Category: Health

Best Practices for Commercial Property Owners/ Operators: Phase One of Reopening the Economy

The Federal Coronavirus Task Force issued a three-stage plan last week to reopen the economy, where authorities in each state – not the federal government – will decide when it is safe to reopen shops, schools, restaurants, movie theaters, sporting arenas and other facilities that were closed to minimize community spread of the deadly virus. Once phase one is adopted in certain states, businesses that reopen will need to be prepared to take certain precautions to meet their common law duty to provide and maintain reasonably safe premises.

Phase One

The first stage of the plan will affect certain segments of society and businesses differently. For example, schools and organized youth activities that are currently closed, such as day care, should remain closed. The guidance also says that bars should remain closed. However, larger venues such as movie theaters, churches, ballparks and arenas may open and operate but under strict distancing protocols. If possible, employers should follow recommendations from the federal guidance to have workers return to their jobs in phases.

Also, under phase one vulnerable individuals such as older people and those with underlying health conditions should continue to shelter in place. Individuals who do go out should avoid socializing in groups of more than 10 people in places that don’t provide for appropriate physical distancing. Trade shows and receptions, for example, are the types of events that should be avoided. Unnecessary travel also should be avoided.

Assuming the infection rate continues to drop, then the second phase will see schools, day care centers and bars reopening; crowds of up to 50 permitted; and vacation travel resuming. The final stage would permit the elderly and immunologically compromised to participate in social settings. There is no timeline prescribed, however, for any of these phases.

Precautionary Basics

Once businesses are reopened during phase one, there are several common sense and intuitive safety practices that business owners/operators must absolutely ensure are in place to meet their common law duty to provide a reasonably safe environment for those present on their premises.

The guidelines issued by the CDC are the core protocols that form the baseline for minimal safety precautions: persistent hand washing, use of masks/gloves and strict social distancing.

Additional Measures

Given the highly infectious nature of the virus, the fact that it is capable of being transmitted by asymptomatic people who are nonetheless infected, and the apparent viability of transmission through recirculated air or via HVAC systems without negative pressure (per a recent report from China about transmission from one restaurant customer to several others via the air circulation system), there is nothing that reasonably can be adopted that will effectively and readily ensure that a business is completely free of someone who is infected and capable of spreading the virus.

As such, additional measures are advisable beyond the CDC protocols, such as robust cleaning/hygienic regimens/complimentary wipes and hand sanitizer for common areas, buttons and handles; and the necessary protections for employees who interact with the public (e.g., shielding and protective gear for checkout clerks at the supermarket or lobby desk/check-in personnel in hotels and office buildings). In addition, it would not be unreasonable or unduly intrusive to check the temperatures (via no-touch infrared devices) of those entering the premises. In the absence of available portable, instant and unobtrusive virus testing methods, temperature readings are the most practical and reasonable precautionary measure beyond the CDC baseline deterrents.

Conscientious and infallible implementation of maintenance, housekeeping and hygiene protocols for the commercial, hospitality, retail and restaurant industries also will be critical to mitigate potential liability claims for negligently failing to provide an environment reasonably safe from the spread of coronavirus.

Advisability of Warnings

Aside from conspicuously publicizing – via posted signage or announcements – the CDC guidelines relating to persistent hand washing, use of masks/gloves and strict social distancing, the need to warn of the potential for – or a history of – infections generally is not considered to be necessary or essential unless there is an imminent threat of a specific foreseeable harm.

Unless there is a specific condition leading to a cluster of infections within a particular property (unlikely given the ubiquity of the disease and community spread, but the reporting would be to the CDC or local health authorities in such an instance), or an isolated circumstance that can be identified to be the source of likely infections to others who proximately were exposed, there is no need or obligation under existing law or regulatory guidelines to report generally that someone who tested positive for the virus may have been on a particular property.

Moreover, unless the business is an employer who administers a self-funded health plan (who are thus charged with the duty to maintain “protected health information”), businesses that are not health providers are not subject to HIPAA; as such, concerns about HIPAA violations are misplaced to the extent that the identity of someone who is infected is somehow disclosed or otherwise required to be disseminated by a business not otherwise charged with the duty to maintain “protected health information.”

A Coordinated Approach

While the CDC’s guidelines are important, they are not exclusive. Businesses planning to reopen also should consider regulations and guidelines from a number of other sources, including OSHA and state and local departments of public health.

© 2020 Wilson Elser

For more on reopening the economy, see the National Law Review Coronavirus News section.

Northeast State Solar Programs in Light of COVID-19

COVID-19 is impacting industries across the globe and clean energy is no exception. As the pandemic continues to influence economic relief efforts at both the state and federal level, states are beginning to offer specific forms of relief through their incentive programs.

Additionally, electric distribution companies in each state have declared COVID-19 a force majeure event, allowing extensions to interconnection milestones and in some cases payment schedules. Below are summaries of the specific relief efforts being offered by some states, and more details regarding electric distribution companies’ declaration of a force majeure event.

Massachusetts

The Massachusetts Department of Energy Resources (“DOER”) filed emergency regulations with the Secretary of State following its regulatory 400MW review of the Solar Massachusetts Renewable Target (“SMART”) Program on April 14, 2020. Among the regulations is a blanket extension of six months to all Solar Tariff Generation Units, including any projects that submit their applications before July 1, 2020, due to the ongoing impacts of COVID-19. More details are provided in the DOER’s Statement of Qualification Guideline.

The Massachusetts Department of Public Utilities has also developed a webpage with information and resources specific to COVID-19. The website includes information on the impacts of the electric distribution companies’ respective declarations of COVID-19 as a force majeure event.

New York

The New York State Energy and Environment agencies wrote a letter to the clean energy industry on April 1, 2020, expressing support for the clean energy industry, particularly as construction has been impacted by COVID-19. The agencies announced in the letter that they are seeking input from clean energy industry stakeholders so that the agencies and the industry can work together to form creative solutions. The letter is found on NYSERDA’s COVID-19 page.

