms, portable rest rooms, and elevators, and limit the number of individuals at those sites concurrently where practicable;
  7. Stagger lunch breaks and work times where practicable to enable operations to safely continue while utilizing the least number of individuals possible at the site;
  8. Require workers and visitors to wear cloth face coverings, in accordance with CDC recommendations, while on the premises, except where doing so would inhibit the individual’s health or the individual is under two years of age, and require workers to wear gloves while on the premises. Businesses must provide, at their expense, such face coverings and gloves for their employees. If a visitor refuses to wear a cloth face covering for non-medical reasons and if such covering cannot be provided to the individual by the business at the point of entry, then the business must decline entry to the individual. Nothing in the stated policy should prevent workers or visitors from wearing a surgical-grade mask or other more protective face covering if the individual is already in possession of such equipment, or if the businesses is otherwise required to provide such worker with more protective equipment due to the nature of the work involved. Where an individual declines to wear a face covering on the premises due to a medical condition that inhibits such usage, neither the business nor its staff shall require the individual to produce medical documentation verifying the stated condition;
  9. Require infection control practices, such as regular hand washing, coughing and sneezing etiquette, and proper tissue usage and disposal;
  10. Limit sharing of tools, equipment, and machinery;
  11. Where running water is not available, provide portable washing stations with soap and/or alcohol-based hand sanitizers that have greater than 60% ethanol or 70% isopropanol;
  12. Require frequent sanitization of high-touch areas like restrooms, breakrooms, equipment, and machinery;
  13. When the worksite is an occupied residence, require workers to sanitize work areas and keep a distance of at least six feet from the occupants; and Place conspicuous signage at entrances and throughout the worksite detailing the above mandates.

 

Finally, Executive Order 142 expressly supersedes the provisions of Executive Order 122 which halted operations of non-essential construction projects and it also applies safety provisions of Executive Order 122 to non-essential construction.[iii]  New Jersey Office of Emergency Management (NJOEM) Administrative Order No. 2020-11 (permitting construction of religious facilities and deeming these projects essential construction projects) is also hereby superseded in full.[iv]

For more information regarding contractor rights and remedies during this unprecedented time, please contact Thomas J. O’Leary, at toleary@walsh.law or (973) 757-1045, or Hector D. Ruiz, at hruiz@walsh.law or (973) 757-1019.

  • [i] Executive Order 142 (2020), at page 3.
  • [ii] Executive Order 142 (2020), at ¶ 2.
  • [iii] Id., at ¶ 3.
  • [iv] Id.

 

Walsh Pizzi O’Reilly Falanga LLP has prepared the content of this alert for general informational purposes. The content should not be considered advice, recommendations, or an offer to perform services. You should not act upon any information provided in this alert without seeking professional legal counsel from an attorney licensed to practice law in your jurisdiction. No representations are being made as to the completeness or accuracy of the information contained herein.

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Updated Client Alert – Guidance for Construction Companies and Contractors in Light of COVID-19
Updated Client Alert – Guidance for Construction Companies and Contractors in Light of COVID-19 150 150 walsh.law

In order to limit the spread of COVID-19 in New Jersey, on April 8, 2020, Governor Murphy issued Executive Order 122, which, among other things, ceased all non-essential construction projects effective April 10, 2020.  As discussed more fully below, the Executive Order provides contractors with guidance on what type of projects are considered “essential construction projects” and permitted to operate, and it outlines safety policies surrounding workers exposed to COVID-19.   On May 2, 2020, Governor Murphy and State Police Superintendent Patrick Callahan announced Administrative Order 2020-11, which permits construction of religious facilities and deems these projects “essential construction projects” within the meaning of Executive Order 122.

