Small Business Update: Paycheck Protection Program Offers Forgivable Loans to Small Businesses 

Wooster, OH April 5, 2020

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was recently signed into law. A key provision of the CARES Act is the Paycheck Protection Program (or “PPP”), which offers forgivable loans to small businesses to cover payroll costs in light of the economic uncertainty caused by the Coronavirus pandemic.

$349 billion has been set aside for these PPP loans, and those funds will be disbursed on a first-come, first-served basis. Businesses can apply for the loans through most local, SBA-approved lenders. Banks began accepting applications on April 3, 2020.

Eligibility:

Generally, small businesses, including non-profits, with less than 500 employees that were in operation as of February 15, 2020 are eligible to apply. Additionally, many sole proprietors, self-employed individuals, and independent contractors are also eligible.

Loan amount:

The loan will be equal to 2.5 times the average of your business’s “monthly payroll costs” over the past 12 months. The interest rate on the loan has been set at 1%. However, principal and interest payments will be deferred for 6 months.

How do I apply?

To apply, you will need to complete an SBA Form 2483, titled “Paycheck Protection Program — Borrower Application Form.” That form is available on the U.S. Small Business Administration’s and the U.S. Treasury’s websites, or from a local SBA-approved lending institution. Additionally, you will need to collect and submit documentation supporting that your business was in existence on February 15, 2020 and supporting your calculations of “payroll costs.” Each business may only apply for 1 PPP loan.

 

What expenses count as “payroll costs”?

“Payroll costs” is defined to specifically include certain monthly expenses and exclude others.

  • Payroll costs specifically include:

    • Salaries, wages, or similar compensation;

    • Cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips);

    • Payments for vacation, parental, family, medical, or sick leave;

    • Allowance for dismissal or separation;

    • Group health plan payments, including premiums;

    • Retirement plan benefits/contributions; and

    • State and local taxes assessed on employee compensation.

  • Payroll costs specifically exclude:

    • Compensation of an individual employee of more than $100,000 per year;

    • FICA (Federal Insurance Contribution Act) taxes;

    • Railroad retirement taxes;

    • Income taxes;

    • Compensation of employees residing out of the United States;

    • Qualified paid sick leave and paid family leave for which an employer is allowed a credit under sections 7001 and 7003 of the Families First Coronavirus Response Act.

You will need to provide documentation of each of the above expenses and provide them to your lender as part of your application. If you are unsure what documents would qualify, ask your lender, or call the Broehl Law Office and one of our attorneys will be happy to assist you.

Once I get a PPP Loan, what can I use the money for?

PPP loan proceeds must be used only for “covered expenses,” or else the loan will not be forgiven. To be eligible for forgiveness, you must document that, for the 8-week period after your business received its PPP loan, you only used the loan proceeds for the following covered expenses:

  • Payroll costs (including payments to continue group health benefits during periods of paid leave);

  • Interest payments on a mortgage or other debt existing prior to February 15, 2020;

  • Rent payments; and

  • Utility payments.

However, at least 75% of the PPP loan proceeds must be used for payroll costs (i.e., no more than 25% can be used for the other covered expenses). This is because the primary intent of the Paycheck Protection Program is to ensure that employees continue receiving paychecks during the Coronavirus pandemic.

It is very important that you keep careful records of the expenses for which you used PPP loan proceeds for the 8-week covered period. If you are unsure how to documents such expenses, contact your lender, and the Broehl Law Office will be happy to offer guidance, as well.

How do I get my PPP loan forgiven?

You must apply for forgiveness to your lender at the end of the 8-week period following the date you received the loan. Your lender may have other requirements, but generally, you will be required to provide:

  • Documentation verifying the number of full-time equivalent employees on the payroll, as well as their pay rates, during the covered period, including:

    • IRS payroll tax filings; and

    • State income, payroll, and unemployment insurance filings;

  • Documentation verifying mortgage interest payments, rent payments, and utility payments;

  • A certification by a representative of the borrower that the documentation presented is true and correct and that the amount for which forgiveness was requested was, in fact, used for forgivable purposes.

Where do I go to apply?

If you have a relationship with a local lender that is SBA-approved, start there. If not, you can search for a local SBA lending institution using the U.S. Small Business Administration’s website. The search function is available here: https://www.sba.gov/local-assistance. Please note that some lenders will only grant PPP loans to existing customers.

Additionally, the Broehl Law Office can help you connect with a local SBA lender, as well as answer any questions you might have with respect to PPP loans or other Coronavirus-related business concerns.

Federal FMLA and Paid Leave Changes Regarding COVID-19

Wooster, OH March 20, 2020

On March 18, 2020, the “Families First Coronavirus Response Act,” or “FFCRA,” was signed into law. Most relevantly for employers, the FFCRA mandates two weeks paid sick leave (“Paid Sick Leave”) and paid Family and Medical Leave Act (“Paid FMLA”) benefits for eligible employees.

Which employers have to comply with the FFCRA?

Private employers with fewer than 500 employees must comply with both the Paid Sick Leave and Paid FMLA provisions of the FFCRA. However, employers that are health care providers or emergency responders will likely be excluded from compliance with the FFCRA, as will small businesses with fewer than 50 employees if compliance would jeopardize the viability of the business as a going concern. The FFCRA gives the U.S. Secretary of Labor the authority to impose rules more clearly defining such exclusions.

Which employees are eligible for Paid FMLA?

Employees are eligible for a new type of FMLA if they have been employed for 30 days and have to stay home to care for their minor child because the child’s school or day care has been closed (or no day care is available) due to a public health emergency (such as Ohio Governor DeWine’s declaration of a state of emergency due to the coronavirus).