Connecticut

In Connecticut, the Department of Energy and Environmental Protection (“DEEP”) is coordinating with governmental offices and stakeholders to offer webinars for clean energy contractors with information about available state and federal aid. Please check in with CT DEEP to find out more information on these offerings.

Maine

The Governor’s Energy Office (GEO) released a statement that the GEO is working with the Maine Public Utilities Commission (PUC) and clean energy stakeholders to answer questions and concerns that are related to COVID-19. Stakeholders that have questions and concerns should contact the GEO for further information.

Electric Distribution Companies’ Force Majeure Declaration

Several electric distribution companies have notified state’s public utilities commissions that COVID-19 is a force majeure event. By declaring a force majeure event, the electric distribution companies have allowed extensions to project milestone dates and in some cases interconnection payments. Electric distribution companies that have not formally declared COVID-19 a force majeure event have waived late fees and extended payment timelines. Individual projects should check in with the electric distribution company specific to the project to confirm how theirs may be impacted.

 

 

© 2020 SHERIN AND LODGEN LLP
ARTICLE BY Tanya M. Larrabee at Sherin and Lodgen LLP, Amy L. Hahn also contributed.
For more on renewable energy programs, see the National Law Review Environmental, Energy & Resources law section.

The Return of Balance and Proportionality

Oscar Wilde was known for saying “Everything in moderation, including moderation.” For a period of time, we were only confronted with the scary aspects of “Big Data.” Think The Great Hack and the testy congressional hearings that we watched.

But the viral pandemic has thrown privacy absolutism into deeper question, as we are suddenly faced with a problem that in order to be solved must involve finding and tracking people for extended periods of time. We need to decide how to balance the societal need for virus control with the societal good of personal privacy.

Contact tracing is often used as an epidemic control measure. Lawmakers have discussed using the tool in the U.S. as Apple and Google work together to develop an effective contract tracing system. It has been deployed against illnesses such as measles, SARs, typhoid, meningococcal disease, and Ebola. It is currently being implemented in South Korea and China to combat COVID-19.

The Israeli government approved tracking cell phone data of people suspected of having coronavirus, to make sure they self-isolated. This emergency power lasted for 30 days. Israel’s Supreme Court, concerned with the privacy implications of using a military technology to track its own citizens’ daily movements, decided that the government would be required to halt this surveillance technology until or unless the government can pass an extension of that use. Then an oversight group in Israel’s parliament blocked an attempt to extend the emergency measures beyond this week, also due to privacy concerns. A committee member said the harm done to privacy outweighed the benefits.

As I recently wrote, this crisis may be testing sensibilities about privacy. Perhaps I was wrong. Sentiments do not seem to be moving aggressively towards greater data collection, or a sacrifice of consumer rights. Instead there appears to be a return towards measuring the weight of data against the potential for abuse, or grand commodification of personal information. In Israel more than 200 people, some identified through phone location information, had been arrested for violating quarantine. Thirty days of these extreme measures were tolerable. Then the Israelis had second thoughts.

Ulrich Kelber, Germany’s federal data protection commissioner, who recently claimed that the lack of GDPR enforcement was a result of enforcement agencies not receiving enough resources, backed a plan for Germany’s disease prevention agency to use Deutsche Telekom metadata. Considering just a week earlier he deemed tracking individual smartphones to monitor quarantine “totally inappropriate and encroaching measure,” it is apparent that Germany is balancing the harsh reality of the crisis and the immediate need for certain information with this encroachment.

Canada’s Privacy Commissioner released a “Framework for the Government of Canada to Assess Privacy-Impactful Initiatives in Response to COVID-19.” The Commissioner’s Office acknowledged that COVID-19 raised “exceptionally difficult challenges to both privacy and public health.” However, the framework reiterated that “the principles of necessity and proportionality, whether in applying existing measures or in deciding on new actions to address the current crisis,” will govern. Canada too is weighing the need of the information collected against the nature and sensitivity of the information collected.

The European Data Protection Board (EDPB) provided multiple guidance documents regarding COVID-19. Much like its Canadian counterpart, guidance provides that the “general principles of effectiveness, necessity, and proportionality must guide any measures adopted by Member States or EU institutions that involve processing of personal data to fight COVID-19.” These guidelines clarify the conditions and principles for the proportionate use of location data and contact tracing tools. But the EDPB also stressed that the “data protection legal framework was designed to be flexible and as such, is able to achieve both an efficient response in limiting the pandemic and protecting fundamental human rights and freedoms.”

Here in the United States, all eyes have been on the California Attorney General regarding enforcement of the California Consumer Privacy Act, which is set to begin on July 1, 2020. Unlike our neighbors to the North and Europe, there is no significant sentiment of the need for balance or proportionality. Just a reminder that as “the health emergency leads more people to look online to work, shop, connect with family and friends, and be entertained, it is more important than ever for consumers to know their rights under the California Consumer Privacy Act.”

For many sovereigns, this crisis has led enforcement agencies and legislatures to return to the roots of data privacy, which is balance and proportionality. Many privacy laws require a balancing test for entities collecting data. COVID-19 has made these principles re-emerge into the limelight.

Copyright © 2020 Womble Bond Dickinson (US) LLP All Rights Reserved.

Chicago City Council Introduces COVID-19 Anti-Retaliation Ordinance, Reflecting Growing Trend

On April 22, 2020, Chicago Mayor Lori Lightfoot, with the backing of several Aldermen, introduced the COVID-19 Anti-Retaliation Ordinance (the “Ordinance”), which, if enacted, would prohibit Chicago employers from retaliating against employees for obeying a public health order requiring an employee to remain at home as a consequence of COVID-19.  This reflects a growing trend among states and local governments in enacting protections against retaliation amid the COVID-19 pandemic.

The Ordinance would prohibit employers from demoting or terminating a “Covered Employee”[1] for obeying an order issued by the Mayor, the Governor of Illinois or the Chicago Department of Public Health requiring the Covered Employee to:

(1) Stay at home to minimize the transmission of COVID-19;

(2) Remain at home while experiencing COVID-19 symptoms or sick with COVID-19;

(3) Obey a quarantine order issued to the Covered Employee;

(4) Obey an isolation order issued to the Covered Employee; or

(5) Obey an order issued by the Commissioner of Health regarding the duties of hospitals and other congregate facilities.

