Limiting Risks When Reopening Your Business After COVID-19 Shutdown

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Limiting Risks When Reopening Your Business After COVID-19 Shutdown

Many businesses are understandably eager to resume operations as the restrictions to prevent the spread of the novel coronavirus loosen. Beginning in the second week in May 2020, businesses in some sectors of California’s economy were permitted to reopen, as the state entered Stage 2 of Governor Gavin Newsom’s plan to reopen the economy.

As the state continues its efforts to slow the spread of COVID-19 pandemic, the reality is that businesses will look very different when they reopen. While taking reasonable steps to prevent illness in the workplace is always advisable practice, it is paramount now. As businesses reopen, they must ensure that they are taking all necessary precautions to protect the health and safety of their employees, customers, and visitors. In doing so, businesses may well protect themselves from exposure to liability down the road.

STAY CURRENT AND DEVELOP A PLAN FOR BUSINESS REOPENING

Businesses should closely monitor government directives related to COVID-19 at the federal, state and local level, and ensure they are in compliance. Being out of compliance with current recognized legal standards is a sure invitation to liability claims if someone can show they were injured as a result.

GUIDANCE FROM OSHA AND THE CDC

As a foundation, businesses must follow existing Occupational Safety and Health Administration (OSHA) standards during the pandemic, such as the General Duty Clause, Section 5(a)(1), of the Occupational Safety and Health Act, which states that all workers must be provided workplace that is safe and free of hazards. In addition, OSHA has released guidelines for businesses to reduce the risk of infection in the workplace posed by COVID-19.

OSHA is also closely coordinating with CDC, NIOSH and other agencies on proper safety precautions. The CDC has issued Guidance on Disinfecting the Workplace (specifically after a suspected or confirmed case of COVID-19). For instance, routine cleaning of commonly used areas is crucial to preventing the spread of COVID-19 in the workplace. However, areas that have not been used in a week or more require only routine cleaning. Employers should check the CDC and OSHA websites often for guidance to make sure their business has the most updated guidance on PPE and other safety measures.

STATE-LEVEL GUIDANCE

According the state’s guidance on Stage 2 of reopening Before reopening, all facilities must:
• Perform a detailed risk assessment and implement a site-specific protection plan
• Train employees on how to limit the spread of COVID-19, including how to screen themselves for symptoms and stay home if they have symptoms
• Implement individual control measures and screenings
• Implement disinfecting protocols
• Implement physical distancing guidelines

California has also issued industry-specific guidance relevant to the businesses of many of our clients:
“Logistics and Warehousing Facilities” –
• COVID-19 INDUSTRY GUIDANCE: Logistics and Warehousing Facilities
• COVID-19 General Checklist for Logistics and Warehousing Employers
“Manufacturing” –
• COVID-19 INDUSTRY GUIDANCE: Manufacturing
• Cal/OSHA COVID-19 General Checklist for Manufacturing Employers
“Office Workspaces” –
• COVID-19 INDUSTRY GUIDANCE: Office Workspaces
• Cal/OSHA COVID-19 General Checklist for Office Workspaces

LOCAL STAY-AT-HOME ORDERS

The Safer at Home order covering businesses in Los Angeles County, which remains in effect for an indeterminate time, requires that all “Essential Businesses” (and, by extrapolation, other businesses that are allowed to open in some capacity):
(1) Provide employees with, and all employees are required to wear, a cloth face covering when performing their duties requires that they be around others;
(2) Practice social distancing by requiring patrons, visitors, and employees to be separated by six feet, to the extent feasible;
(3) Provide access to hand washing facilities with soap and water and/or hand sanitizer; and
(4) Post a sign in a conspicuous place at the public entry to the venue instructing members of the public not to enter if they are experiencing symptoms of respiratory illness, including fever or cough.

CONDUCT AN INDUSTRY-SPECIFIC RISK ASSESSMENT

• Walk through the workplace and observe it in its usual state during different phases of business activity.
• Rate all risks found as high, medium, and low risk, and address the risks accordingly.
• Regularly evaluate the office workspace for compliance with the plan and document and correct deficiencies identified.
• Investigate any COVID-19 illness and determine if any work-related factors could have contributed to risk of infection. Update the plan as needed to prevent further cases.

ADAPT YOUR IDER PLAN TO SAFELY REOPEN

Business will change after reopening, and business have to adapt accordingly. While a business cannot be expected to ensure prevention of infection with COVID-19 in its workplace, it is strongly advisable to institute and follow reasonable safety measures as part of an Infectious Disease Emergency Response Plan (IDERP). Once the business has developed a plan to protect its workers, it must then be effectively communicated to employees. The employer should post a notice of these policies in a conspicuous location in the workplace.

Part of this plan entails assessing current protocols to accommodate social distancing policies, such as:
• Require those employees that can work from home to do so; Helpful to categorize jobs classified as low, medium, high, and very high exposure risk.
• Provide hand sanitizer and schedule frequent cleaning to sanitize common areas in the workplace (such as door knobs, keyboards, the break room, etc.).
• Discourage workers from using other workers’ phones, desks, offices, or other work tools and equipment, as much as possible.
• Limit non-essential visitors and establish screening policies for essential visitors

COMMUNICATE THE PLAN TO EMPLOYEES AND MAKE IT AVAILABLE TO CUSTOMERS

• Train managers and supervisors to recognize COVID-19 symptoms, the precautions that will be implemented to prevent infection, and how to response to emerging employee/customer infection.
• Inform and encourage employees to self-monitor for signs and symptoms of COVID-19 if they suspect possible exposure.
• Instruct managers, supervisors and employees on use of PPE, cleaning schedules and sanitizing techniques, and what to do if exposure is suspected.
• Have a summary of the plan posted or available to customers on request.
• Address when employees are fearful to come into work because of the risk of contracting COVID-19 by discussing the IDER Plan that has been implemented.

VERIFY ALL NEW AND RETURNING PERSONNEL’S HEALTH AND ABILITY TO WORK

• Utilize a basic Health Questionnaire each day an employee reports to work.
• Consider implementing pre and post work shift temperature checks. Employees should not be permitted to work with temperatures over 100.4°F. The EEOC has confirmed that measuring employees’ body temperatures and/or testing for COVID-19 does not run afoul of the employee privacy protections provided in the Americans with Disabilities Act (“ADA”), but the results must be kept confidential. (Note that body temperature is not completely reliable, as some carriers of the virus do not exhibit fever symptoms.) The EEOC has not addressed antibody testing to date.
• Be certain to avoid discriminatory practices in the Health Questionnaire and health screening of employees.