Executive Order 122 defines “essential construction projects” to include the following:

  • Projects necessary for the delivery of health care services, including but not limited to hospitals, other health care facilities, and pharmaceutical manufacturing facilities.
  • Transportation projects, including roads, bridges, and mass transit facilities or physical infrastructure, including work done at airports or seaports.
  • Utility projects, including those necessary for energy and electricity production and transmission, and any decommissioning of facilities used for electricity generation.
  • Residential projects that are exclusively designated as affordable housing.
  • Projects involving pre-K-12 schools, including but not limited to projects in Schools Development Authority districts, and projects involving higher education facilities.
  • Projects already underway involving individual single-family homes, or an individual apartment unit where an individual already resides, with a construction crew of 5 or fewer individuals. This includes additions to single-family homes such as solar panels.
  • Projects already underway involving a residential unit for which a tenant or buyer has already entered into a legally binding agreement to occupy the unit by a certain date, and construction is necessary to ensure the unit’s availability by that date.
  • Projects involving facilities at which any one or more of the following takes place: the manufacture, distribution, storage, or servicing of goods or products that are sold by online retail businesses or essential retail businesses, as defined by Executive Order 107 (2020) and subsequent Administrative Orders adopted pursuant to that Order.
  • Projects involving data centers or facilities that are critical to a business’s ability to function.
  • Projects necessary for the delivery of essential social services, including homeless shelters.
  • Any project necessary to support law enforcement agencies or first responder units in their response to the COVID-19 emergency.
  • Any project that is ordered or contracted for by Federal, State, county, or municipal government, or any project that must be completed to meet a deadline established by the Federal government.
  • Any work on a non-essential construction project that is required to physically secure the site of the project, ensure the structural integrity of any buildings on the site, abate any hazards that would exist on the site if the construction were to remain in its current condition, remediate a site, or otherwise ensure that the site and any buildings therein are appropriately protected and safe during the suspension of the project.
  • Any emergency repairs necessary to ensure the health and safety of residents.

 

To protect workers, Executive Order 122 mandates that contractors on essential construction projects adopt policies surrounding workers exposed to COVID-19, and that they also abide with numerous requirements, including, among other things:

  • Prohibiting non-essential visitors from entering the worksite;
  • Limiting worksite meetings, inductions, and workgroups to groups of fewer than ten individuals;
  • Requiring individuals to maintain six feet or more distance between them wherever possible;
  • Staggering work start and stop times where practicable;
  • Staggering lunch breaks and work times where practicable;
  • Restricting the number of individuals who can access common areas, such as restrooms and breakrooms, concurrently;
  • Requiring workers and visitors to wear cloth face coverings, in accordance with CDC recommendations,
  • Requiring infection control practices;
  • Limiting sharing of tools, equipment, and machinery;
  • Providing sanitization materials; and
  • Requiring frequent sanitization of high-touch areas like restrooms, breakrooms, equipment, and machinery.

 

Previously, Governor Murphy issued Executive Order 107, which allowed for work to continue at job sites but directs construction contractors “to reduce staff on site to the minimal number necessary to ensure that essential operations can continue.”  COVID-19 and the extraordinary actions taken by authorities to contain its spread will pose great challenges to contractors.  Some measures that contractors can take to mitigate any financial losses include:

  1. Review your contracts to determine if they permit adjustments to schedule milestone dates or delivery schedules due to causes beyond your control. While construction contracts do not typically entitle contractors to additional compensation, force majeure type clauses which excuse performance are common.
  2. If specialty materials required by project specifications are not available in light of COVID-19 shutdowns, submit a request for a time extension. To mitigate any potential schedule impact, inquire about obtaining approval for a material substitution.
  3. If your business is interrupted, review your insurance policies for potential coverage. Time matters, and your policy may have a deadline for reporting claims. Standard property insurance policies usually include two types of coverage for disruptions like COVID-19: (1) business interruption coverage typically insures against losses when the policyholder’s operations are directly affected, and (2) contingent business interruption coverage insures against indirect losses such as when suppliers or customers are affected. Keep track of your costs as documentation will be required to substantiate any business losses.

 

For more information regarding contractor rights and remedies during this unprecedented time, please contact Thomas J. O’Leary, at toleary@walsh.law or (973) 757-1045.

 

Walsh Pizzi O’Reilly Falanga LLP has prepared the content of this alert for general informational purposes. The content should not be considered advice, recommendations, or an offer to perform services. You should not act upon any information provided in this alert without seeking professional legal counsel from an attorney licensed to practice law in your jurisdiction. No representations are being made as to the completeness or accuracy of the information contained herein.