An employer would also be prohibited from retaliating against a Covered Employee for obeying an order issued by the employees’ treating healthcare provider relating to subsections (2), (3) and (4) above.

Finally, the anti-retaliation protections would extend to Covered Employees who are caring for an individual who is subject to subsections (1)-(3) above, and would apply even if workers have exhausted any earned sick-leave time available pursuant to Chicago’s Paid Sick Leave Ordinance.

Affirmative Defense

The Ordinance would allow an employer to assert an affirmative defense if it relied upon a reasonable interpretation of the public health order at-issue and, upon learning of the violation of the Ordinance, cured the violation within 30 days.

Penalties/Damages

The Ordinance has teeth:  violations can lead to fines of up to $1,000 per offense per day, and Covered Employees who have been retaliated against may pursue the following recovery in a civil action: (i) reinstatement; (ii) damages equal to three times the full amount of wages that would have been owed had the retaliatory action not taken place; (iii) actual damages caused directly by the retaliatory action; and (iv) costs and reasonable attorneys’ fees.

Next Steps

The Ordinance has been referred to the Chicago Committee on Workforce Development for further deliberation.

A Growing Trend

The protections the Ordinance would afford to employees are consistent with a growing trend among state and local governments in response to the COVID-19 crisis.  Similar protections have been established through emergency orders or rules in New Jersey, Michigan and Washington which prohibit employers from disciplining or terminating employees for requesting or taking time off after contracting or, in some circumstances, being exposed to COVID-19.  Other states, such as New York and California, have issued guidance applying existing federal, state, and local anti-discrimination and anti-retaliation laws to prohibit employers from discriminating against or refusing to provide reasonable accommodations for employees who contract or are otherwise impacted by the virus. As state legislative and executive responses continue to rapidly evolve, employers should ensure that they are familiar with the latest guidance in each state where their employees are located.

[1] “Covered Employee” generally means any employee who, in any particular two-week period, performs at least two hours of work for an employer while physically present within the geographic boundaries of the City of Chicago.  Chicago, Ill., Mun. Code § 1-24-010.

© 2020 Proskauer Rose LLP.
For more on COVID-19 related employment ordinances, see the National Law Review Coronavirus News section.

COVID-19 Update: Don’t Be a Target: What Business Should Know about State Attorney General Reactions to COVID-19

In any time of crisis, there is heightened risk for fraud and scams. While United States Attorney General Barr has warned of scams and other illegal acts on the federal level,1 it is with the state Attorneys General (“AGs”) where the rubber hits the road in enforcing social distancing orders, investigating companies for alleged price gouging, continuing ongoing investigations, and overseeing lending relief efforts. As the economy begins to reopen on a state-by-state and sector-by-sector basis, companies must be vigilant in protecting themselves from the next wave of scrutiny by state AGs.

During normal times, state AGs rely upon their state’s Consumer Protection Act and Unfair or Deceptive Acts or Practices (UDAP) statutes to fight against perceived fraud. During the COVID-19 crisis, state AGs have taken the additional step of issuing Civil Investigative Demands, mostly focused on the issue of price gouging, or an instance in which a company allegedly inflates prices above a perceived acceptable level based not solely on supply and demand, but also on leveraging, in this case, the COVID-19 pandemic to the detriment of the consumer. Allegations of price gouging often appear during or immediately following natural disasters, an example of which would be heightened prices for essential products such as generators and flashlights in historically hard-hit areas such as Florida or New Orleans during the Atlantic hurricane season. In the current environment, state AGs across the country are each receiving literally hundreds of consumer complaints alleging that companies are similarly raising prices on necessities.2 Online platforms for third-party sellers are particularly vulnerable to state AGs in this environment, with most people sheltering in place and fulfilling the majority of their purchasing needs through online retail. In fact, 33 state AGs sent a letter to Amazon.com, Inc., Facebook, Inc., Craigslist, Inc. and eBay Inc. to request enhanced procedures to protect against price gouging on their respective platforms.3 Ironically, companies such as Facebook, Google, Navient, and others that have been targeted by state AGs, often on extremely flimsy legal grounds, are now being asked by those same regulators to continue their efforts to step up to assist in this pandemic. And those companies, and so many others, are doing just that.

However, there are indeed some bad actors. In one well-publicized example, two Tennessee men hoarded over 17,000 bottles of hand sanitizer with the intent to sell them for up to $70 per bottle and was immediately met by an expedited investigation by Tennessee AG Herbert Slatery.4 Other examples have abounded: Massachusetts AG Maura Healey unilaterally expanded her state’s price gouging regulations, which had previously been limited to gasoline and petroleum products, to include “all goods or services necessary for the health, safety or welfare of the public”;5 New York AG Letitia James sent cease and desist letters to merchants that were allegedly engaging in price gouging related to the sale of hand sanitizer and disinfectant;6 New Jersey AG Gurbir Grewal has sent over 80 cease and desist letters after receiving more than 600 complaints of COVID-19-related price gouging and other related consumer protection violations;7 Florida AG Ashley Moody activated a “Price gouging Hotline” and opened an investigation into third-party sellers accused of price gouging on essential goods through accounts on Amazon;8 and finally, 20 state AGs have implored 3M Company to create a database and accounting of the distribution and pricing of 3M’s N95 respirator masks, including urging 3M to publish its policies prohibiting price gouging.

