Latest Publications & COVID-19 Task Force Updates
General Considerations for Bringing Back Furloughed Employees
The Importance of Being Earnest
Preparing the Workplace for a New Reality
Changes in Labor Laws 2022-2023
Zoom Webinar
Changes in Labor Laws 2022-2023
Zoom Webinar
New Employment Laws 2022
Zoom Webinar
How To Avoid A Lawsuit
Zoom Webinar
2021 Legal Challenges and New Risks
San Francisco Small Business Week
GENERAL CONSIDERATIONS – BRINGING BACK FURLOUGHED EMPLOYEES
General Considerations for Bringing Back Furloughed Employees
As a result of the health crisis caused by the COVID-19 outbreak, many employers were forced to lay-off or furlough their employees. Presently, federal and state authorities are loosening their restrictions on businesses, thereby enabling businesses to slowly reopen. Those employers that are ready and able to return their furloughed employees back to work should take into account the below considerations.Note, this list is not exhaustive, as each place of business and its employees are unique, and other considerations may impact the evaluation process of returning furloughed employees to work. Accordingly, it is critical businesses consult with their employment counsel when reintegrating furloughed employees back into the workplace.
Employee Paperwork: When preparing to return furloughed employees, employers should identify any paperwork that may need to be updated and/or completed before returning each employee to work, including but not limited to: W-4’s, I-9’s, job descriptions, or employment agreements. If the furlough was six months or more in duration, it is recommended, but not required, that the employee’s hiring paperwork be refreshed. Additionally, employers should furnish all returning employees with a recall letter that identifies the return date , and send this at least a week or more in advance of the employee’s return to work. The employee is required to respond to this recall letter by indicating his or her intention to return to work. Employers should expect that some employees may have found alternate employment or may elect not to return to work for other reasons pertaining to the COVID-19 pandemic. In either case, recall letters help employers efficiently manage the return of their furloughed employees…
Obligations under the Americans with Disabilities Act/Employee Requests to Work from Home: Employers should remain apprised of their obligations under the Americans with Disabilities Act (ADA) to discuss potential reasonable accommodations of employees that may have disabilities. Under the ADA, employees have the right to work from home or take leave if they have underlying health conditions that would be impacted by COVID-19, for example, individuals with compromised immune systems, lung disease, heart disease, or those with diabetes, among others. Notably, anxiety is a recognized mental health condition, and persons with anxiety conditions can request to work from home. As situations and work environments vary, employers should consult with their employment counsel should any ADA issues relating to accommodations arise.
Potential Misclassification of Employees: Upon returning employees from furlough, employers need to be cautious that all employees are properly classified in their positions as either exempt or non-exempt employees. If an employee’s job duties and/or manner in which he or she is paid has changed upon returning to work, the employer should ensure the employee is correctly classified as either exempt or non-exempt employee, as such classifications have implications pertaining to overtime, meal and rest periods, and other federal and state regulations.
Caution regarding Paid Sick Leave: Employers should be aware that some furloughed employees returning to work can become eligible (potentially immediately) for paid leave under the Families First Coronavirus Response Act and other similar state statutes. Specifically, employers with fewer than 500 employees must provide up to two weeks of paid sick leave at full pay when an employee is unable to work because of reasons related to COVID-19. This includes full-time AND part-time employees. For further detail, please see our website regarding Paid Sick Leave and Family Leave.
COVID-19 TASK FORCE
DLHA has formed a COVID-19 task force to help clients and local business communities navigate the broad scope of legal issues brought on by this public health challenge. DLHA’s COVID-19 task force has presented to several chambers of commerce in the San Francisco Bay Area, and monitors developments as they unfold. If you would like to stay informed, please reach out to our offices for updates, webinar information, or guidance on specific legal issues.
