Category Archives: Uncategorized

The Paycheck Protection Program . . . a brief summary

Part of the relief package passed by the federal government (the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act includes the Paycheck Protection Program.  The Paycheck Protection Program will provide cash to support emergency loans to qualifying businesses. Through the Program, the Small Business Administration (“SBA”) has the authority to provide 100% federally backed loans through December 31, 2020 to help eligible businesses pay operational costs such as payroll, rent, and utilities. If a business satisfies certain conditions, portions of the loans are forgivable!

Who is Eligible?

Generally, businesses (including, sole-proprietors, independent contractors, and other self-employed individuals) with fewer than 500 employees, that were in operation on February 15, 2020, and paid (salaries, compensation, and payroll taxes) employees or independent contractors are eligible for the Paycheck Protection Program. The 500-employee threshold includes all employees, including full-time, part-time and any other status. There are some limited exceptions to the 500-employee eligibility requirement for certain industries, such as businesses in the hospitality and food sectors that have multiple locations, which can have up to 500 employees per physical location of the business.

What is the maximum loan amount?
During the Covered Period (February 15, 2020 through June 30, 2020),  an eligible business’s maximum loan amount is based upon the business’s average total monthly payroll costs incurred during the one-year period before the date of the loan. (There is an adjustment for a seasonal workforce). For the period, an eligible business may receive up to 2.5 times its average monthly payroll costs subject to a $10 million limitation.

When determining what the “average total monthly payroll costs” are, the following are excluded:

  • Individual employee compensation over $100,000;
  • Payroll and income taxes;
  • Compensation for an employee with a principal place of residence outside the United States; and
  • Qualified sick leave or family leave wages for which a business will receive a credit under the Families First Coronavirus Response Act.

What can the loaned funds be used for?
During the Covered Period, an eligible business can the founds for the following:

  • Payroll costs;
  • Cost related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
  • Employee salaries;
  • Interest payments on any mortgage;
  • Rent and utility payments; and
  • Interest payments on any other debt obligations that were incurred before February 15, 2020.

This loan might forgiven?!!!
A loan through the Program is eligible for loan forgiveness. The amount of forgiveness cannot exceed the principal amount of the loan, but may equal up to a business’s costs during the 8 weeks following the date of the loan’s origination for the following categories of expenditures:

  • Payroll costs;
  • Interest on real or personal property mortgage obligations in existence before February 15, 2020 and incurred in the ordinary course;
  • Rent under a lease agreement in force before February 15, 2020; and
  • Utility payments, including electricity, gas, water, transportation, telephone or internet, for which service began before February 15, 2020.

The amount of loan forgiveness is subject to reduction based on a business’s decline in headcount or wages. Declines in headcount or wages between February 15, 2020 and April 26, 2020 will not trigger a reduction in loan forgiveness if the business reverses the decline and returns to pre-decline levels by June 30, 2020. Loan forgiveness will not be included in a business’s taxable income.

What else?

  • Collateral and a personal guarantee are not required (except if the funds are used for non-allowable uses).
  • SBA loan fees are waived for a loan.
  • Payments of principal and interest on a loan are deferred for a period of six months to one year.
  • There is no prepayment penalty.
  • The maximum rate of interest that can be charged for a is four percent; the maximum term is ten years from the date on which the business applies for loan forgiveness.

How does this program work with the Payroll Tax Credits under the FFCRA (for paid sick leave and emergency FMLA)?

A business that gets a loan through the program will not be able to use the payroll tax credits available under the FFCRA.

 

As per all these emergency laws, more guidance is forthcoming from the SBA!

Remember: A termination is (usually) a termination and we have RULES in California about that!

In California, when an employee is involuntarily terminated, all wages earned (including earned commissions and bonuses) and all accrued paid time off (vacation or PTO) must be paid out at termination.

When these amounts are not paid at termination, the employer must pay waiting time penalties. These can be costly – a full days’ wage for every day any of those monies are unpaid, up to thirty calendar days.

If a California employer lays off an employee without a return date within the pay period (or “furloughs” the employee or “sends them home without an expected return date because of a Stay at Home / Shelter in Place order”), the final pay rules are triggered.

The Labor Commissioner’s policy is that if there is a return date within the pay period and the employee is scheduled to return to work, the wages may be paid at the next regular pay day (and the payment rule isn’t triggered).

These are complicated issues given the Stay at Home orders (county and state). Be sure to check with legal counsel to help you navigate them.

The Governor’s Temporary “Suspension” of parts of Cal-WARN

Just to keep the blog links going . . . Here is a link to the Labor Commissioner’s Guidance on Conditional Suspension of California WARN Act Notice Requirements under Executive Order N-31-20.  And below is some guidance about the “suspension” of parts of Cal-WARN.