Businesses that remain open should be mindful of the additional steps taken to ensure compliance with social distancing regulations. For example, Vermont AG T.J. Donovan issued a directive for law enforcement outlining guidance for the enforcement of the state’s COVID-19 Executive Order that, among other things, extended authority to the state Department of Public Safety to inspect the premises and records of any employer to ensure compliance with the Executive Order.9 Other state AGs are enforcing their states’ Executive Orders with similar diligence: New York AG James ordered over 70 medical transportation companies to stop providing group rides;10 Michigan AG Dana Nessel sent a letter to home improvement store Menards in the wake of reports that the retailer had engaged in business practices that would endanger consumers and employees contrary to the Executive Order issued by Michigan Governor Gretchen Whitmer;11 and Delaware law enforcement officials even issued cease and desist orders to a barber shop and a tobacco shop.12

As the economy begins to incrementally ‘reopen’ in the weeks and months to come, companies should document every step taken to protect their customers and employees as well as the rationale underlying those measures. The far-reaching effects of the COVID-19 pandemic are unlikely to subside until a vaccine becomes publicly available. Thus, state AGs are likely to continue to probe companies aggressively about safety measures taken to protect their customers and employees; adherence to government policies and interpretative guidance; their definition of essential employees; and whether the company contributed to the spread of the virus.

State AGs are the top law enforcement officers in their states and will continue to act to protect their citizens during, and long after, the COVID-19 crisis is over. Industry should be on the lookout for measures taken by state AGs to identify and prosecute fraud and perceived price gouging during the COVID-19 pandemic, and should comply with laws and Executive Orders as diligently as possible. What constitutes the requisite compliance with social distancing – both now and as the economy begins to reopen – and what constitutes an essential service are often somewhat subjective and may require the consult of counsel. Cadwalader’s state AG practice is regularly in close communication with state AG offices and is well-positioned to provide guidance to clients that may be in receipt of an inquiry from a state AG, and we stand ready to continue to assist clients as they navigate the implications of the COVID-19 pandemic.

1   https://www.justice.gov/opa/pr/attorney-general-william-p-barr-urges-american-public-report-covid-19-fraud

2 https://www.cadwalader.com/state-attorney-general-insider/index.php?nid=6&eid=34

3  https://www.attorneygeneral.gov/wp-content/uploads/2020/03/03_25_2020_Multistate-letter.pdf

4   On April 21, 2020, Tennessee AG Slatery announced that a settlement had been reached with the two men to resolve allegations of price gouging; all supplies were surrendered to a nonprofit organization in Tennessee and a portion of the supplies were distributed to officials in Kentucky, and the two men were prohibited from selling emergency or medical supplies grossly in excess of the price generally charged during any declared state of abnormal economic disruption related to the COVID-19 pandemic.

5  https://www.mass.gov/news/ag-healey-issues-emergency-regulation-prohibiting-price gouging-of-critical-goods-and-services

6  https://ag.ny.gov/press-release/2020/ag-james-price gouging-will-not-be-tolerated

7  https://www.njconsumeraffairs.gov/News/Pages/03172020.aspx

8   http://www.myfloridalegal.com/newsrel.nsf/newsreleases/A32615BF3942B33E8525854300514289?Open&

9  https://www.attorneygeneral.gov/wp-content/uploads/2020/03/03_25_2020_Multistate-letter.pdf

10  https://ag.ny.gov/press-release/2020/attorney-general-james-orders-78-transport-providers-immediately-stop-endangering

11  https://www.michigan.gov/coronavirus/0,9753,7-406-98158-523976–,00.html

12 https://www.delawarepublic.org/post/delaware-flagging-non-essential-businesses-open-during-shutdown

© Copyright 2020 Cadwalader, Wickersham & Taft LLP

For more on AG’s Enforcement Activities around COVID-19 Fraud see the National Law Review Coronavirus News section.

Connecticut Further Revises “Safe Workplace Rules for Essential Employers,” Requiring All Employees to Wear Face Masks or Face Coverings At All Times

On April 17, 2020, the Connecticut Department of Economic and Community Development materially revised its previously issued “Safe Workplace Rules for Essential Employers.” Now, all employees working at every workplace that remains open during the COVID-19 pandemic must wear a face mask or face cloth covering at all times.

Employers are required to provide masks or face coverings to employees and, if infeasible because of supply-chain shortages, employers must provide materials for employees to make their own masks or face coverings. Employers must provide these materials, along with the Centers for Disease Control tutorial showing how to make masks and face coverings or, alternatively, compensate employees for reasonable and necessary costs to make their own masks and face coverings.

The new requirements do not apply to employees whose health or safety would be negatively impacted by wearing a mask or face covering due to a medical condition.  And employees are not required to produce medical documentation to verify the stated condition.

© 1998-2020 Wiggin and Dana LLP

For more on states’ COVID-19 legislation, see the Coronavirus News section of the National Law Review.

COVID-19 Pandemic: Streamlining Financial Institution Regulation to Encourage Lending

In recent weeks, regulators of U.S. financial institutions have heeded calls to relax or provide temporary relief from a wide array of regulations that are viewed as impediments to lending in the current crisis environment.  Some of these actions were mandated (or reinforced) by provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).  Many of the relevant regulations were enacted following the 2008/2009 financial crisis with the goal of strengthening the capital and liquidity positions of financial institutions and limiting their risk taking. The current economic and credit crisis has brought into clear relief the tensions between protecting and limiting risk-taking of financial institutions, and ensuring that those financial institutions have the capacity to lend to support the economy in a crisis, and the changes below make clear that market participants and regulators are increasingly concerned that certain regulations may limit flexibility and credit formation in a crisis like the COVID-19 pandemic.  Below we present a summary of some of the most significant recent changes that have been enacted by regulators or via statute. If you have questions about what these changes mean for your business or a financial institution you transact with, please reach out to the listed authors or your regular Polsinelli contacts.

Regulatory Streamlining Changes That Have Been Recently Adopted:

  • Changes to Financial Institution Capital Requirements in Connection with Paycheck Protection Program Lending Facility and Paycheck Protection Program (PPP):  Existing capital requirements may constrain lending by increasing the amount of equity or other capital that banks must have to support expanded lending, particularly loans that would be assigned a higher risk weighting under existing capital rules.  Additionally, the Federal Reserve’s PPP Lending Facility operates by lending to banks against PPP loans they have originated, which would also have a regulatory capital impact to participating institutions.  To provide liquidity to small business lenders and relief to small businesses, a provision in the CARES Act [1], as implemented with a joint interim final rule issued by the Federal Reserve and other banking regulators [2], (1) provides that PPP loans guaranteed by the Small Business Administration (SBA) will be assigned a zero risk weight under the risk-based capital rules and (2) effects changes to the regulatory capital treatment of utilizing the PPP Lending Facility, which, together, should neutralize the regulatory capital effect of banks increasing lending under the PPP and financing those loans via the Federal Reserve’s PPP Lending Facility.