CONTACT:
If you have any questions or would like more information on the issues discussed above, please contact Lindsay R. Myer with D/L/H/A Law Group, a division of De La Housaye & Associates, A Law Corporation:
Lindsay R. Meyer: lindsay@dlhalaw.com
THE IMPORTANCE OF BEING EARNEST
Paycheck Protection Program Loan Forgiveness
First came enactment, then applications, disbursement, and now the Paycheck Protection Program (PPP) will soon enter its next phase: forgiveness. Forgiveness was a policy cornerstone of the PPP program, but it has been made difficult by the rapidly evolving guidance issued by the Small Business Administration (SBA) and Department of Treasury. For this reason, it is critical that borrowers make good faith efforts to comply with the changing regulatory environment as they navigate the sustained economic downturn caused by COVID-19.Being Earnest
For businesses that obtained PPP loans, a good faith belief in the need for the loans is a necessary condition to avail themselves of PPP loan forgiveness. If a business owner is having second thoughts about their actual need, they should assess their position, consider the economic outlook and potential future losses, and if need be, communicate with their lender to the extent that they believe their “need” might have been unfounded. Although the safe harbor deadline to return funds without penalty has expired, that deadline may be extended, and the mere existence of this policy shows an understanding that the initial rollout of the program was unclear enough for participants to make good faith mistakes…
What’s Important
Let’s assume a business owner has a good faith belief in their need for the loan, the next question is how to deploy the funds to obtain the maximum return on the forgivable portion. Regardless of the amount that was borrowed, at least 75% of the total must be used for qualifying payroll costs; [1] the rest (up to 25%) can be used for qualifying non-payroll costs, which include mortgage interest, rents, and utilities. [2] This usage requirement applies to qualifying costs over the life of the loan. Loan forgiveness is based on the use of funds during the 8-week period following the date of disbursement (Covered Period). [3] The amount spent on qualifying costs during the Covered Period is eligible for forgiveness, up to the entire principal amount of the PPP Loan (and possibly accrued interest – the PPP Interim Final Rules and PPP Forgiveness application (Form 3508) seem to contradict each other regarding accrued interest). However, the important clarification is that PPP program allows for partial forgiveness: if a business owner’s payroll costs during the Covered Period do not meet 75% of the total PPP loan amount, whatever amount that was spent on qualifying payroll costs during the Covered Period are forgivable, as are qualifying non-payroll costs that do not exceed 25% of the amount forgiven.
Let’s take an example. ABC Corp borrows $100,000 in PPP loans. During the Covered Period, ABC spends $50,000 on qualifying payroll costs, $25,000 on qualifying non-payroll costs, and has $25,000 left over. The entire $50,000 spent on qualifying payroll costs is forgivable, but only $16,666.67 of the $25,000 spent on qualifying non-payroll costs is forgivable, because those costs cannot exceed 25% of the total forgivable amount. A simple way to calculate this for ABC Corp is to take all qualifying payroll costs during the Covered Period and divide it by 0.75. That amount equals the total that is forgivable, and then ABC Corp can simply apportion this first to their qualifying payroll costs, and the rest to their qualifying nonpayroll costs. In the above, $50,000 / 0.75 = $66,666.67 = total forgivable amount. Since $50,000 of the $66,666.67 are qualifying payroll costs, that leaves $16,666.67 ($66,666.67 – $50,000) eligible for qualifying nonpayroll costs. Whatever amounts that are not forgiven (here that quals $100,000 – $66,666.67 = $33,333.33) is subject to the standard terms and conditions of the debt. Each business must take into account their revenue projections, liquidity needs, and other relevant factors to decide whether to prepay that amount or keep the money until maturity.
On May 22, 2020, the SBA released Interim Final Rule on Loan Forgiveness, which provided much needed clarifications on the eligible costs and procedures for loan forgiveness. For example, the SBA clarified that qualifying payroll costs may include payments to furloughed employees or non-furloughed employees that are nonetheless unable to perform their day-to-day duties. Loan forgiveness will also not be reduced if a borrower offered to rehire a previously terminated employee, but the employee declined the offer. There is plenty of additional guidance that may or may not apply to your business – the key is to work in good faith with your lender (and lawyer) and document your approach and methodologies. That’s the importance of being earnest.
*Legislative Note – as this article is published, the House of Representatives is considering changes to the PPP Program, including an extension of the 8-week coverage period for loan forgiveness, an extension of the total term of the loan itself, and reductions to the required percentage of PPP funds that must be used for qualifying payroll costs. These actions are likely to be supported by the Senate and President, who have signaled their willingness to extend deadlines for PPP money.
COVID-19 TASK FORCE
DLHA has formed a COVID-19 task force to help clients and local business communities navigate the broad scope of legal issues brought on by this public health challenge. DLHA’s COVID-19 task force has presented to several chambers of commerce in the San Francisco Bay Area, and monitors developments as they unfold. If you would like to stay informed, please reach out to our offices for updates, webinar information, or guidance on specific legal issues.
CONTACT:
If you have any questions or would like more information on the issues discussed above, please contact Kellen Stevens with D/L/H/A Law Group, a division of De La Housaye & Associates, A Law Corporation:
Kellen Stevens: Kellen@dlhalaw.com