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Updated Client Alert – The CARES Act Provides Relief for Small Businesses
Updated Client Alert – The CARES Act Provides Relief for Small Businesses 150 150 walsh.law

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or the “Act”)[i] became law on March 27, 2020, following approval by the House lawmakers earlier in the day.  The Act presents small business entities an opportunity to borrow an amount equal to two and one-half times monthly payrolls and obtain forgiveness of that loan amount provided certain employee retention and other criteria are met. It is an extraordinary piece of legislation.  As of this update, funding has been exhausted for the “Paycheck Protection” Plan, and on April 15, 2020, U.S. Treasury Secretary Steven T. Mnuchin and U.S. Small Business Administration (SBA) Administrator Jovita Carranza issued a statement that the SBA will not be able to issue new loan approvals once appropriations for the program lapses.  Congressional Republicans and Democrats are currently in discussions to the replenish the fund.

The nearly 900-page CARES Act aims to provide relief to individuals and businesses impacted by the COVID-19 pandemic.  The main provisions of the legislation for small businesses expand access to the SBA loan program in the form of emergency grants and forgivable loans for companies with 500 or fewer employees.  The Act also increases access to bankruptcy relief for small businesses.

On March 30, 2020, Treasury Secretary Steven Mnuchin announced that he anticipated that details will be released on Monday, March 30, 2020, instructing small businesses on how they can apply for the SBA loans. [ii]  The Treasury Secretary added that he expected loans to be available starting Friday, April 3, 2020, “which will be at lightning speed.”[iii]  On March 31, 2020, the U.S. Department of the Treasury and the SBA released a sample application form for businesses to apply for and obtain loans under the newly-announced “Paycheck Protection” Program as well as an Information Sheet for Borrowers.[iv] On April 2, 2020, the SBA issued an interim final rule concerning the “Paycheck Protection” Plan, and on April 14, 2020, the SBA issued a second interim final rule.  The SBA has also published a final loan application form.  The interim final rule can be found here, the second interim final rule can be found here, the final application form can be found here, and the Information Sheet for Borrowers can be found here.

Overview of the Small Business “Paycheck Protection” Program

As part of the CARES Act, the SBA will administer $349 billion in loan commitments through the “Paycheck Protection” Program, which includes small business loans, loan forgiveness, relief for existing SBA borrowers, as well as an expansion of the SBA’s Economic Injury Disaster Loan (“EIDL”) program.  Additional guidance has recently been provided about the “Paycheck Protection” Program.[v]  All loans under this program will have the following features:

  • Loans will be made on a first come, first served basis
  • Interest rate of 1.0%
  • Maturity of 2 years
  • First payment deferred for six months
  • 100% guarantee by SBA
  • No collateral
  • No personal guarantees
  • No borrower or lender fees payable to SBA

 

Loan Eligibility and Terms

For a short window of time, the CARES Act greatly expands the category of business eligible for loans through the SBA.[vi]  Specifically, from February 15, 2020 through June 30, 2020 (the “Covered Period”), eligible loan recipients under the Act are expanded to include (i) small business concerns –  a defined term under legislation creating the SBA – as well as (ii) business concerns, nonprofit organizations, veterans organizations, or Tribal business concerns that employ not more than the greater of 500 employees, or the standard number of employees established by the SBA for the industry in which the business operates.  Eligible loan recipients also include individuals who operate under a sole proprietorship or as an independent contractor and eligible self-employed individuals, as well as businesses in the accommodation and food services industry if such business employs no more than 500 employees per location.[vii]  Both full-time and part-time employees are considered “employees” for purposes of this eligibility determination, and no threshold appears in the statute for part-time status.

No collateral or personal guarantee is required for a covered loan, and interest rates cannot exceed four percent.[viii]  The CARES Act also contains a waiver of SBA existing affiliate rules, under which the SBA may ordinarily deem a loan applicant to be affiliated with another concern, a condition which could prove disqualifying due to size limitations.