WHAT IF AN EMPLOYEE TESTS POSITIVE FOR COVID-19 AFTER REOPENING?

The business’ IDERP should include protocols for how the business will respond if an employee test positive for COVID-19.
• Develop policies and procedures from prompt identification and isolation of sick workers (The CDC Guidance on Disinfecting the Workplace specifically addressed safety measures after a suspected or confirmed case of COVID-19).
• Until at least July 6, 2020, California presumes a COVID-19 infection was acquired at work if it was diagnosed, or a positive test occurs, within 14 days after any worksite appearance. While the presumption can be rebutted in theory, in effect this means that active employees will almost always receive workers compensation benefits and treatment for COVID-19 infections. Be sure to follow normal workers compensation procedures as you would for any other workplace injury or illness.
• EEOC guidelines allow employers to ask if employees are experiencing recognized symptoms of COVID-19 (fever, cough, shortness of breath, sore throat). Employers must maintain that information in confidence as a medical record – information about an employee’s symptoms may be protected by ADA or HIPPA.
• Once the employer has good faith reason to believe an employee has a suspected or confirmed case of COVID-19, the employee should be required to stay out of the workplace for a 14-day period or until cleared by a doctor’s note or alternative, such as a negative COVID-19 test report. This policy must be applied in a non-discriminatory fashion, not applied only against selected individuals.
• The employer must advise other employees who may have contact with the affected person, without identifying the affected employee, to protect that employee’s privacy. The employer must take steps to prevent harassment or discrimination against those suspected of having COVID-19.

DEVELOP CONTINGENCY PLANS IN THE EVENT OF AN OUTBREAK

Businesses would be wise to develop contingency plans to prepare for scenarios which may arise as a result of outbreaks, such as:
• Increased rates of worker absenteeism.
• The need for social distancing, staggering work shifts, downsizing operations, delivering services remotely, and other exposure-reducing measures.
• Options for conducting essential operations with a reduced workforce, including cross-training workers across different jobs in order to continue operations or deliver surge services.
• Options for interrupted supply chains or delayed deliveries.
Employers who implement these safety measures and diligently adhere to them will not only improve their workplace and avoid disruptions, they will reduce their exposure to liability in the event that an employee, customer or vendor contracts COVID-19.

Conkle, Kremer & Engel attorneys will continue to monitor and advise clients about the legal implications of the COVID-19 pandemic, and how businesses can navigate these uncertain times.

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U.S. Dept. of Labor Publishes FAQ Guidelines for FFCRA

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U.S. Dept. of Labor Publishes FAQ Guidelines for FFCRA

We recently posted about the U.S. Families First Coronavirus Response Act (FFCRA), including its most important components, the Emergency Paid Sick Leave Act and the Emergency Medical Leave Expansion Act. As with most of the major new enactments intended to address COVID-19 issues, there was so little lead time that widespread confusion followed. The U.S. government has provided updates and guidelines to try to clarify the application of the FFCRA.

Most recently, the Department of Labor (DOL) has provided a “FAQ” response with more specific guidance to employers about how to comply with the FFCRA. These are some of the most important takeaways for employers:

  1. The DOL cleared up ambiguity surrounding whether state and local “stay at home” orders are considered a “quarantine or isolation order” for purposes of qualifying for EPSL under the FFCRA. The DOL guidance provides that a quarantine or isolation order includes a broad range of governmental orders including orders that “advise some or all citizens to shelter in place, stay at home, quarantine, or otherwise restrict their own mobility.” However, the government order must be the “but for” cause of the inability to work. An employee subject to one of these orders may not take paid sick leave where the employer does not have work for the employee, such as due to a downturn in business related to COVID-19, because the employee would be unable to work even if he or she were not required to comply with the quarantine or isolation order.
  2. Employees are not entitled to take EPSL or Emergency Family and Medical Leave (EFML) if their employer’s business has been forced to shut down in response to a federal, state or local government directive.
  3. If an employee takes EFML, an employer may require that the employee concurrently use any leave offered under the employer’s policies that would be available for the employee to take to care for his or her child, such as vacation, personal leave, or paid time off. No such provision exists with respect to EPSL.
  4. The DOL also provided additional guidance on the specific factors a small employer, with fewer than 50 employees, must show to receive an exemption from the requirement to provide leave under the FFCRA, when doing so would “jeopardize the viability of the business as a going concern.”
  5. Employers whose employees are teleworking should bear in mind that they are still required to comply with labor laws. Employees who are teleworking for COVID-19 related reasons must always record, and be compensated for, all hours worked, including overtime.
  6. An employee’s “regular rate of pay” as that phrase is defined under the Fair Labor Standards Act is used to determine the amount an employer must pay an eligible employee who takes EPSL or EFML (after the initial two-week unpaid period). Employers need to ensure they are accurately calculating employees’ regular rate of pay when compensating employees for paid leave.

The DOL’s FAQs, available here, provide needed guidance to help employers interpret and comply with the FFCRA. Conkle, Kremer & Engel attorneys continue to monitor and advise clients about the legal events affecting businesses trying to manage the impact of the COVID-19 pandemic.

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Ready or Not, FFCRA is Here

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Ready or Not, FFCRA is Here

The new Families First Coronavirus Response Act (FFCRA) became effective April 1, 2020, as the first substantial U.S. labor law response to the extensive disruption of employment resulting from COVID-19. Employers with fewer than 500 employees are affected, and need to understand its implications to be able to respond legally and appropriately. The most important parts of FFCRA are divided into three sections:

  • Emergency Paid Sick Leave Act (EPSLA)
  • Emergency Family and Medical Leave Expansion Act (EFMLA)
  • Tax Credits for Paid Sick and Paid Family and Medical Leave.

Be sure to read to the end – the Tax Credits are how employers get repaid the benefits that FFCRA requires them to pay employees.

Employers’ Notice Posting Requirements Under the FFCRA

As an initial note, the Department of Labor (DOL) has issued guidance on the FFCRA providing that employers with fewer than 500 employees are required to post a Notice of employees’ paid leave rights under the FFCRA conspicuously in their workplace. If some or all of an employer’s workers are working remotely, this notice requirement can be satisfied via email, regular mail, or a posting to the employer’s internal or external website. Employees who were recently laid off need not be provided with the Notice. The DOL guidelines will be the subject of another blog post in the near future.

