Available Legal & Business Resources in Response to COVID-19
The COVID-19 pandemic has caused significant disruptions for all businesses worldwide. We have been helping clients understand the ramifications of COVID-19 as we seek to understand them ourselves, and as part of those conversations we have compiled a list of resources we believe are helpful to many businesses.
The resources we are providing in this post are either drafted by Immix or believed to be reliable, although not a substitute for advice. But hopefully this will help you and your colleagues as a reference for the latest available resources to help deal effectively with COVID-19 related disruptions to your business.
This post addresses three key issues for businesses:
- The availability of insurance and disaster relief;
- Loans, grants, and capital sources for businesses; and
- Employment issues, new rules, and payroll relief.
Among these resources you’ll also find specific issues, including industry topics as well as unique issues raised by the novel coronavirus’s effect on contracts and obligations.
COVID-19 pandemic coverage in business interruption and property insurance policies.
If you are a business owner, you may have business interruption insurance. Business interruption insurance is a type of insurance policy that insures against losses of income and certain extra expenses that are a result of an interruption of business due to a covered disaster. Many insurance companies are denying business interruption and similar coverage due to COVID-19 related events, as pandemics are not clearly covered by the “disaster” or similar definition in some policies (and sometimes pandemic coverage may be specifically disclaimed). Your business interruption policy is generally the best resource to understand your rights. You should consult your insurance policy and applicable endorsements and discuss with your advisors the extent of your coverage, because no two policies and businesses are identical. In many cases, if there’s a question about whether you’re covered, its best to submit a claim and see what the insurer’s position is.
You may also have potential coverage related to property damage due to the COVID-19 pandemic, though it remains unclear whether the virus qualifies as damaging to property directly and thus invokes coverage under any property damage insurance policy. Additional guidance is likely to emerge soon from insurance companies and other industry resources, as conflicts related to insurance policies and COVID-19 will start to be resolved. It seems likely that standard is that COVID-19 related claims for property damage will not be viable in normal circumstances but, your property insurance policies may also have a “civil authority” provision that may be an easier path to substantiate coverage if included in your policy. Stay tuned for more on this from your insurance provider and talk with your advisors to determine claims for coverage. As insurers begin to take a position regarding coverage under certain policy language, we expect a consensus to emerge.
Loans, grants, and investments in the age of COVID-19 related measures.
Governments in the United States are scrambling to effectively deal with the speed of the economic fall-out from the response to COVID-19, both in the US and worldwide. Some business interruption is expected from a pandemic, such as a dramatic drop in demand for travel and lodging services. Other impacts, such as those experienced by restaurants, breweries, and leisure and hospitality are principally a result of governmental decree, as places to gather are shut down.
The early fiscal actions have begun: on March 27, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) passed the House was signed into law.
There are two programs organized through the SBA that will make capital available to small businesses:
- The CARES Act declares a nationwide emergency and provides funds for Economic Injury Disaster Loans (EIDL) to affected businesses. These loans are available based on credit worthiness, but no personal guarantee is required for loans below $200k, and $10k can be issued regardless of credit worthiness, and published guidance says the initial $10k can be paid within 3 days of application.
- The CARES Act amended existing 7a loan programs with a new Paycheck Protection Program loan (PPP). These loans are made based on a declaration by the employer of the effects of the current pandemic, not based on credit-worthiness, in an amount of 2.5x average monthly payroll costs. The amount of the loan used to pay payroll costs, mortgage interest, qualifying utilities, or rent applicable to the 8 weeks following the loan will be forgiven (rules for forgiveness are forthcoming); the balance of the loan will have deferral of 6 months, and a term of 2 years. These loans are issued through established SBA lenders. The SBA announced their Interim Final Rule on April 2, 2020, which provides information to both employers and lenders. Applications are now open. Employers should contact their bank promptly if they are interested in applying, as the loan program is on a first come-first serve basis up to the total allocated in the CARES Act ($349 Billion). For the PDF, click here.
The SBA has also announced expansions of loan programs, including the Express Bridge Loan Pilot Program. Qualified SBA banks have up-to-date information about current lending programs, and for businesses with existing SBA loans there is relief on loan payments due.
State business development offices are consolidating resources and making loans or grants available. We’ve focused our list of employer resources on our home states of Oregon and Washington, but similar resources are available in other states.