Permitted uses of “Covered Loans” include payroll costs, rent, mortgage payments, utility costs, and preexisting debt.[ix]  The maximum loan amount is the lesser of:

  • 5 times the average monthly payroll costs incurred during the one-year period before the loan is made;
  • For a business not in existence from February 15, 2019 to June 30, 2019, 2.5 times the average total monthly payroll payments from January 1, 2020 to February 29, 2020; or
  • $10,000,000.

The term “Payroll costs” is defined as follows: [x]

  • Includes: employee salary, wages and commissions; payment of cash tips; payment of vacation; parental, family, medical or sick-leave; allowance for dismissal or separation; payment required for group health benefits (including insurance premiums); payment of retirement benefits; or payment of state or local tax assessed on employee compensation; and sole proprietor income or independent contractor compensation not in excess of $100,000 (prorated for the Covered Period).
  • Excludes: compensation of an individual person in excess of $100,000 (prorated for the period); federal employment taxes imposed or withheld taxes; compensation to an employee whose principal residence is outside of the U.S.; qualified sick leave for which a credit is allowed under Section 7001 of the Act; and qualified family leave wages for which a credit is allowed under Section 7001 of the Act.


Loan Forgiveness

Another key feature of the “Paycheck Protection” Program is the forgiveness of a Covered Loan if the borrower meets certain criteria.[xi]  For income tax purposes, the loan forgiveness amount is excluded from taxable income.[xii]  Generally, indebtedness is forgiven for a Covered Loan in an amount equal to the following costs incurred during the Covered Period:[xiii]

  • Payroll costs (excluding compensation above $100,000 annually as prorated for the Covered Period);
  • Payment of interest on mortgages (not principal) incurred before February 15, 2020;
  • Payment on rent obligated by a leasing agreement in force prior to February 15, 2020; and
  • Any utility payment for which the utility service began before February 15, 2020.

To encourage employers to retain employees at existing salaries, however, the forgiveness amount is subject to reduction.[xiv]  The Act provides for a reduction of the borrower’s loan forgiveness as follows:

  • The amount attributable to any reduction will be equal to any workforce reduction in the average number of full-time equivalent employees per month employed by the eligible recipient during, at the recipient’s election, either the period between February 15 and June 30, 2019 (if the business was operational during this time) or, if not, the period between January 1 and February 29, 2020; and
  • The total amount attributable to salary or wage reductions of employees in excess of 25 percent of the employees’ total salary or wages during the most recent full quarter each such employee was employed before the eight-week period following the origination date of the loan. The calculation only applies to employees who did not receive wages or salary at an annualized rate of pay of more than $100,000.

To motivate employers to rehire employees and undo salary reductions, reductions in workforce, salaries and wages that occur from February 15, 2020 to April 26, 2020 will be disregarded for purposes of reducing the forgiveness amount so long as the reductions are eliminated by June 30, 2020.[xv]

Borrowers must apply for forgiveness with the lender servicing the loan.[xvi]  Required documentation under the Act includes evidence verifying the number of full-time equivalent employees on payroll and pay rates for the relevant periods.[xvii]  The lender must issue a decision within 60 days of receipt of the application for loan forgiveness.[xviii]

SBA Economic Injury Disaster Loans

In addition to expanding the SBA’s general loan program, the CARES Act expands the SBA’s Economic Injury Disaster Loan Program (EIDL or Program).[xix]  Generally speaking, the EIDL provides financial assistance to small businesses or private, non-profit organizations that suffer substantial economic injury as a result of a declared disaster.  The changes to the Program include:

  • EIDLs are now also available to Tribal businesses, cooperatives, and ESOPs with fewer than 500 employees. They are also available to all non-profit organizations, including 501(c)(6)s, and to individuals operating as sole proprietors or independent contractors.
  • No personal guarantee requirement on all loans up to $200,000.
  • EIDLs can be approved by the SBA based solely on an applicant’s credit score.
  • Waives requirement that an applicant be unable to find credit elsewhere.
  • Borrowers can receive a $10,000 emergency grant cash advance within three days of the SBA’s receipt of the application, which can be forgiven if spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments or repaying obligations that cannot be met due to revenue losses.


