Category: Labor & Employment

Emergency Paid Leave — Making it Work

The Families First Corona Virus Response Act creates a new entitlement – for workers – to receive paid sick leave and paid FMLA between April 1 and December 31, 2020.[i]  If the virus is contained in the next six to eight weeks as hoped, we can expect the economic impact on workers to be most severe in April, May and June 2020.  The Families First Act is intended to help as many individuals as possible to avoid financial exigency, job loss and loss of health insurance during this critical window. Emergency paid leave is funded at 100 percent by a federal tax offset and rebate.

This is not an employer v. employee situation.  Employers do not want to lay off their employees.  Layoffs create instability and have a significant economic domino effect.  Employees lose their income and benefits and, possibly, accept other employment in the short term out of necessity.  Employers may struggle to regroup and regain their markets if their trained workers are unavailable.  The ramifications of sudden mass unemployment are passed along through landlords and mortgage lenders, unpaid service providers and the emergency rooms that replace health insurance.

As clients adapt to the new normal, lawyers need to do the same.  Risk mitigation in the current environment requires thoughtful legal analysis supported by the capacity for change.  Two recent questions under the Families First Act illustrate the paradigm shift –

Emergency Paid Sick Leave – is a state shelter at home order a “State … quarantine or isolation order related to COVID-19”?

The Families First Act created temporary emergency paid sick leave accessible under six circumstances.[ii]  The first is when the employee is “subject to a Federal, State or local quarantine or isolation order related to COVID-19.”[iii]  Last month, as states rapidly issued shelter at home orders, employers and employees wanted to know whether a shelter at home order was a quarantine or isolation order entitling employees to paid sick leave.

The Wage and Hour Division published sub-regulatory guidance on March 23, 2020, (since updated several times) called Families First Coronavirus Response Act: Questions and Answers.  The WHD’s guidance did not initially answer the quarantine order question.  Questions 23-27 explained that emergency paid sick leave is not available when an employer has “closed” the employee’s worksite or furloughed the employee. [iv] The employee’s worksite is “closed” when the employer “sends the employee home” and “stops paying” the employee because the employer does not have work for the employee to do.  Under these circumstances, the employee is not entitled to take emergency paid sick leave.

A shelter at home order requires all individuals present within the state or local government’s boundaries to “stay at home or in their place of residence” with exceptions described in the order.[v] 

According to the common wisdom, although the Families First Act made no reference to it, the Centers for Disease Control and Prevention’s definition of quarantine applied.  The CDC’s definition of quarantine — separating and restricting the movement of people who were exposed to a contagious disease to see if they become sick — is discussed on the CDC’s webpage regarding ports of entry and land border crossings.[vi]  Using the CDC’s definition precludes the use of emergency paid sick leave for employees unable to work due to a state or local shelter at home order.

The legal analysis did not support the more restrictive reading.  The Emergency Paid Sick Leave Act does not make any reference to the CDC’s definition.  The related Congressional Record does not mention the CDC’s definition.  The Congressional Record for the compressed time during which Congress debated and then passed the Families First Act is explicit in its bipartisan emphasis on using taxpayer funded emergency paid leave to mitigate hardship for employees and employers.

The rules of statutory construction would not allow a court or administrative agency to read the CDC’s definition into the legislation.  The U.S. Supreme Court recently reiterated that courts are to enforce plain and unambiguous statutory language according to its terms.  In Intel Corporation Investment Policy Committee v. Sulyma, the Court relied on the dictionary definition of the word “actual” (“existing in fact or reality”) to confirm the meaning of the ERISA notice requirement of “actual knowledge.”[vii]

The Merriam-Webster Dictionary defines “quarantine” as “a restraint upon the activities or communication of persons or the transport of goods designed to prevent the spread of disease or pests.” [viii]  Shelter at home orders clearly qualify.

On April 3, 2020, the WHD confirmed that a state or local shelter at home order is a quarantine order for the purposes of the Emergency Paid Sick Leave Act.  With this context in mind, rather than looking for ways to avoid it, affected employers and employees should be encouraged to use an expansive view of Emergency Paid Sick Leave.

Emergency Family and Medical Leave Expansion Act – is it reasonable for the WHD to limit or prevent employees who recently used FMLA leave from the full use of Emergency Family and Medical Leave?

In contrast to the WHD’s initial silence on shelter at home orders, the guidelines clearly advised that FMLA time is limited to 12 weeks regardless of the entitlement.  The WHD’s guidance on this question does not seem reasonable when considered in light of the intent of the Families First Act and the likely consequences of applying it as advised.

An argument could be made that the WHD is creating, rather than interpreting, legislation by adding a limitation to the Families First Act that Congress did not intend.

Section 2612(a)(1) of the Family and Medical Leave Act entitles eligible employees to a total of twelve workweeks of unpaid leave during any 12-month period when the employee experiences “one or more” of five situations.[ix]  The same definitions of eligible employee and covered employer apply for each category of unpaid leave.