FedWARN.  There are two “WARN” acts that California employers have to be mindful of – the federal WARN act and California’s Cal-WARN. And of course, they are different!

The federal WARN act applies to employers of 100 or more full-time employees (or 100 full-time and part-time employees who work a total of 4,000 non-overtime hours per week. A covered employer must give 60-days notice to affected employees and specified government officials before it: (i) shuts down an employment site that causes employment loss for 50 or more full-time employees; (ii) conducts a layoff that effects 50 or more employees and 33% or more of the total workforce at a single location; or (iii) lays off 500 or more employees at a single location. Of note during this current crisis is that federal WARN has several exceptions. WARN does not apply to layoffs lasting less than 6 months. Nor does WARN apply to closures or layoffs resulting from a “natural disaster.” Finally, an employer could give less than 60 days notice in the case of a closure or layoff resulting from “business circumstances that were not reasonably foreseeable.”

Cal-WARN. Cal-WARN applies to an employer who has employed 75 or more persons, including part-time employees, at a single industrial or commercial facility (called a “covered establishment”) within the preceding 12 months. An employer has to give 60-days notice before (1) terminating operations at the covered establishment; (2) relocating the covered establishment’s operations more than 100 miles; or (3) laying off 50 or more employees at the covered establishment in a 30-day period. For an employee to count as part of the 50-employee threshold, that person must have worked for the employer for at least 6 of the preceding 12 months. Cal-WARN doesn’t have some of the helpful exceptions of WARN with regard to the shelter in place, etc. While WARN only applied to layoffs exceeding 6 months, Cal-WARN applies to layoffs of any duration. As such, employers must comply with Cal-WARN even for a short-term layoff. Prior to the Governor’s Executive Order, Cal-WARN had no express exception for unforeseen business circumstances.

The Executive Order Change About Cal-WARN.  Governor Newsom’s  Exeuctive ORder, which I blogged a link to here: Relief regarding mass terminations from Governor Newsom applies from March 4, 2020, through the end of the declared State of Emergency, suspends the 60-day notice requirement of Cal-WARN for employers who meet certain conditions.

While Cal-WARN still applies, the notice requirement is to be given “as soon as practicable.” The notices must include a basis for reducing the notification period, including reference to being due to “business circumstances that were not reasonably foreseeable as of the time of the notice would have been required.” In order to avail themselves of the exception, then, employers must:

  • Provide the requisite written notices to employees impacted by the mass layoffs or shutdown, and state and local government;
  • Provide as much paid notice as possible, and to explain in writing to the impacted employees and state and local government why full notice cannot be given, and
  • Expressly notify employees of their eligibility for unemployment insurance benefits (the written notice must contain the following statement: “If you have lost your job or been laid off temporarily, you may be eligible for Unemployment Insurance (UI). More information on UI and other resources available for workers is available at labor.ca.gov/coronavirus2019“)

Employers must establish a causal connection between the mass layoff or shutdown and COVID-19. For example, if an employer was already planning a Cal WARN-triggering mass layoff or shutdown before the onset of the COVID-19 emergency, the executive order would not apply to such a layoff or shutdown.

DOL issues Poster for FFCRA and more FAQs

The DOL published a poster for employers to use regarding the FFCRA – a link is here that you can use to print out and post.

The DOL also issued guidance / FAQs about the notice.

DOL’s Guidance on Federal Paid Sick Leave and Emergency FMLA

The DOL issued some Facts Sheets for employees and employers regarding FFCRA.  They also published some FAQs.  Hopefully, we’ll get more guidance . .  but here is an initial round.

OF NOTE – the DOL says the FFCRA is effective April 1 in the guidance. I (and others) had it as April 2 – so note the date the DOL says is the one! 

Are your employees working from home? Cut them some slack!

This is the rare blog post I am doing that is NOT just links to other resources.  But here goes: it is HARD to work from home when everyone else is home!  It is hard to respond to bosses and colleagues and customers and vendors when family members (especially kids) need some attention.  “Distance Learning” for children (and by “children” I mean anyone under 22, honestly) is hard.  Working from home for people who like a collaborative office, or just the “space” going to an office brings, is hard!

Your employees, and especially their kids, are feeling isolated and scared. This is true even when it is not coming out in those words, but instead the words “make me a snack!” So. . . be kind to your employees.  Be kind to each other. Don’t get upset when the Zoom meeting goes awry.  Stuff is getting done. Everyone is TRYING (at least, I am until the magic hour of puzzles and beer kicks in. Just kidding!)

We’re all in this, separately and socially distanced, together!

 

The Labor Commissioner, Paid Sick Leave and COVID-19

This is just a link to the DLSE’s FAQ’s about California’s Paid Sick Leave and the Labor Commissioner’s interpretation of its use for COVID-19 related events (sick employees, employees’ sick relatives, employees staying home to care for kids).