What new FMLA benefits are eligible employees entitled to?

Employers must provide up to 12 weeks of FMLA benefits to eligible employees. The first 2 weeks can be unpaid (although employees will likely request Paid Sick Leave for the first two weeks), but the remaining 10 weeks must be paid in an amount equal to 2/3 of the employee’s usual pay, although total benefits are capped at $200 per day and $10,000 total. Employees merely need to provide notice to their employers “as is practicable” in order to receive Paid FMLA.

Which employees are eligible for Paid Sick Leave?

An employee is eligible for Paid Sick Leave if the employee is unable to work (or telework) because the employee:

  • Was ordered to self-quarantine by a governmental authority or healthcare provider due to the coronavirus, or is caring for an individual who has been quarantined;

  • Is caring for his or her child because the child’s school or day care has been closed (or no day care is available) due to coronavirus precautions; or

  • Is experiencing any other substantially similar condition specified by the U.S. Secretary of Health and human Services.

What kind of Paid Sick Leave benefits are eligible employees entitled to?

Employers must provide 2 weeks (80 hours) of paid sick leave to full-time eligible employees, and they must provide part-time employees pay for the number of hours they would normally work in a two-week period. Generally, the pay must be at the employee’s regular hourly rate. However, weekly pay is capped at $511 per day ($5,110 in the aggregate) for employees who were ordered to quarantine under eligibility criterion (1), above, and $200 per day ($2,000 in the aggregate) for employees quarantined under eligibility criteria (2) or (3), above.

Will businesses be reimbursed for the cost of providing paid sick leave and paid FMLA?

Yes. Businesses must pay the new Paid Sick Leave and Paid FMLA benefits themselves, but they will receive a tax credit for doing so. The credit will be equal to 100 percent of the qualified Paid FMLA and Paid Sick Leave wages paid by the employer, and it will be applied as a credit against the business’s quarterly payroll taxes. Any excess credit will then be refunded to the employer.

If you have any questions regarding coronavirus-related changes to existing employment and business laws, please do not hesitate to contact us. While we have instituted health and safety measures at Broehl Law Office in accordance with federal and state guidance, including cancellation of in-person appointments, we are still actively working for our clients, and we remain available to address your needs and concerns.

Small Business Update: Ohio Unemployment Law Update Regarding COVID-19

Wooster, OH March 19, 2020

The attorneys at Broehl Law Office recognize employers are confronting many new challenges and questions as a result of daily press releases and orders from federal, state, and local authorities with respect to the coronavirus pandemic.

Brief Note on Federal Response

The U.S. Congress passed the “Families First Coronavirus Response Act,” or “FFCRA,” and President Trump signed it into law on March 18, 2020. The law will go into effect in 15 days. The FFCRA requires employers with less than 500 employees to provide two weeks of paid sick leave to eligible affected employees, and it requires businesses to offer paid FMLA leave to eligible affected employees. The FFCRA also expands unemployment and nutrition assistance, and it increases resources for coronavirus testing. We will be providing a separate memo outlining the new provisions of the FFCRA in more detail.

Ohio’s Response

In Ohio, Governor DeWine issued Executive Order 2020-03D (the “Order”) on March 16, 2020, expanding access to unemployment benefits for those impacted by the coronavirus. The Order specifically makes benefits available to workers who have been laid off because of work stoppages or who have been ordered to quarantine themselves. And most notably, the Order waives the traditional waiting period for applicants so that they can receive benefits more quickly. Per the Order, benefits are evaluated as follows:

  • Employees who are partially or totally unemployed as a result of someone else’s decision are eligible for benefits. This includes:

    • Individuals quarantined per doctor’s order;

    • Individuals quarantined per employer’s instructions without the ability to work remotely; and

    • Individuals whose employer shut down or laid off workers because of the coronavirus.

  • However, individuals electing to self-quarantine are ineligible for benefits, and these benefits are not available to workers who have leave benefits from their employer.

Naturally, this raises questions for employers regarding their unemployment tax rates. At this time, “contributory employers” that pay unemployment premiums based upon a tax rate multiplied by wages will have their premiums mutualized with all other such employers, and claims will be paid out of this collective fund rather than charging against an individual employer’s account. There are some employers, usually non-profits, that are set up as “reimbursing employers,” pursuant to which they reimburse the State for benefits on a dollar-for-dollar basis. Reimbursing employers’ obligations remain unchanged by the new Order.

 

Employees laid off or quarantined can apply for unemployment benefits in two ways: (1) via telephone at 1-877-644-6562 or TTY 1-614-387-8408; or (2) by filing an application online at https://unemployment.ohio.gov/. The Ohio Department of Job and Family Services (“ODJFS”) also published a webpage with information related to the new coronavirus unemployment benefits at http://jfs.ohio.gov/ouio/CoronavirusAndUI.stm. Additionally, ODJFS created a “Mass Layoff Instruction Sheet,” which it asks employers to distribute to each employee laid off because of the coronavirus. This will expedite the claim process for those employees. That form can be accessed online at http://www.odjfs.state.oh.us/forms/num/JFS00671/pdf/

Governor DeWine also applied to the U.S. Small Business Administration (“SBA”) to qualify the State of Ohio for the Economic Injury Disaster Loan program, which would make low-interest loans available to small businesses.

If you have any questions regarding coronavirus-related changes to existing employment and business laws, please do not hesitate to contact us. While we have instituted health and safety measures at Broehl Law Office in accordance with federal and state guidance, including cancellation of in-person appointments, we are still actively working for our clients, and we remain available to address your needs and concerns.

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