The Emergency Family and Medical Leave Expansion Act adds a fifth entitlement.  Section (F) creates a temporary nine month right to federally-financed paid childcare leave.[x]  A completely different eligible employee is entitled to a total of 12 workweeks from a completely different covered employer between April 1 and December 31, 2020, for a completely different reason, “because of a qualifying need related to a public health emergency in accordance with section 2620 [i.e., loss of access to child care or school].”

Although it is a new entitlement that is temporary, limited in time and applicable to a different set of employees and employers, the WHD restricted access to Emergency Family and Medical Leave.  Employees cannot take more than twelve total weeks of any FMLA leave during the employer’s 12-month unpaid leave administrative period.[xi]

This means employees who took unpaid FMLA leave in the first quarter of 2020 or earlier in their employer’s administrative period are partially or fully excluded from taking Emergency Family and Medical Leave.  These employees, by definition, are now at a much higher risk of job loss through no fault of their own.  Sudden job loss in the current environment is more likely to cause these families to lose their health insurance because they may experience longer periods of unemployment.  Loss of health insurance and the inability to pay medical bills is the most significant contributor to financial hardship and bankruptcy with all of the related economic reverberations.

It could be argued that the WHD has legislated an unintended restriction into the EFML Expansion Act.  Consistent with its decision in King v. Burwell, the U.S. Supreme Court recently limited Chevron deference in similar cases where agency guidance created prescriptive limits that do not exist in the legislation.  In Smith v. Berryhill, the Court noted, “[a]lthough agency determinations within the scope of delegated authority are entitled to deference, it is fundamental ‘that an agency may not bootstrap itself into an area in which it has no jurisdiction.’”[xii]

The Emergency Family and Medical Leave Expansion Act entitlement is unique.  It applies to small employers with fewer than 500 employees who will receive tax credits for the leave payments.  The twelve-month availability period in the original FMLA is replaced by the quick start and hard stop nine-month Emergency Family and Medical Leave Expansion Act period of April 1 to December 31, 2020, after which the paid child care leave entitlement (hopefully) ends.  The standard FMLA eligibility requirements are replaced with the 30-day employment eligibility period.  The reason for the leave, to care for children because schools and daycare centers are closed, is situationally unique.

Most importantly, the EFML Expansion Act is a paid leave.  It is a significant, and significantly enhanced, entitlement for the people it is intended to help.  The legislative history clearly addresses the limited emergency parameters of this legislation and emphasizes that it is intended to be applied to workers as inclusively as possible.[xiii] Wages paid for EFML are reimbursed by the federal government at 100 percent.

Employees who used FMLA time in Q1 2020 (or within their FMLA administrative year) are, arguably, most in need of Emergency Family and Medical Leave.  They may suffer the most extreme consequences without it.

Employees who used FMLA time in 1Q 2020/admin year gave birth or welcomed an adopted or foster child into their home, received treatment for their own serious health condition or cared for a family member.  They are much more likely to need continuation of their employer-sponsored health insurance at this time.  If they are now home-schooling their children or unable to access daycare, they have no resources.  Loss of income and health insurance through a layoff or furlough would be a disaster that will affect the family well into the future.

It is difficult to understand how the WHD would not consider the effect of the guidance on overburdened hospitals, clinics and emergency rooms.  What possible rationale could support an interpretation of the Emergency Family and Medical Leave Expansion Act that will force employers to deny paid Emergency Family and Medical Leave to the employees who may need it the most and push families into the ER for their health care because they have lost their health insurance?[xiv]

There is a workaround.  Section 2653 of the FMLA, titled “Encouragement of more generous leave policies”, says “[n]othing in this Act or any amendment made by this Act shall be construed to discourage employers from adopting or retaining leave policies more generous than any policies that comply with the requirements under this Act or any amendment made by this Act.”[xv]

In response to specific Congressional encouragement, employers covered under the Emergency Family and Medical Leave Expansion Act could reset their FMLA administrative period to April 1, 2020.  The reset would allow all eligible employees to receive up to 12 weeks of paid EFML between April 1 and December 31, 2020, when they may need it most.

Although the FMLA regulations require 60 day notice of an administrative period date change, they also re-emphasize that the employer should take every precaution to avoid reducing the employee’s FMLA entitlement and do everything possible to preserve the greatest benefit to the employee.[xvi]  As long as the employer is enhancing the FMLA entitlement for employees, the 60 day notice period should be waived.

To contribute at a higher level, lawyers should guard against assuming a reflexive defensive crouch and help employers and employees use the emergency legislation to mitigate economic distress.

[i] FAMILIES FIRST CORONAVIRUS RESPONSE ACT, PL 116-127, March 18, 2020, 134 Stat 178

[ii] SEC. 5102. PAID SICK TIME REQUIREMENT.

(a) IN GENERAL.—An employer shall provide to each employee employed by the employer paid sick time to the extent that the employee is unable to work (or telework) due to a need for leave because:

(1) The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID–19.

(2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19.

(3) The employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis.