Bankruptcy Protections for Small Business

The CARES Act makes some important changes to various provisions of the United States Bankruptcy Code by increasing access to Bankruptcy relief for small businesses.[xx]  For instance, the debt limit eligibility threshold is increased for small business reorganization from $2,725,625 to $7,500,000; thereby, enabling more businesses to elect the “small business case process” in Chapter 11 bankruptcy.[xxi]  The Act also clarifies that payments made in connection with the COVID-19 emergency excluded from definitions of current monthly income and disposable income.[xxii]  The bankruptcy relief is only effective for one year after the enactment of the CARES Act.

For more information regarding options for your business during this unprecedented time, please contact Hector Ruiz at hruiz@walsh.law or (973) 757-1019, Christopher Hemrick at chemrick@walsh.law or (973) 757-1033, or Sydney Darling at sdarling@walsh.law or (973) 757-1034.

 

  • [i]Coronavirus Aid, Relief, and Economic Security Act, H.R. 748, 116th Cong. (2020).
  • [ii]Interview of Treasury Secretary Steven Mnuchin, March 30, 2020, Fox News Network.
  • [iii]Id.
  • [iv]Press Release, With $349 Billion in Emergency Small Business Capital Cleared, SBA and Treasury Begin Unprecedented Public-Private Mobilization Effort to Distribute Funds (March 31, 2020).
  • [v]Id.
  • [vi]H.R. 748, § 1102.
  • [vii]H.R. 748, § 1102(a)(2).
  • [viii]Id.
  • [ix]Id.
  • [x]Id.
  • [xi]H.R. 748, § 1106.
  • [xii]H.R. 748, § 1106(i).
  • [xiii]H.R. 748, § 1106(b).
  • [xiv]H.R. 748, § 1106(d).
  • [xv]Id.
  • [xvi]H.R. 748, § 1106(e).
  • [xvii]Id.
  • [xviii]H.R. 748, § 1106(g).
  • [xix]H.R. 748, § 1110.
  • [xx]H.R. 748, § 1113.
  • [xxi]H.R. 748, § 1113(a).
  • [xxii]H.R. 748, § 1113(b).

 

Walsh Pizzi O’Reilly Falanga LLP has prepared the content of this alert for general informational purposes. The content should not be considered advice, recommendations, or an offer to perform services. You should not act upon any information provided in this alert without seeking professional legal counsel from an attorney licensed to practice law in your jurisdiction. No representations are being made as to the completeness or accuracy of the information contained herein.

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Client Alert – New Jersey Governor Signs Additional Bills Into Law Related to Coronavirus/COVID-19 Crisis
Client Alert – New Jersey Governor Signs Additional Bills Into Law Related to Coronavirus/COVID-19 Crisis 150 150 walsh.law

On April 14, 2020, New Jersey Governor Phil Murphy signed several bills into law aimed at further assisting New Jersey residents and businesses in dealing with the Coronavirus/COVID-19 crisis.  Before reaching Governor Murphy’s desk, the bills were voted on in the Senate’s first-ever remote voting session on April 13th.  The new laws approved by the Governor include, among other things, measures to expand the state’s paid family leave program, legislation permitting leaders of not-for-profit organizations to hold virtual meetings during a declared state of emergency, a law permitting a notary public to perform certain notarial work remotely during the COVID-19 public health emergency, legislation protecting health care facilities and professionals treating patients during the COVID-19 state of emergency from malpractice claims, and permission to use virtual or remote instruction to meet minimum 180-day school year requirement.

S2374 – On April 14, 2020, Governor Murphy signed new legislation again expanding the New Jersey Family Leave Act to address COVID-19 related circumstances.  Under S2374, family leave now includes time off for employees who need to care for a child when the child’s school or childcare is closed due to the epidemic, to care for a family member as a result of measures to prevent the spread of a communicable disease, or to care for a family member who is advised to self-quarantine by a healthcare provider.  Under the Family Leave Act, employees are permitted to take up to 12 weeks of family leave during a 24-month period.  The law imposes certification requirements for taking this leave, and intermittent leave is available in certain circumstances.  This new law takes effect immediately and is retroactive to March 25, 2020.