The Emergency Paid Sick Leave Act (EPSLA)

The EPSLA requires employers with fewer than 500 employees to provide employees with Emergency Paid Sick Leave (EPSL), in addition to any leave accrued pursuant to the employer’s existing paid sick leave policy. An employee is entitled to use EPSL if the employee is unable to work or telework because they are:

  1. Subject to a federal, state or local quarantine or isolation order
  2. Advised by a health care provider to self-quarantine
  3. Experiencing COVID-19 symptoms and seeking medical diagnosis
  4. Caring for an individual subject to a federal, state or local quarantine or isolation order or advised by a health care provider to self-quarantine due to COVID-19 concerns
  5. Caring for the employee’s child if the child’s school or place of care is closed or the child’s care provider is unavailable due to public health emergency
  6. Experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor

Employees qualify for emergency paid sick leave regardless of the duration of their employment prior to the leave, and cannot be forced to exhaust other forms of accrued leave prior to using the new emergency paid sick leave. Employers must pay eligible employees for EPSL, but the FFCRA places caps on the amount:

• Full-time employees are to be paid for 80 hours at their “regular rate of pay” (as defined in the Fair Labor Standard Act) when the emergency paid sick leave taken for reasons 1 though 3 (limited to $511/day or $5,110 total per employee); and two-thirds of the employee’s regular rate of pay when leave is taken for reasons 4 through 6 (limited to $200/day, or $2,000 total per employee).
• Part-time employees are to be paid in the same manner, except the number of hours is based on the average number of hours worked over a two-week period.

The Emergency Family and Medical Leave Expansion Act (EFMLEA)

EFMLEA requires affected employers to allow eligible employees to take up to 12 weeks of paid leave if they are unable to work or telework due to the need to care for their minor child because the child’s school or childcare is unavailable due to Coronavirus-related reasons. The first 14 days (2 weeks) of the leave is unpaid, but the remaining 10 weeks must be paid at two-thirds of the employee’s regular rate of pay (limited to $200/day and $10,000 in the aggregate per employee). Note that an employee may elect to use ordinary accrued paid sick, vacation and/or PTO leave to cover the initial 10-day unpaid time period, and may also qualify for EPSLA.

Employers with 25 or more employees are required to return any employee who takes EFMLEA leave under this section to the same or an equivalent position upon the employee’s return to work. Employers with fewer than 25 employees are exempted from this requirement if they can show that, despite good faith efforts to restore the employee’s position, due to economic hardship no such position exists following the leave.

The DOL has advised that employers with fewer than 50 employees qualify for exemption from providing EFMLEA leave if it would “jeopardize the viability of the business as a going concern.” Employers seeking this exemption should document why their business meets this criteria.

Employer Tax Credits For Paid Leave under FFCRA

FFCRA includes crucial tax credit provisions intended to reimburse employers for mandatory employees’ paid leave benefits under the FFCRA. 100 percent of qualified (i.e. subject to the limits discussed above) sick and family leave payments made each quarter, through December 31, 2020, are exempt from the employer’s portion of payroll taxes. The credit is an offset to any payroll tax liability the employer has in the calendar quarter. Any excess amounts of paid leave above the employer-portion of the payroll taxes and deposit will be refunded to the employer. Employers should consult a tax professional regarding the full scope and limitations of these tax credits as they apply to their businesses.

Employers Who Shut Down Operations or “Furlough” Employees Need Not Provide FFCRA Leave

The DOL’s guidance provides that employees are not entitled to take paid sick leave or family and medical leave if their employer closes their worksite before, on or after April 1, 2020 (or if the business stays open on or after April 1, 2020, and employees are furloughed) if the business has been forced to shut down in response to a federal, state or local government directive.

Attorneys at Conkle, Kremer & Engel are monitoring the many legal implications of employers’ responses to COVID-19. CK&E is available to help businesses navigate compliance with the FFCRA, and other federal, state and local regulations intended to address the Coronavirus pandemic.

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Employers’ Duties to Maintain Employee Privacy in a COVID-19 Pandemic

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Employers’ Duties to Maintain Employee Privacy in a COVID-19 Pandemic

Dealing with illness in the workplace can be challenging under normal circumstances, but it is much more so in the midst of the Coronavirus pandemic. Many questions remain unanswered regarding the precise application of federal, state and local orders and their relationship with employee benefits. As COVID-19 becomes an increasing presence in California workplaces, and employers are forced to comply with government directives, it is just as important as ever for employers to take steps to maintain compliance with employee privacy regulations. Workers who suffer adverse employment decisions, such as pay reductions, furloughs and layoffs, may be particularly attuned to whether all their rights were respected in the process.

How much information may an employer request from an employee who calls in sick, in order to protect the rest of its workforce during the COVID-19 pandemic?

According to Guidance provided by the Equal Employment Opportunity Commission (EEOC) addressing the COVID-19 pandemic, employers covered by the Americans with Disabilities Act (ADA) may ask employees if they are experiencing COVID-19 symptoms such as fever, chills, cough, shortness of breath, or sore throat, but employers must maintain all information about employee illness as a confidential medical record in compliance with the ADA.

Does an employer have a duty to inform employees that one of their colleagues has tested positive for COVID-19?

Employers may be uncertain about whether to tell employees that there has been a reported case of COVID-19 in the workplace. Depending on the particular facts involved, information regarding illness of an employee or family member may be protected under the Health Insurance Portability and Accountability Act (HIPAA), the ADA or both.

A pandemic, on the other hand, likely alters those practices. In light of the rapid spread of COVID-19, employers should promptly inform workers if one of their colleagues tests positive for the virus. However, employers typically need not divulge the identity of an employee or employee’s family member to achieve the objective of maintaining a healthy workplace.

Employers may also choose to notify employees and other relevant parties that contagious illnesses may be present in any workplace and list precautionary steps suggested by medical professionals, such as the CDC. Even when not specifically required by law, it is important for business effectiveness to maintain the privacy of individual employees. These matters are best handled carefully to prevent unnecessary disruption in the workplace.

How should the employer communicate to employees that one of their colleagues has a suspected or confirmed case of COVID-19?