  • Limiting Troubled Debt Restructurings (TDRs) Determinations: Generally, under U.S. GAAP, lenders are required to treat loans modified due to borrower financial distress as TDRs, which triggers additional reporting obligations and accounting requirements.  Federal and State bank regulators have acted to collectively encourage financial institution to work with borrowers have indicated that they and will not direct supervised institutions to automatically categorize COVID-19 related loan modifications as troubled debt restructurings (TDRs). [3]  Additionally, the CARES Act allows lenders to suspend such determinations, with certain limitations, with respect to loan modifications from March 1, 2020 through the earlier of December 1, 2020 and 60 days after the end of the declared public health emergency. [4]

  • Delay of Application of Current Expected Credit Loss (“CECL”) to Financial Institutions: FASB auditing standards require that financial institutions recognize the inherent losses in their loan and lease portfolios. CECL is a new methodology for measuring the inherent losses, and requires lenders to estimate and report expected credit losses at origination of a loan, rather than when a loan becomes distressed. The Federal Reserve and other banking agencies issued a joint interim final rule authorizing an extension in the transition period for implementing the full effects of CECL, which is intended to delay any impact that CECL might have on regulatory capital (and therefore lending). [5]  Additionally, the CARES Act specifies that insured depository institutions, bank holding companies and affiliates would not be required to adopt the standard prior to the earlier of December 31, 2020 and the termination of the declaration of national emergency—however market participants have raised questions about whether that would still require them to comply for the 2020 reporting period. [6]  Separate adoption dates apply for smaller financial institutions, and have also been delayed.

  • Temporary Change to Federal Reserve Supplementary Leverage Ratio Rule: The Supplementary Leverage Ratio applies to large financial institutions to limit their total leverage exposure. The change would exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation until March 31, 2021, and would therefore allow those institutions to expand their balance sheets and potentially provide additional credit to households and businesses. [7]

  • Temporary Change to Community Bank Leverage Ratio: Under existing law, qualifying community banking organizations have the option to adopt a simplified 9% leverage ratio in lieu of complying with the full panoply of BASEL III capital rules (those financial institutions meeting the leverage ratio requirement are generally deemed to be well capitalized for prompt corrective action purposes). A provision of the CARES Act, [8] as implemented by interim final rules of the Federal Reserve and other banking regulators, temporarily reduces the applicable leverage ratio to 8% (with a graduated transition to 8.5 % in 2021 and back to 9% thereafter) and provides for a grace period for covered institutions whose leverage ratios fall below the applicable requirement. [9]

  • Technical Changes to Total Loss Absorbing Capital Rules (“TLAC”): TLAC rules require global systemically-important  banks to maintain loss-absorbing long term debt and other tier 1 capital at specified levels.  The Federal Reserve System revised the definition of eligible retained income for purposes of the TLAC rules. This technical change allows covered companies to continue to lend and utilize their capital buffers in a gradual manner without severely constraining their ability to distribute capital. [10]

  • Deferral of Appraisals and Evaluations for Real Estate Transactions Affected by COVID-19: The federal banking agencies have issued a final interim rule [11] allowing lenders to defer certain appraisals and evaluations for up to 120 days after closing of residential or commercial real estate loan transactions to provide temporary relief by enabling regulated institutions to continue to close loans even if they are unable to arrange an appraisal/evaluation ahead of closing. [12] Real estate transaction involving acquisitions, development and constructions are excluded from the scope of the interim final rule. The temporary relief provisions will expire on December 31, 2020, unless extended. The National Credit Union Administration (NCUA) will consider a similar proposal on April 16, 2020. [13] The federal agencies along with NCUA and the Consumer Financial Protection Bureau have issued a joint statement offering guidance and describing temporary changes to Fannie Mae and Freddie Mac appraisal standards to provide assistance to lenders. [14]

  • Federal Reserve Regulatory Reporting Relief for Small Institutions: The Federal Reserve will not take action against a financial institution with $5 billion or less in total assets for submitting its March 31, 2020, Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) or Financial Statements of U.S. Nonbank Subsidiaries of U.S. Bank Holding Companies (FR Y-11) after the official filing deadline, as long as the applicable report is submitted within 30 days of the official filing due date. [15] The federal financial institution regulators and state regulators also offer similar relief to financial institutions affected by COVID-19. [16]

  • Temporary Modification to Wells Fargo Growth Restriction Order: One of the consequences of the Wells Fargo account opening scandal was a 2018 Consent Order that, among other things, restricted Wells Fargo’s asset growth until it met certain requirements. In light of the extraordinary events related to the COVID-19 pandemic, the Federal Reserve amended that order to temporarily lift the asset restriction to allow Wells Fargo to continue lending without violating the limits in the order. [17]

  • Six-Month Delay of the Federal Reserve’s Revised Control Framework:  The Revised Control Framework would have changed the determination of “control” for purposes of the Bank Holding Company Act and therefore the application of certain bank regulatory requirements.  The delay moves the effective date to September 30, 2020 to give additional time for implementation as well as for institutions to consult with the Federal Reserve on the effect of the change. [18]

  • Early adoption of Standardized Approach for Measuring Counterparty Credit Risk Rule (“SA-CCR”): SA-CCR is a new methodology for measuring counterparty credit risk of derivatives contracts for regulatory capital purposes, The Federal Reserve and other banking regulators issued a joint notification allowing the companies early adoption of SA-CCR by banks and bank holding companies, with the intent that the early adoption could reduce regulatory capital requirements and therefore encourage lending. [19]

[1] 26 U.S.C. §1102.