S2353 – Under S2353, which Governor Murphy signed into law on April 14, 2020, the NJ WARN Act (Worker Adjustment and Retraining Notification Act) has been amended.  The NJ WARN Act was scheduled to have amendments take effect on July 19, 2020. The effective date of those amendments is now pushed back to 90 days after the governor’s stay-at-home executive order is terminated.  Further, the definition of “mass layoff” was amended to exclude layoffs that occur due to a “national emergency,” meaning mass layoffs occurring as a result of the COVID-19 crisis do not trigger NJ WARN Act applicability.  This change is effective as of March 9, 2020.

S2333 – This legislation provides immunity to certain health care professionals and health care facilities from certain medical malpractice claims alleging injury or death incurred during the Public Health Emergency and State of Emergency declared by the Governor in Executive Order 103 of 2020.   This legislation also facilitates the issuance of certain temporary licenses and certifications during the state of emergency.

S2342 – Permits not-for-profit corporations to hold virtual meetings to allow members to participate in meetings by means of remote communication and allows nonprofit corporations to hold meetings in part or solely by means of remote communication during state of emergency.

S2336 – Allows remote notarial acts during the current state of emergency, by way of communication technology permitting the notary public and a remotely located individual to communicate with each other simultaneously by sight and sound.

S2337 – Permits use of virtual or remote instruction to meet minimum 180-day school year requirement under certain circumstances, with respect to public schools and approved private schools for students with disabilities.

For more information about the Governor’s newest legislation, please contact Hector D. Ruiz at hruiz@walsh.law or (973) 757-1019, or Caitlin Cascino at ccascino@walsh.law or (973) 757-1024.

 

Walsh Pizzi O’Reilly Falanga LLP has prepared the content of this alert for general informational purposes. The content should not be considered advice, recommendations, or an offer to perform services. You should not act upon any information provided in this alert without seeking professional legal counsel from an attorney licensed to practice law in your jurisdiction. No representations are being made as to the completeness or accuracy of the information contained herein.

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Client Alert – Peter Pizzi to Present on IADC’s “Remote Depositions: A Panacea During a Pandemic?”
Client Alert – Peter Pizzi to Present on IADC’s “Remote Depositions: A Panacea During a Pandemic?” 150 150 walsh.law

On Thursday, April 23, 2020, Walsh Partner, Peter J. Pizzi will present in a complimentary Webinar at 1:00 PM EDT on “Remote Depositions: A Panacea During a Pandemic?”. For litigation to progress despite physical distancing, litigators must become adept at fully remote depositions. This panel will show how a deposition by video-conference takes place, how exhibits are shared, marked and even annotated, and how a high quality record can be obtained. The panel will also discuss challenges which the medium presents, how to avoid pitfalls, and the possible need for rules changes.

More information is available here.

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Updated Client Alert – DOJ and State Attorneys General Warn Against Exploiting Equipment and Supply Shortages
Updated Client Alert – DOJ and State Attorneys General Warn Against Exploiting Equipment and Supply Shortages 150 150 walsh.law

The Department of Justice’s Antitrust Division announced on March 9, 2020 that its lawyers stand ready to initiate investigations to mitigate potential risks the public faces from scarcities associated with the COVID-19 pandemic. It has been widely reported that there exist significant shortages for government, private sector, and individual U.S. consumers of personal protective equipment (PPE) such as sterile gloves, respirators, and face masks.  To combat COVID-19 related fraud and misconduct, U.S. Attorney for the District of New Jersey Craig Carpenito, New Jersey Attorney General Gurbir S. Grewal, and New Jersey Acting State Comptroller Kevin D. Walsh recently announced on March 30, 2020 of the formation of a joint federal-state task force “to investigate and prosecute a wide range of misconduct arising from the COVID-19 pandemic, including the unlawful hoarding of medical supplies, price gouging, charity scams, procurement fraud, insurance fraud, phishing schemes, and false and misleading investment opportunities.”[i]  To aid in these efforts, the task force is comprised of a number of agencies, including the Federal Bureau of Investigation; the Department of Health and Human Services, Office of the Inspector General; the U.S. Secret Service; the U.S. Postal Inspection Service; and the Office of Inspector General, among others.