Clear, effective employer communications are critical to providing employees with relevant information, maintain order in the workplace, and reduce employees’ concerns. Employers should keep the following in mind when developing employee communications:

• Inform employees that the company will take any reasonable and necessary steps to ensure a safe and healthy work environment.
• Identify typical symptoms employees should watch out for.
• Include information on how to protect against getting the illness.
• Advise employees of any changes to policies.
• Notify employees of any discontinued travel.
• Ensure HR is available and prepared to address employees’ questions

What Are Employers’ Obligations to Prevent Harassment of Those Suspected of Being Infected?

Employers must take steps to prevent discrimination and harassment against individuals who have a potential claim that they are disabled due to a COVID-19 related reason. Employers should consider reminding employees of anti-harassment and discrimination company policies. Employers must be vigilant about promptly responding to and investigating any complaints of harassment or bullying in the workplace, and be conscious to limit the spread of rumors and speculation amongst the workforce.

Under the ADA, may an employer to require employees to provide a doctors’ notes certifying their fitness for duty when they return to work?

The EEOC says yes. The ADA permits such inquiries either because they would not be disability-related or, are justified under the ADA standards for disability-related inquiries of employees given the COVID-19 outbreak. However, doctors and other health care professionals may be too busy during and immediately after a pandemic outbreak to provide fitness-for-duty documentation. Therefore, new approaches may be necessary, such as reliance on local clinics to provide a form, a stamp, or an e-mail to certify that an individual does not have the pandemic virus.

Conkle, Kremer and Engel’s attorneys follow the legal developments concerning Coronavirus issues at the federal, state and local level. We are available to assist employers navigate their rights and obligations in these difficult times.

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CARES Act Update: Application for Paycheck Protection Program Loans And Guidelines Available Here

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CARES Act Update: Application for Paycheck Protection Program Loans And Guidelines Available Here

We recently blogged about the Paycheck Protection Program (“PPP”), and the tax free gifts it can provide to careful employers. On March 31, 2020, the U.S. Treasury Department published the Application Form for PPP loans, available here. The Application is short – just two pages.

The Application requires some basic information about the business applying for the PPP loan, including certifications that the loan is necessary to address economic uncertainty in the current circumstances, and that the loan proceeds will be used for payroll, rent and utility payments. The Application invites the borrower to insert its own calculation of its average monthly payroll, which should be calculated pursuant to the limitations noted in our prior blog post, including: (1) for most businesses, calculating payroll for the one-year period prior to the date on which the loan is made; and (2) excluding costs over $100,000 on an annualized basis for each employee. Borrowers should calculate payroll cost to include salaries, tips, payment for vacation or sick leave, health insurance premiums, retirement benefits and state and local payroll taxes. The Application notes that documentation of payroll costs will be required, but is not specific about what kind of documentation will be required or when it must be submitted.

The Treasury Department has also just published an Information Sheet for PPP Borrowers with important information, available here. The guidelines indicate that only 25 percent of the amount forgiven may consist of costs other than payroll costs (e.g., rent, utilities, etc.), which is a limitation not expressly stated in the CARES Act. Other notable points from the Treasury Department’s Information Sheet are:
• Loan applications for businesses and sole proprietorships will be available beginning April 3, 2020
• Loan applications for independent contractors and self-employed individuals will be available beginning April 10, 2020
• All payments will be deferred for 6 months
• The interest rate for PPP loans will be a fixed rate of 0.50%, and will accrue during the deferral period of the loan
• The loan term is two years.

[Despite the Treasury’s published Information Sheet, on April 2, 2020 U.S. Treasury Secretary Steven Mnuchin announced that the interest rate would be changed to 1% to help small banks. Further changes may arise, so check all loan terms carefully.]

We expect that more specific guidance about the PPP loan application process will be forthcoming over the next few days. Conkle, Kremer & Engel attorneys stay updated on legal events affecting businesses trying to manage the impact of the Coronavirus pandemic. We will update our blog as more developments occur.

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U.S. CARES Act: PPP Loans Provide Gifts for Careful Employers

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U.S. CARES Act: PPP Loans Provide Gifts for Careful Employers

The U.S. Coronavirus Aid, Relief, and Economic Security (“CARES”) Act passed on March 27, 2020, and signed into law by President Trump on March 28, 2020, aims to address some of the economic impact of the COVID-19 crisis. The entire act is a $2 Trillion economic stimulus package – the largest ever. Aside from the well-publicized $1,200 per person payments, the CARES Act provides hundreds of billions of dollars for large and small businesses, state and local governments and public health.

Rather than try to summarize the entire CARES Act, we’d like to focus on what many of our clients should pay attention to first: The $349 billion loan fund for small businesses called the “Paycheck Protection Program” (“PPP”) administered by the Small Business Administration. The PPP is designed to be a huge tax-free gift to employers, provided that the employers are careful about how they use it.

The basic points for PPP loans under the CARES Act are:

  1. PPP loans are available to businesses with fewer than 500 employees, as well as 501(c)(3) non-profits, sole-proprietors, independent contractors and other self-employed individuals, so long as the business was operational and had paid employees on February 15, 2020. Some businesses with multiple locations, each having less than 500 employees, may also qualify (but generally, this is limited to hospitality businesses with a primary NAICS code starting with “72” – Accommodation and Food Service).
  2. Borrowers must make a good faith certification that the PPP loan is necessary due to the uncertainty of the current economic conditions caused by COVID-19.
  3. PPP loans will be issued through regular lenders who already handle SBA loans, in addition to new lenders electing to provide PPP loans. Your regular bank is likely to offer PPP loans.
  4. The amount of the PPP loan is at the borrower’s choice, but the maximum amount of a PPP loan is 2.5 times the business’ average monthly payroll expenses for the past year, up to $10 million.
  5. Most of the usual “red tape” for SBA loans has been waived, including determinations of borrower eligibility and creditworthiness. PPP loans are non-recourse, and require no personal guarantees. There are no fees, a maximum interest rate of 4%, and all payments are deferred for 6-12 months.
  6. PPP loans can be used for:
    a. “Payroll Costs” including salaries, vacation and sick leave, health insurance, retirement benefits, and state and local payroll taxes. But “Payroll Costs” does not include compensation for an employee’s annual salary in excess of $100,000. There is some uncertainty about this limitation, but indications are that for highly compensated individuals the first $100,000 in salary can be paid with PPP loan funds.
    b. Rent.
    c. Utilities.
    d. Interest on any debt obligations incurred before February 15, 2020.
  7. The total amount of the PPP loan funds that are used for these approved categories within the eight-week period following loan origination would be forgiven, and the forgiven amount is not taxable. In effect, the PPP loan turns into a tax free grant to the extent that it was used for the approved purposes.
  8. Businesses may elect to use PPP loan funds for other purposes not within the approved categories, but funds spent for “non-approved” uses will not be forgiven and the loan must be repaid with interest.
  9. There is an additional important condition that the PPP borrower must maintain the same number of full time employees, and cannot reduce salaries more than 25%, through June 2020. Otherwise portions of the PPP loan may not be forgiven. If the borrower terminated employees or made salary reductions greater than 25% between February 15, 2020 and April 26, 2020, as long as the employer hires back the same number of employees and restores salaries to sufficient levels by June 30, 2020, the PPP loan funds used for approved purposes will still be forgiven.
  10. One further cautionary note is that borrowers receiving a PPP loan are not be eligible for several of the other tax credits, refunds or deferrals available under the CARES Act, so consulting a tax professional about the value of those benefits to particular businesses would be advisable.