[2] Federal Reserve, Interim Final Rule, Regulatory Capital Rule: Paycheck Protection Program Lending Facility and Paycheck Protection Program Loans (amending Sections 32 and 131 of the capital rule) https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200409a1.pdf.  See, 12 CFR 3.2, 12 CFR 3.32(a)(1)(iii), 12 CFR 3.131(e)(3)(viii) and 3.305 (OCC); 12 CFR 217.2, 12 CFR 217.32(a)(1)(iii), 12 CFR 217.131(e)(3)(viii) and 12 CFR 217.305 (Federal Reserve); 12 CFR 324.2, 12 CFR 324.32(a)(1)(iii), 12 CFR 324.131(e)(3)(viii) and 12 CFR 324.304 (FDIC).

[3]  Federal Reserve et al. Press Release, Agencies Provide Additional Information to Encourage Financial Institutions to Work with Borrowers Affected by COVID-19 (March 22, 2020) https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200322a.htm. See, also, Federal Reserve et al. Press Release, Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (March 22, 2020) https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200322a1.pdf; Federal Reserve et al. Press Release, Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (Revised) (April 7, 2020) https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200407a1.pdf.

[4] 26 U.S.C. §4013.

[5] Federal Register, Regulatory Capital Rule: Revised Transition of the Current Expected Credit Losses Methodology for Allowances (March 31, 2020) https://www.federalregister.gov/documents/2020/03/31/2020-06770/regulatory-capital-rule-revised-transition-of-the-current-expected-credit-losses-methodology-for.

[6] 26 U.S.C. §4014.

[7] Federal Reserve Press Release, Federal Reserve Board announces temporary change to its supplementary leverage ratio rule to ease strains in the Treasury market resulting from the coronavirus and increase banking organizations’ ability to provide credit to households and businesses (April 1, 2020) https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200401a.htm.

[8] 26 U.S.C. §4012.

[9] Federal Reserve, Interim Final Rule, Regulatory Capital Rule: Temporary Changes to the Community Bank Leverage Ratio Framework, (amending 12 CFR Chapters I, II and III), https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200406a1.pdf; Federal Reserve, Interim Final Rule, Regulatory Capital Rule: Transition for the Community Bank Leverage Ratio Framework, (amending 12 CFR Chapter I, II and III), https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200406a2.pdf

[10] Federal Register, Total Loss-Absorbing Capacity, Long-Term Debt, and Clean Holding Company Requirements for Systemically Important U.S. Bank Holding Companies and Intermediate Holding Companies of Systemically Important Foreign Banking Organizations: Eligible Retained Income (March 26, 2020) https://www.federalregister.gov/documents/2020/03/26/2020-06371/total-loss-absorbing-capacity-long-term-debt-and-clean-holding-company-requirements-for-systemically.

[11] Federal Reserve, Interim Final Rule, Real Estate Appraisals (amending 12 CFR 34, 12 CFR 225 and 12 CFR 323), https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200414a1.pdf. See, 12 CFR 34.43 (OCC); 12 CFR 225.63 (Federal Reserve); 12 CFR 323.3 (FDIC).

[12] Federal Reserve et al., Press Release, Federal Banking Agencies to Defer Appraisals and Evaluations for Real Estate Transactions Affected by COVID-19 (April 14, 2020) https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200414a.htm. 

[13] Id.  

[14] Federal Reserve et al., Interagency Statement on Appraisals and Evaluations for Real Estate Related Financial Transactions Affected by the Coronavirus (April 14, 2020) https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200414a2.pdf.

[15] Federal Reserve Press Release, Federal Reserve offers regulatory reporting relief to small financial institutions affected by the coronavirus (March 26, 2020) https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200326b.htm.

[16] FFIEC Press Release, Financial Regulators Highlight Coordination and Collaboration of Efforts to Address COVID-19 (March 25, 2020) https://www.ffiec.gov/press/pr032520.htm.  

[17] Consent Order, In the matter of Wells Fargo & Company, Docket No. 20-007-B-HC, United States of America before the Board of Governors of the Federal Reserve System Washington, D.C., filed April 8, 2020, https://www.federalreserve.gov/newsevents/pressreleases/files/enf20200408a1.pdf.

[18] Federal Reserve Press Release, Federal Reserve Board announces it will delay by six months the effective date for its revised control framework (March 31, 2020) https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200331a.htm. 

[19] Federal Register, Standardized Approach for Calculating the Exposure Amount of Derivatives Contracts (March 31, 2020) https://www.federalregister.gov/documents/2020/03/31/2020-06755/standardized-approach-for-calculating-the-exposure-amount-of-derivative-contracts

© Polsinelli PC, Polsinelli LLP in California

For more on COVID19 related lending, see the Coronavirus News section of the National Law Review.

Social Distancing During Wedding Season: Mitigating Loss and Securing Insurance Coverage

In a typical year, March flowers hint at wedding showers soon to be celebrated.  But 2020 is not a typical year.  As travel and crowd size restrictions continue to tighten, the wedding industry—which relies on large gatherings of people, many of whom travel for the occasion—has been and will continue to be significantly impacted.  And wedded bliss is big business; as reported by NPR, “Americans spent $54 billion on more than 2 million weddings” in 2019.

As my colleagues have noted, insurance may be an invaluable resource to businesses impacted by the coronavirus and related restrictions.  How does this apply to the wedding industry, including venues, event planners, photographers, videographers, caterers, musicians, florists, and potentially airlines, hotels, and online travel vendors?