Voicing concern for consumers and businesses on the “buy” side of the equation, the Antitrust Division warned “bad actors” against trying to exploit the crisis created by the government’s failure to act in advance to ramp up production of critical supplies and equipment.  The press release cautions suppliers against “tak[ing] advantage of emergency response efforts, healthcare providers, or the American people during this crucial time.”  Those who “fix prices or rig bids for personal health protection equipment such as sterile gloves and face masks could face criminal prosecution.”  Similarly, the Division warned against any horizontal allocation of customers.

Attorney General William P. Barr is quoted: “The Department of Justice stands ready to make sure that bad actors do not take advantage of emergency response efforts, health care providers, or the American people during this crucial time … I am committed to ensuring that the department’s resources are available to combat any wrongdoing and protect the public.”

Also, several state attorneys general have announced measures to combat price gouging in connection with the COVID-19 pandemic.  For instance, New Jersey Attorney Grewal announced that his office has issued more than 80 cease and desist and warning letters in response to complaints of price gouging, and explained that his office is “taking an all-hands-on-deck approach to consumer complaints about price gouging and other abuses related to the COVID-19 pandemic[.]”

On March 23, 2020, President Trump signed an executive order to prevent price gouging and hording of supplies needed to combat COVID-19.  Executive Order 13909, entitled “Prioritizing and Allocating Health and Medical Resources to Respond to the Spread of COVID–19,” provides that personal protective equipment and ventilators meet criteria to be considered “scarce and critical material essential to the national defense” under the recently-invoked Defense Production Act (DPA).  During the March 23, 2020 Press Briefing of the Coronavirus Task Force, United States Attorney General William Barr stated that “[o]nce specific materials are so designated, persons are prohibited from accumulating those items in excess of reasonable personal or business needs, or for the purpose of selling them in excess of prevailing market prices.”  According to Attorney General Barr, those determined to be hoarding or price gouging could face criminal prosecution.

None of this has been lost on plaintiff class action lawyers.

On March 10, 2020, a purported class action complaint was filed against Amazon in Florida state court accusing it of price-gouging on toilet paper and hand sanitizer.

And on April 10, 2020, 3M Company sued mask-seller, Performance Supply LLC, for alleged price gouging and trademark infringement in connection with 3M-brand N95 respirators.[ii]  In an action filed in the Southern District of New York, 3M alleges that defendant tried to sell 3M-branded masks to New York officials for up to six times the list price.  3M’s Complaint specifically alleges, for instance, that “[a]nother equally detestable element of Defendant’s unlawful conduct is price gouging.  Defendant’s quote of $6.05 per 3M brand, N95 Model 8120 respirator is approximately 600% over 3M’s suggested list price of $1.02-$1.31 per respirator.”[iii]  3M also alleges deceptive trade practices by defendant in connection with 3M brand and marks.

Walsh partners Marc D. Haefner and Liza M. Walsh lead the firm’s antitrust practice and have particular experience in the application of antitrust laws to pharmaceutical and consumer product pricing issues.

For more information, please contact Marc D. Haefner at mhaefner@walsh.law or (973) 757-1013 or Liza M. Walsh at lwalsh@walsh.law or (973) 757-1101.

 

  • [i] U.S. Attorney Carpenito, AG Grewal, Acting Comptroller Walsh Announce Federal-State COVID-19 Fraud Task Force, available at: https://nj.gov/governor/news/news/562020/approved/20200330a.shtml.
  • [ii] This action is captioned, 3M Company v. Performance Supply, LLC, Civil Action No. 1:20-CV-02949 (S.D.N.Y.).
  • [iii] Id., Complaint at ¶44.

 

Walsh Pizzi O’Reilly Falanga LLP has prepared the content of this alert for general informational purposes. The content should not be considered advice, recommendations, or an offer to perform services. You should not act upon any information provided in this alert without seeking professional legal counsel from an attorney licensed to practice law in your jurisdiction. No representations are being made as to the completeness or accuracy of the information contained herein.

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