The PPP loan portion of the CARES Act is plainly designed to stem the layoffs and furloughs that have been rampant in the wake of the economic seizure that has been imposed by federal, state and local governments’ “stay at home” guidelines and orders intended to stem the COVID-19 outbreak. This can benefit both employees and employers who need to adapt their businesses to the unsettled conditions in which we find ourselves.

Business owners – from sole proprietors to employers of 499 employees (and some with more) should explore very seriously, very quickly, the virtual giveaway that the PPP loan program represents. If taken, PPP loans demand some care in documenting use of funds to assure compliance with the terms required to be granted forgiveness of the loan and receive the tax-free gift from the U.S. government.

Conkle, Kremer & Engel attorneys stay attuned to legal developments and the opportunities they create for our business clients. The CARES Act is a big opportunity that should be carefully considered and acted upon promptly.

June 18, 2020 Update: PPP funds remain undistributed, and PPP Loan Applications are currently due by June 30, 2020. See our updated blog posts concerning further developments in the PPP program:

CARES Act Update: Application for Paycheck Protection Program Loans And Guidelines Available Here

PPP Flexibility Act’s Changed Timing and Terms of Loan Forgiveness

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Can Coronavirus be a Force Majeure to Excuse Contract Performance?

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Can Coronavirus be a Force Majeure to Excuse Contract Performance?

Businesses dealing with Coronavirus developments are suddenly faced with many pressing concerns, from whether they will be allowed to continue to operate, to employee relations and supply and delivery issues. One question that may become urgent is: What are the effects of Coronavirus and COVID-19 events on your business’ existing contracts? Can you cancel that big product order you placed, when government closure orders or other disruptions will make it difficult for you to sell it? Can you be forced to deliver products when you can no longer get the ingredients due to supply chain disruptions? Who bears those risks?

First, Does Your Contract Have a Force Majeure Clause?

All contracts are in some ways a method of allocating risks between the parties. Many (but not all) contracts contain what is commonly called a force majeure clause. These clauses explain what will happen when an unexpected and uncontrollable event disrupts performance of contractual obligations. Such a force majeure event is sometimes loosely referred to as an “Act of God,” but it is more accurately an unanticipated event that the parties could not have controlled. A key element is that the parties could not have reasonably anticipated the event at the time of contracting. As a result, the contract date becomes an important consideration: In a force majeure analysis, a contract entered into during March 2020 may well be treated differently than one entered into in March 2019.

Next, Read and Comply with the Requirements of the Force Majeure Clause

The primary purpose of a force majeure clause is to allocate the risk of such unanticipated events – effectively excusing one party’s failure to perform a contractual obligation due to such an event. It is regarded as a term that is negotiable between the parties, like price or delivery time. Whether the parties have any force majeure clause, and its specific terms, will vary from contract to contract. So it is essential to read your contracts carefully and be sure to comply with their terms.

If a contract has a force majeure clause, the first question that will arise is what kind of event can trigger it? Common events identified may be floods, earthquakes, wars and terrorism. Relatively few force majeure clauses refer to “pandemic,” “epidemic” or “state of emergency,” which seem most applicable here. But some may, and others may include events that result from such occurrences, such as “government action or order.” Others may refer to inability to obtain supplies, which could also be triggered by worldwide Coronavirus effects. And some may just generally refer to “force majeure” without identifying any specific event, or include a “catch all” term of some kind. Courts tend to apply such non-specific force majeure terms narrowly, so it is important to read and understand your specific contract and how its terms are likely to be applied.

Many force majeure terms include written notice requirements. Strict compliance with such notice requirements is often required, including giving written notice of inability to perform the contract within a specified time after the unanticipated event. Here, the Coronavirus pandemic and its effects, such as new government orders, may be viewed as a series of events that have varying effects – whether any one or more triggers the required notice will depend heavily on the contract terms and the specific circumstances.

The decision about whether and when to give the required notice can be daunting: Giving notice too early may itself be a breach of the contract – an anticipatory repudiation in legal terminology – but giving notice too late may waive the force majeure excuse. In many instances, it may be advisable to have communications with the other side about the issues, without formally giving notice.

Then, Give Consideration to the Controlling Law

Another important consideration is what jurisdiction’s laws control the contract. Many contracts include an agreement on which state or country’s law will control. But when the contract does not include such an agreement, it may become a fact question driven largely by where the parties were located, where the contract was made and where the performance was required.

The law of the controlling jurisdiction can be very important because states differ in what they require to apply a force majeure excuse for non-performance. California, for example, invokes a standard of “commercially impracticability,” which is more flexible than the standards of many other states. Some states require that actual impossibility be shown. All states require some showing of causation – meaning that the alleged disruption in fact was a cause of the inability to perform. But some states require that the force majeure be shown to be the sole cause of the inability to perform, and not just one among many causes.

Some states, including California, require substantial effort to mitigate the disruption (meaning, taking all reasonable alternative measures to eliminate or limit the effects of the force majeure), but other states are less demanding of mitigation efforts. For example, if the seller has unanticipated problems getting expected supplies of required ingredients, a court may require that the seller seek other more expensive supplies, or may even require that the seller take legal action against its suppliers. Courts may also require partial performance, if the unanticipated disruption does not preclude all performance.