For all such businesses, vendors’ own losses (also known as “first-party claims”) may be covered by the following types of insurance:

  • Property Insurance, which can apply when a property cannot be used for its intended purpose, even absent structural damage or destruction. Thus, for example, the contamination of a wedding venue, rehearsal dinner site, church, photography studio, or other location due to the presence of coronavirus may be covered.
  • Business Interruption Insurance, which is designed to reimburse policyholders for profits lost due to a covered risk. Such insurance may apply both for amounts lost while a company is out of operation and while the company has resumed operation and is working back up to full capacity.
  • Contingent Business Interruption Insurance, which covers loss sustained by one company as a result of impacts on a third party, such as a supplier. For example, loss may be sustained by a domestic wedding vendor because a dress ordered from China will be delivered late due to restrictions in place there.  And given how many vendors can work together on a single wedding, this coverage type could conceivably apply to more than one loss in connection with a single event.
  • Business Income Insurance, which may apply to loss of income that results from governmental orders that limit the business’s ability to operate. Although such coverage often is time-limited, how those limits apply will—as always—be subject to specific policy language and facts.
  • Event Cancellation Insurance, which generally applies when loss results from a cause “beyond the insured’s control.” Although this coverage typically is discussed in the context of concerts and the like, if contained in vendors’ policies, it could apply to wedding-related losses as well.

Regardless of the insurance type, vendors would be wise to keep records of how virus-related restrictions impact their business.  Those facts will be key to any claim.

Vendors also may seek coverage for claims filed against them if, for example, they provided services for a wedding that occurred before restrictions were put in place and attendees were exposed to the virus.  Such third-party claims potentially could be covered by General Liability Insurance, Workers’ Compensation Insurance, and Employers’ Liability Insurance.

When submitting a claim for first- or third-party losses, policyholders should expect insurers to reserve rights or deny claims based on limitations in the policies that may, on their face, appear to apply.  However, policyholders should never accept at face value an insurer’s reservation or denial.  For one thing, limitations on coverage are construed narrowly, and whether they apply depends on specific policy language and facts.  For another, if reasonable people could read a coverage limitation differently, the policy is ambiguous, and will be construed in favor of coverage.

Finally, regardless of the type of insurance, a key factor for the wedding industry will be mitigation, or minimizing loss.  Common law and many insurance policies require policyholders to try to minimize the negative impact of an event on their business.  For wedding vendors, this might mean accommodating couples by postponing services.  That, in turn, means that vendors ultimately will receive payment, but only after a gap in income.  In an industry that tends to be locally based and relies on word of mouth, this approach is a smart business practice.  And, in some instances, insurers may reimburse policyholders for both the amount they spend to minimize loss (e.g., costs associated with finding a new date and dealing with associated logistics), any income they lose during the “gap” period that they are unable to defer, and the opportunity costs resulting from weddings being rescheduled when others might otherwise have taken place.  In short, working with your clients to save their big day might be the right choice in more ways than one.

© 2020 Gilbert LLP

ARTICLE BY Jenna A. Hudson of Gilbert LLP.
For more on COVID-19 impacts on various industries, see the National Law Review Coronavirus News section.

Could the COVID-19 Pandemic Impact Child Custody and Relocation?

As a result of the COVID-19 pandemic, many face uncertainty about their jobs and careers. The last week of March saw 6.6 million Americans applying for unemployment benefits, and many more experienced reduction in their compensation. The uncertainty could lead to more people choosing to relocate closer to family or take jobs that may require them to relocate for different economic opportunities. If you share physical custody of your children with their parent, what should you consider before making the decision to relocate?

Under Michigan law, a parent is prohibited from relocating a child, whose custody is governed by a court order, more than 100 miles from the child’s legal residence at the time of the original court order. As a result, parents who share custody of their child and want to relocate will need court permission. MCL 722.31. The court analyzes a parent’s request to move with a child in four steps. The first is to determine whether the relocating parent can support the move of the child by analyzing the following factors:

  1. Whether the legal residence change has the capacity to improve the quality of life for both the child and the relocating parent.
  2. The degree to which each parent has complied with and utilized his or her time under a court order governing parenting time with the child and whether the parent’s plan to change the child’s legal residence is inspired by that parent’s desire to defeat or frustrate the parenting time schedule.
  3. The degree to which the court is satisfied that, if the court permits the legal residence change, it is possible to order a modification of the parenting time schedule and other arrangements governing the child’s schedule in a manner that can provide an adequate basis for preserving and fostering the parental relationship between the child and each parent, as well as whether each parent is likely to comply with the modification.
  4. The extent to which the parent opposing the legal residence change is motivated by a desire to secure a financial advantage with respect to a support obligation.
  5. Domestic violence, regardless of whether the violence was directed against or witnessed by the child.

MCL 722.31

What impact, if any, does the COVID-19 pandemic have on a court’s analysis of the above factors? First of all, as far as the COVID-19 pandemic relates to the potential quality of life of a particular geographic region, as more and more data becomes available regarding the outbreak, certain regions of the country that found themselves more susceptible to COVID-19 may be less likely to increase the quality of life for a parent and child. Certain geographic areas may pose more of a health risk to families until the development of a vaccine. Second, many parents, although acting reasonably and in the best interests of their child, have informally agreed to modify their parenting time due to Gov. Whitmer’s Stay Home, Stay Safe order. Although it is difficult to imagine a court would criticize a parent for putting a child’s health first, lapses in parenting time and parental absence can dramatically impact a child’s relationship with a parent, which a court may be hard pressed to ignore, despite good intentions. At the end of the day, a parent’s desire to provide more stable financial and family support during this uncertain time may not necessarily result in a court approving the move.

© 2020 Varnum LLP

For more on family & other laws affected by COVID19, see the Coronavirus News section of the National Law Review.

To Provide an N95 Mask or Not to…That is the Question Plaguing Some Employers (US)

One of the biggest questions plaguing employers during the COVID-19 pandemic is whether or not to provide employees with respirators—the holy grail of all PPE at this time. On March 11, 2020, the White House issued a Presidential Memorandum, entitled “Making General Use Respirators Available,” which mandated all necessary efforts by the government and public at large to make respiratory devices available for use by healthcare workers during the COVID-19 pandemic to mitigate against further transmission of the virus. In response, OSHA has issued several forms of temporary enforcement guidance for the Respiratory Protection standard, as well as its April 13, 2020 Interim Enforcement Response Plan for Coronavirus Disease 2019 (COVID-19), and both the healthcare and general industries have scrambled to comply with this exacting standard in the face of extensive shortages.