Employment matters related to COVID-19
Most businesses will have to make difficult employment related decisions because of COVID-19. Some businesses may seek opportunities to expand their workforce, while others will furlough or layoff staff. If you need to take any action with respect to your employees, you will want to understand all consequences and what resources are available that may influence a decision. Laws and regulations (and repeals of laws and regulations) are making available new resources and providing new opportunities to employers regularly. You may be eligible to receive funding and offset unemployment insurance and other related liabilities, and you may have additional options with respect to letting go of any employees during the COVID-19 pandemic, including “standby” status and resources at the state and federal level designed to incentivize businesses to keep employees employed. State Workshare programs may be available to allow employers to reduce the hours for employees due to economic conditions.
The Families First Coronavirus Response Act (FFCRA) includes two closely related provisions that apply to employers, effective April 1, 2020: paid sick leave for up to two weeks, then an expansion of FMLA, titled “Emergency FMLA”. Applicable to all employers under 500 employees, qualifying leave includes taking time off due to illness, taking time off to care for someone with illness, quarantining under orders of a doctor or authority, or taking time off to care for a child whose child care provider or school is closed. An employer will be responsible to pay sick leave or E-FMLA leave, and eligible for a tax credit for the amount paid in 2020.
The CARES Act includes two tax provisions for employers, Sections 2301 and 2302, which provide tax relief on employment compensation for businesses that do not receive a PPP loan. Section 2301 provides a tax credit of 50% of eligible compensation up to $10k ($5k credit) per employee to applied against applicable employment taxes for businesses that are forced to close. Section 2302 provides a deferral for 50% of the applicable employment taxes for eligible businesses. Please speak with your tax advisor to consider the effect of these provisions.
Each of Oregon and Washington, as well as California and other states, has several executive orders from their Governor limiting which businesses can do business as usual, and requiring work-from-home be considered as a policy. Employers may need to consider whether to continue operations, and may need to review state policies on an ongoing basis – for instance, ongoing construction projects may be halted or continued depending on what is being built – whether the Governor has determined that industry (and not the construction industry) to be essential for the state in which the project is conducted.
- Oregon State Department (resources on closings, rules, recommendations, and education for employees and employers): https://govstatus.egov.com/or-covid-19
- State of Washington (resources on closings, rules, recommendations, and education for employees and employers): https://www.business.wa.gov/site/alias__business/1561/covid-19.aspx
- Business Oregon Resources For Business: https://www.oregon4biz.com/Coronavirus-Information/
Oregon Capital Access Program (CAP): https://www.oregon4biz.com/How-We-Can-Help/Finance-Programs/CAP/
- Startup Washington Resources for Business (crisis planning): http://startup.choosewashingtonstate.com/links/crisis/covid-19-resources/
- From our friends at Delap LLP: US Coronavirus Aid, Relief, and Economic Security Act (CARES Act): (includes a summary of financial resources available pursuant to the CARES Act): https://www.delapcpa.com/alerts/the-cares-act-emergency-relief-for-businesses-and-individuals.htm
- Department of Labor (Q&A on the FFCRA): https://www.dol.gov/agencies/whd/pandemic/ffcra-questions
Details of FFCRA programs affecting employers: https://www.dol.gov/agencies/whd/pandemic/ffcra-employee-paid-leave
- Oregon Bureau of Labor and Industries
- Washington State Department of Labor & Industries
- General employment related resources, including regional office information, paid sick leave, workers’ compensation, and workplace safety and health related to COVID-19: https://www.lni.wa.gov/agency/outreach/novel-coronavirus-outbreak-covid-19-resources
- Resources specifically on paid sick leave related to COVID-19 and commonly asked questions: https://www.lni.wa.gov/agency/outreach/paid-sick-leave-and-coronavirus-covid-19-common-questions
- Resources specifically related to workers compensation coverage for workers affected by COVID-19: https://www.lni.wa.gov/agency/outreach/workers-compensation-coverage-and-coronavirus-covid-19-common-questions
- Washington State Employment Security Department (resources related to unemployment and other benefits and which also includes a discussion of new “standby” status for employee layoffs): https://esd.wa.gov/newsroom/covid-19
- Oregon Employment Department (resources on unemployment and other benefits): https://www.oregon.gov/employ/unemployment/pages/default.aspx
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