Be Judicious in Your Use of the Force Majeure Clause

In all instances, the focus will be on the event that caused the disruption, not on the disruption itself. Just showing that performance has become more costly, difficult or inconvenient will not usually suffice to establish a force majeure. Courts may assume that the parties allocated ordinary risks of post-contract changes in costs and profitability, although contract terms can set different standards that could control this assessment.

Business managers should readily see that a contract’s force majeure clause can be a powerful tool in this Coronavirus emergency, but it can be double-edged if not wielded carefully. Managers may also have to face the difficult position of being on both sides of this issue – on the one hand, dealing with a business partner that is unable to perform a contractual obligation, and on the other hand, being unable to perform yourself. Conkle, Kremer & Engel attorneys routinely help clients with complex business matters, including contract terminations and force majeure disputes. In our next blog post on this subject, we will turn to what happens when your contract did not include any force majeure clause. In California, as in many states, the Uniform Commercial Code or other doctrines of Impossibility of Performance and Frustration of Purpose can come into play.

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23
MAR
0

Banking and Finance, Beauty Industry, Contracts, Contracts, Business and Finance, Fashion, Food, Craft Beer and Nutrition, Litigation, Arbitration and Mediation, Manufacturing, Personal Care Products, Real Estate & Construction, Sales, Technology

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The Personal Care Product Industry as “Essential Activity” in the Coronavirus Pandemic

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The Personal Care Product Industry as “Essential Activity” in the Coronavirus Pandemic

March 20, 2020 Update to Post:

Very Fast-Moving Developments on the Subject of Essential Business Activity

Since Conkle, Kremer & Engel’s first publication of this blog post on March 18, 2020, there have already been significant additional developments, including more government orders. In the early evening of March 19, Los Angeles County and the State of California each issued “stay-at-home” orders that have noteworthy differences from the March 16 San Francisco Bay Area orders. All of these orders appear to be operating in parallel effect, so different requirements may apply depending on your business locations.

With respect to the Los Angeles County order, both establishments selling “personal care products” and “businesses that supply other essential businesses [like grocery stores and pharmacies]” are categorized as “Essential Business” and exempt from the closure effects in Los Angeles County. This “personal care products” exemption is like the Bay Area orders. The Los Angeles County order additionally includes establishments providing “personal grooming services,” like salons and barber shops, emphasizing the importance of personal hygiene to combat the Coronavirus and indicating that, top to bottom, the supply chain of personal care products should continue to operate in Los Angeles County. At least, for now.

The State of California’s order, which applies statewide, appears to be much broader in general application than many county orders, but is quite vague as to what activities are “Essential” and therefore permitted. Instead of listing the specific exempt businesses like the county orders, the California state order refers to the federal Cybersecurity and Infrastructure Security Agency’s (“CISA”) list of 16 “Critical Infrastructure Sectors,” which are somewhat malleable business categories that may cause confusion as to which businesses might be exempt. On March 19, CISA released a guidance memorandum that appears to contemplate the manufacture of personal hygiene and cleaning products as being “critical,” but again is not nearly as specific to personal care products as are the various California county orders. Even though it is possible that the California state order supersedes county, city or other local orders, the state order is somewhat unclear as to what business activity is prohibited or remains permitted. For that reason in particular we have, for now, continued to look to the various more specific county orders to provide advice to clients.

CK&E’s personal care product industry sources inform us that there will likely be additional official guidance on the California state order sometime next week, and it is anticipated that such guidance should include specific permission for personal care products manufacturers and sellers to continue at least some scope of business activity. Underlying the various orders there continues to be a strong policy argument to keep personal care products businesses running – they make products that can help reduce the risk of spreading and being infected by Coronavirus.

CK&E will continue to monitor events as they develop and provide up-to-date information to its clients in personal care and other industries in order to assist in navigating through these uncertain and fast-changing circumstances.

Original March 18, 2020 Post:

With states and counties temporarily shuttering certain categories of businesses to combat the Coronavirus pandemic, many manufacturers, distributors, and retailers of personal care products and cosmetics may wonder whether their businesses fall under such executive orders and are required to close. If the March 16, 2020 “stay-at-home” orders issued by six of California’s San Francisco Bay Area counties are any indication, it appears that at least some categories of personal care products, and the businesses that deal in them, may be considered “Essential Activities,” allowing such businesses to remain in operation.

Those Bay Area executive orders (used as a model by Orange County, California for a similar March 17 order, subsequently amended and narrowed March 18) have two pertinent “Essential Activities” sections. The first includes “personal care products” and “products necessary to maintain the sanitation of residences,” and the second includes “businesses that supply other essential businesses [like grocery stores and pharmacies] with the supplies necessary to operate.” These two categories certainly should include personal cleaning and protective items like shampoos, soaps, washes, lotions, balms, and creams, as these products are essential elements of the personal hygiene deemed necessary to combat the Coronavirus. The California Health and Safety Code has long required workers to maintain standards of personal cleanliness with respect to hair, hands, and skin, and in the wake of government directives to wash hands frequently, news outlets like the Washington Post and the Boston Globe have recently quoted medical experts for the importance of moisturizing skin to keep a strong barrier against disease.

With respect to “elective” or “non-hygienic” personal case products such as hair treatments, coloring products, makeup, and nail polish, while the Bay Area orders do refer to the continued sale of all “personal care products” without limitation, it is unclear whether manufacturers or sellers of non-hygienic personal care products will be considered “Essential Activities” in practice. Many hair and nail salons have been closed, and governments have already begun issuing warnings and citations to non-essential companies who have remained open in the face of lockdown orders.

For comparison, the U.S. Department of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) issued a national emergency declaration to provide “hours-of-service regulatory relief to commercial vehicle drivers transporting emergency relief in response to the nationwide coronavirus (COVID-19) outbreak.”  Among the transported products that are within emergency FMCSA regulatory exemptions are: “Supplies and equipment, including masks, gloves, hand sanitizer, soap and disinfectants, necessary for healthcare worker, patient and community safety, sanitation, and prevention of COVID-19 spread in communities.” US DOT’s FMCSA reportedly considers its regulatory exemptions applicable to mixed shipments of general consumer goods and some of these types of products that are important to healthcare worker, patient and community safety.