As we recently discussed here, OSHA issued two enforcement guidance memos on April 3, 2020, regarding issues surrounding the use of respiratory equipment. The first memorandum discusses the use of respiratory protection and the N95 mask shortage due to COVID-19, specifically outlining enforcement discretion to permit the extended use and reuse of respirators, as well as the use of respirators that are past their manufacturer’s recommended shelf life—when following the directions set forth in the memorandum (i.e., attempting to obtain other NIOSH-approved respirators and using all other feasible engineering controls) and when used as recommended by the CDC. The reasoning behind the memorandum is the sad fact that the pandemic has limited the availability for N95 filtering facepiece respirators to only workers in the healthcare and emergency response fields (and even then there are not enough respirators to go around). The second memorandum provides similar guidance on the use of respiratory protection equipment certified under the standards of other countries or jurisdictions during the COVID-19 pandemic, if the methods set forth in the first memoranda are unavailable. Both memoranda explicitly explain their application to both (1) healthcare personnel exposed to actual and potential COVID-19 patients, as well as (2) workers exposed to other respiratory hazards due to the shortage of respirators resulting from the COVID-19 pandemic response.

On April 8, 2020, OSHA issued further guidance and announced the expansion of temporary guidance provided in a March 14, 2020 memorandum regarding supply shortages of N95 masks or other filtering facepiece respirators (FFRs) due to the COVID-19 pandemic. The memorandum expands application of mandatory fit-testing requirements in the March 14 memorandum beyond healthcare to all workplaces covered by OSHA—where there is required use of respirators—and explains that “OSHA field offices will exercise enforcement discretion concerning the annual fit-testing requirements, as long as employers have made good-faith efforts to comply with the requirements of the Respiratory Protection standard and to follow the steps outlined in the March 14, 2020 memorandum.”

Notably, all three memoranda outline some version of this statement: “Due to the impact on workplace conditions caused by limited supplies of N95 FFRs, all employers should reassess their engineering controls, work practices, and administrative controls to identify any changes they can make to decrease the need for N95 respirators. Employers should, for example, consider whether it is possible to increase the use of wet methods or portable local exhaust systems or to move operations outdoors. In some instances, an employer may also consider taking steps to temporarily suspend certain non-essential operations.” OSHA also clarified that “[a]ll employers whose employees are required to use or are permitted voluntary use of respiratory protection must continue to manage their respiratory protection programs (RPPs) in accordance with the OSHA respirator standard, and should pay close attention to shortages of N95s during the COVID-19 pandemic. Paragraph (d)(1)(iii) in section 1910.134 requires such employers to identify and evaluate respiratory hazards in the workplace, and paragraph (c)(1) requires employers to develop and implement written RPPs with worksite-specific procedures and to update their written programs as necessary to reflect changes in workplace conditions that affect respirator use.” OSHA confirmed this fact in its April 13, 2020 Interim Enforcement Response Plan, where it again focused on healthcare and emergency response job tasks with “high” and “very high” occupational exposure risk to COVID-19.

So who should be provided respirators in the first place then? OSHA has not yet put forth any guidance saying that it will require (or even recommend, consistent with CDC guidance for the general public) NIOSH-approved respiratory protection in the typical working environment, except for employees working within 6 feet of patients “known to be, or suspected of being, infected with SARS-CoV-2 and those performing aerosol-generating procedures.” The agency has also clarified that the use of PPE, including respiratory protection, should not take the place of other prevention strategies.

However, whether respiratory protection is required is still a case-by-case analysis, the outcome of which will be dependent on each employer’s internal hazard assessment and the risk category within which the employer’s workers fall (as described in OSHA’s guidance). Only for high risk and very high risk positions does OSHA recommend the use of respiratory protection, including NIOSH-approved N95 devices, as well as face shields or goggles—in accordance with CDC guidance for hospital preparedness. For medium risk workplaces, the guidance notes that situations requiring employers to use respirators are rare. And for lower risk workplaces, OSHA does not even recommend additional PPE, let along respirators. Instead, the agency directs that “[w]orkers should continue to use the PPE, if any, that they would ordinarily use for other job tasks.” Therefore, employers falling into the latter two categories that want to provide respiratory protection may be stuck between a rock and a hard place until supply levels increase and agency guidance expands.

That said, OSHA recognizes the difficulties at hand and has clarified that its inspectors will be given specific enforcement discretion when enforcing the Respiratory Protection standard during the COVID-19 outbreak. In exercising this discretion, inspectors are instructed to refer to OSHA’s guidance outlined herein, to continue to check for additional or modified guidance, and to always assess “whether the employer is making a good-faith effort to provide and ensure workers use the most appropriate respiratory protection available for exposures to SARS-CoV-2.” Per OSHA’s Interim Enforcement Response Plan, assessing good-faith efforts will be accomplished by the following:

  • Implementing the hierarchy of controls in an effort first to eliminate workplace hazards, then using engineering controls, administrative controls, and safe work practices to prevent worker exposures to respiratory hazards;
  • Prioritizing efforts to acquire and use equipment according to OSHA’s guidance memorandum above;
  • Performing a user seal check each time an employee dons a respirator, regardless of whether it is a NIOSH-certified device or not, and do not use a respirator on which they cannot perform a successful user seal check; and
  • Training workers to understand proper usage, maintenance, sanitation, and storage of respirators and other PPE.

In other words, it is hard to get respirators in the first place, even for healthcare and emergency workers falling into the high and very high risk categories. So, employers must implement comprehensive backup plans involving the use of engineering controls, administrative controls, safe work practices, and other appropriate PPE. However, if respirators are available for your workers, and they need and are provided respirators for their particular position, they must be used in the context of a comprehensive respiratory protection program that meets the requirements of OSHA’s Respiratory Protection standard (29 CFR 1910.134), at least to the greatest extent possible, including the requirements for medical exams, fit testing, and training.

© Copyright 2020 Squire Patton Boggs (US) LLP

For more on respirator availability & usage, see the National Law Review Coronavirus News section.