Based on these developments, and to the extent possible, businesses dealing in a variety of personal care or cosmetics products may want to consider pivoting to a larger share of production of hygiene-centric products to remain “essential” until issuance of further guidance.

Conkle, Kremer & Engel has decades of advising clients in the personal care, cosmetics, and beauty industry, including with respect to a wide range of regulatory and employment-related matters. CK&E is working with the Personal Care Products Council and closely monitoring the fast-developing Coronavirus legal landscape in order to assist clients with their immediate business, workplace, and workforce needs in this uncertain time.

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18
MAR
0

Beauty Industry, California Trade Regulations, Food, Craft Beer and Nutrition, Personal Care Products, Regulatory Compliance, Sales

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What California Employers Must Know About Coronavirus and COVID-19

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What California Employers Must Know About Coronavirus and COVID-19

Federal, California and other state and local governments continue to grapple with responding to and reducing the spread of Coronavirus (severe acute respiratory syndrome coronavirus 2 
(SARS-CoV-2)) and the disease caused by it, COVID-19. In addition to grappling with the personal and family effects, employers must ensure that they have a response plan in place to address Coronavirus’ impact on their business. In doing so, employers must be conscious of responding appropriately in light of the legal and business implications. In some ways, employers are in uncharted territory, but there are guideposts in existing laws and regulations. Here are some of the important considerations for employers to keep in mind in responding to Coronavirus:

Stay Up to Date on Government Guidance

In order to make an educated decision regarding what course of action will best protect employee safety, employers need to stay informed about the latest developments regarding the spread of the virus and adhere to government guidance for responding to the virus.

The Center for Disease Control (“CDC”) has provided Interim Guidance for Business and Employers  meant to help prevent workplace exposures based on the information currently known about the virus. Given the rapidly evolving nature of this situation, employers should check the CDC’s website frequently for updates.

Employee Education to Prevent the Spread of COVID-19 in the Workplace

Some basic steps employers should take to help prevent the spread of Coronavirus and protect workers’ health and safety include:

  • > Educate employees on Coronavirus signs and symptoms and precautions to take to minimize the risk of contracting the virus
  • > Encourage employees to wash hands frequently with soap and water for at least 20 seconds, and avoid touching their mouth, nose, and eyes with unwashed hands
  • > Practice social distancing, including minimizing non-essential travel, meetings and visitors
  • > Provide employees who continue to work in the office with hand sanitizer, flu masks, disinfecting wipes and paper towels, instruct them on proper use, and direct them to diligently clean frequently touched surfaces and objects (such as doorknobs, telephones, keyboards and mice)
  • > Actively encourage employees who show any symptoms of the disease caused by Coronavirus (COVID-19) or are close to others who have, to stay home and not come to work

Formulate a Response Plan

Employers should move quickly to implement workplace policies to prevent the spread of the virus and protect employees. Some examples of potential elements of an employer’s response plan may include:

  • > Establish processes to communicate information to employees and business partners on your infectious disease outbreak response plan
  • > Review human resources policies to make sure that policies and practices are consistent with public health recommendations and existing state and federal workplace laws
  • > Increase the frequency and thoroughness of worksite cleaning efforts, particularly in common areas such as bathrooms, break rooms and kitchens
  • > Seriously consider new policies and practices to reduce congregations and increase the physical distance between employees, customers, vendors and others, to reduce the chances for exposure – for example, staggered break times, phone or video conferences instead of meetings
  • > To the extent feasible, ensure that employees have the requisite computer, phone and other technological capabilities to perform their work from home
  • > Formulate plans for suppliers and workers whose jobs cannot be performed remotely, such as staggered schedules and breaks, off-hours deliveries, or having some tasks performed by outside contractors
  • > Encourage employees who are feeling sick to stay home or work remotely, even if they are not showing Coronavirus symptoms
  • > Prepare to respond to employees who may be nervous or concerned about contracting COVID-19. Employers should be understanding of  employees’ concerns and evaluate each request or issue based on the individual employee’s specific circumstances.

Legal Implications of Workplace Strategy

Although there is currently no California law or regulations addressing an employer’s legal obligations relating specifically to Coronavirus, workplace safety and health regulations in California require employers to protect workers exposed to airborne infectious diseases. Therefore, it is important for employers to understand the legal issues implicated by Coronavirus and the guiding legal principles which will inform the employer’s response to the virus.

OSHA Standards for Maintaining a Safe Workplace

Employers have a legal obligation to provide a safe workplace for employees, and the best way to prevent infection is to avoid exposure. The General Duty Clause, Section 5(a)(1) of the OSH Act of 1970, 29 U.S.C. 654(a)(1) requires employers to provide workers with working conditions free from recognized hazards that are causing or are likely to cause death or serious physical harm, to receive information and training about workplace hazards; and to exercise their rights without retaliation, among others.

Cal/OSHA Requirements

The Aerosol Transmissible Diseases (ATD) standard (California Code of Regulations, title 8, section 5199) requires employers to take certain actions to protect employees from airborne diseases and pathogens such as Coronavirus. The regulations apply only to specific industries, such as health care facilities, law enforcement services and public health services, in which employees are reasonably expected to be exposed to suspected or confirmed cases of aerosol transmissible diseases.

The ATD requires such employers to protect employees through a written ATD exposure control plan and procedure, training, and personal protective equipment, among other things. However, the requirements are less stringent in situations where the likelihood of exposure to airborne infectious diseases is reduced. For more information, Cal/OSHA has posted guidance to help employers comply with these safety requirements and to provide workers information on how to protect themselves.

Medical Leave, Paid Sick Leave Issues and Disability Discrimination

If an employee is forced to miss work due to the need to be quarantined or the need to care for a family member for similar reasons, employers must determine whether the Family and Medical Leave Act (FMLA) or other leave laws apply to an employee’s absence. If the employee has exhibited symptoms and is required to be away from work per the advice of a healthcare provider or is needed to care for a family member, leave laws may apply to the absence.

The FMLA regulations state that the flu ordinarily does not meet the Act’s definition of a “serious health condition,” it may qualify if it requires inpatient care or continuing treatment by a health care provider. In addition, eligible employees might be entitled to FMLA leave when taking time off for examinations to determine if a serious health condition exists, and evaluations of the condition, under the FMLA definition of “treatment.”

In contrast, if the employer itself implements health and safety precautions that require the employee to be away from work, an employer should proceed with caution before designating any time away from work as leave under a specific law. Doing so may require that the employee provide such leave when it otherwise would not be required to do so.

Review your sick leave, PTO (paid time off), or vacation policies. Consider reminding workers that the use of paid sick leave (PSL) is available to help workers who are sick to stay home. However, the employer cannot require that the worker use PSL – that is the employee’s choice. Employers may require employees use their vacation or PTO benefits before they are allowed to take unpaid leave, but cannot mandate that employees use PSL.

Employees in California at worksites with 25 or more employees may also be provided up to 40 hours of leave per year for specific school-related emergencies, such as the closure of a child’s school or day care by civil authorities (Labor Code section 230.8). Whether that leave is paid or unpaid depends on the employer’s paid leave, vacation or other PTO policies.

Paying Workers During a Pandemic

Depending on your organization’s business, some employees may be directed to work from home, temporarily furloughed, or work a reduced schedule.

Furloughs and Layoffs

Short-term layoffs or furloughs are generally permitted as long as the criteria for selection are not protected classes such as race, national origin, gender, etc. Exempt employees generally should continue to receive their full salary for each workweek in which they perform work. In contrast, hourly workers need not be paid for time not worked. A short-term layoff or furlough of less than six months should not implicate notice obligations under the Federal Worker Adjustment and Retraining Notification (“WARN”) Act, but may require advance notice under the California WARN Act, which was recently interpreted as having been triggered by certain short-term furloughs.

If non-exempt employees’ work schedules are reduced due to a temporary closure, they need not be paid according to their regular schedule under the Fair Labor Standards Act (FLSA). However, they may be eligible for state Disability Insurance (“DI”), and Paid Family Leave (“PFL”) benefits for caring for themselves or their family members. Employees receiving reduced hours because of the effects of COVID-19 may be eligible for unemployment insurance (“UI”). In California, the Governor’s Executive Order waives the one-week unpaid waiting period for DI and UI, so workers can collect those benefits for the first week out of work.

Resources for Additional Information about Coronavirus from the CDC

For more information about the Coronavirus and how businesses and individuals should best respond, refer to the below resources provided by the CDC and California’s Employment Development Department:

CDC: About Coronavirus and COVID-19

CDC: What You Need to Know About Coronavirus

CDC: Interim Guidance for Businesses and Employers

CDC: Frequently Asked Questions and Answers

EDD: Coronavirus 2019 and COVID-19

CK&E Can Help

During these uncertain and rapidly changing developments, employers need to be proactive and careful as to the steps they take to protect their businesses, employees, customers and vendors. Lawyers at Conkle, Kremer & Engel have decades of experience advising California employers and companies doing business in California about labor, regulatory, consumer and contract concerns. We remain available and ready to help our clients navigate these difficult times. Please contact John Conkle, Amanda Washton or any of our attorneys to discuss your concerns.

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14
MAR
0

Banking and Finance, Beauty Industry, California Trade Regulations, Class Actions, Contracts, Contracts, Business and Finance, Discrimination, Employment Law, Fashion, Food, Craft Beer and Nutrition, Industries Represented, Manufacturing, Real Estate & Construction, Regulatory Compliance, Sales, Technology

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US Takes New Steps to Combat Counterfeit Products

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US Takes New Steps to Combat Counterfeit Products

On January 31, 2020, the White House issued an executive order outlining several new steps to address the ongoing and growing issue of the sale of counterfeit goods through e-commerce platforms over the internet, which harms both manufacturers and sellers of authentic products and the consumers who purchase the fake (and sometimes physically harmful) products. Estimates show that the annual value of counterfeit goods traded internationally rose from $200 billion in 2005 to $509 billion in 2016. U.S. Customs and Border Protection reports 27,599 shipment seizures stemming from intellectual property violations in fiscal year 2019. Those most commonly affected by the sale of counterfeit goods include the personal care, apparel, electronics, luxury goods, software, entertainment and media, and automotive industries.

Several agencies, including CBP, the Department of Homeland Security, Immigration and Customs Enforcement, and the U.S. Postal Service are involved in the anti-counterfeiting efforts. New steps include (1) the revocation or suspension of Importer of Record numbers for those caught importing counterfeit goods; (2) requirements for consigners, carriers, hub facilities, and customs brokers to notify CBP of any importers known to be dealing in counterfeit goods and to cease transacting with such parties, with increased scrutiny and penalties for noncompliance; (3) the creation of a task force between the CBP, DHS, and USPS in order to determine permissible ways to prevent and deter the transport of counterfeit goods through the postal system, including the targeting of particular international posts (for example, the Chinese postal system) for repeated violations; (4) the periodic publishing by DHS of information relating to seizures and violations; (5) DHS and CBP recommendations of best practices for e-commerce platforms and third-party marketplaces; and (6) the prioritization by Federal prosecutors of offenses involving counterfeiting or piracy.

Importantly, per DHS reports, CBP will “treat domestic warehouses and fulfillment centers,” like ones operated by e-commerce giant Amazon, “as the ultimate consignee for any good that has not been sold to a specific consumer at the time of its importation.” As such, e-commerce platforms that store violative products, even if those products are technically in the possession of third-party sellers while they are being stored, will have a “greater responsibility” to cooperate in the identification and removal of such products, and “greater liability” for failure to cooperate. This could potentially benefit private litigants as well – if e-commerce stores have a greater responsibility to inspect, identify, and address counterfeit products, the threshold for a finding of willful or knowing infringement, which can lead to damage multipliers and attorney fee awards, could be reduced. Even the prospect of such increased penalties can create powerful leverage for settlements beneficial to infringement plaintiffs.

Conkle, Kremer & Engel has extensive experience helping product manufacturers and distributors investigate and enforce their rights to stop and remedy counterfeiting, parallel importation, gray market and other trademark- and intellectual property-infringement claims. CK&E attorneys are well-versed in the careful initial steps that should be taken promptly when sales of illicit products are suspected. CK&E keeps abreast of the latest laws and techniques that permit manufacturers and distributors to identify, prevent, and report counterfeiters and other IP violators. Stay tuned for additional CK&E blog posts as we monitor important developments relating to e-commerce counterfeiting.

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21
FEB
0

Beauty Industry, Brand Protection, Copyrights, Fashion, Food, Craft Beer and Nutrition, Intellectual Property, Manufacturing, Patents, Personal Care Products, Sales, Technology, Trademarks, Unfair Competition

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