(4) The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).

(5) The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter *196 has been closed, or the child care provider of such son or daughter is unavailable, due to COVID–19 precautions.

(6) The employee is 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.

FAMILIES FIRST CORONAVIRUS RESPONSE ACT, PL 116-127, March 18, 2020, 134 Stat 178

[iii] Id

[iv] Questions 23-27, https://www.dol.gov/agencies/whd/pandemic/ffcra-questions (accessed 04/14/2020)

[v] State of Wisconsin Department of Health Services Emergency Order #12 Safer at Home Order https://evers.wi.gov/Documents/COVID19/EMO12-SaferAtHome.pdf

NOW THEREFORE, under the authority of Wis. Stat. § 252.02(3) and (6) and all powers vested in me through Executive Order #72, and at the direction of Governor Tony Evers, I, Andrea Palm, Secretary-designee of the Wisconsin Department of Health Services, order the following:

1. Stay at home or place of residence. All individuals present within the State of Wisconsin are ordered to stay at home or at their place of residence, with exceptions outlined below.

[vi] See, https://www.cdc.gov/quarantine/. 

[vii] Intel Corp. Inv. Policy Comm. v. Sulyma, 140 S. Ct. 768 (2020)

[viii] https://www.merriam-webster.com/dictionary/quarantine

[ix] (a) In general

(1) Entitlement to leave

Subject to section 2613 of this title and subsection (d)(3), an eligible employee shall be entitled to a total of 12 workweeks of leave during any 12-month period for one or more of the following:

(A) Because of the birth of a son or daughter of the employee and in order to care for such son or daughter.

(B) Because of the placement of a son or daughter with the employee for adoption or foster care.

(C) In order to care for the spouse, or a son, daughter, or parent, of the employee, if such spouse, son, daughter, or parent has a serious health condition.

(D) Because of a serious health condition that makes the employee unable to perform the functions of the position of such employee.

(E) Because of any qualifying exigency (as the Secretary shall, by regulation, determine) arising out of the fact that the spouse, or a son, daughter, or parent of the employee is on covered active duty (or has been notified of an impending call or order to covered active duty) in the Armed Forces.

29 U.S.C.A. § 2612 (West)

[x] (F) During the period beginning on the date the Emergency Family and Medical Leave Expansion Act takes effect, and ending on December 31, 2020, because of a qualifying need related to a public health emergency in accordance with section 2620 of this title.

29 U.S.C.A. § 2612 (West)

[xi] Questions 44 and 45, https://www.dol.gov/agencies/whd/pandemic/ffcra-questions (accessed 04/14/2020)

[xii] Rather, “[a]lthough agency determinations within the scope of delegated authority are entitled to deference, it is fundamental ‘that an agency may not bootstrap itself into an area in which it has no jurisdiction.’”

Smith v. Berryhill, 139 S. Ct. 1765, 1778, 204 L. Ed. 2d 62 (2019) quoting Adams Fruit Co. v. Barrett, 494 U.S. 638, 649–650, 110 S.Ct. 1384, 108 L.Ed.2d 585 (1990).

[xiii] https://www.congress.gov/116/crec/2020/03/18/CREC-2020-03-18.pdf

[xiv] The issue of aggregating FMLA and EFML time is different than the question, not yet directly answered, of whether regular FMLA and EFML Expansion Act time runs concurrently after April 1, 2020.  The WHD did clarify that the EFML entitlement is limited to a total of 12 weeks.  In a temporary rule published April 10, 2020, the WHD explained that an eligible employee is entitled to no more than 12 weeks of EFML between April 1 and December 31, 2020, even if the employer’s FMLA administrative period runs from July 1 to June 30.  See, 29 CFR 826.70.

[xv] 29 U.S.C.A. § 2653 (West)

[xvi] 29 C.F.R. § 825.200(d)(1) says:

(d)(1) Employers will be allowed to choose any one of the alternatives in paragraph (b) of this section for the leave entitlements described in paragraph (a) of this section provided the alternative chosen is applied consistently and uniformly to all employees. An employer wishing to change to another alternative is required to give at least 60 days notice to all employees, and the transition must take place in such a way that the employees retain the full benefit of 12 weeks of leave under whichever method affords the greatest benefit to the employee. Under no circumstances may a new method be implemented in order to avoid the Act’s leave requirements.

Lewis Law Office, LLC copyright 2020. All rights reserved.

For more on the Emergency Paid Sick Leave law, see the National Law Review Coronavirus News section.

Brazil and India Act to Protect Employers and Employees During the COVID-19 Pandemic

The COVID-19 pandemic has altered the global workplace and international employer-employee relations in profound ways. As COVID-19 continues to spread, countries are enacting legislation and issuing guidance to support employers and employees as they confront the global crisis. In particular, Brazil, with a population of over 211 million, and India, with a population of approximately 1.3 billion, each has enacted measures to combat the ongoing economic and financial troubles caused by the COVID-19 pandemic.

Specifically, Brazil has issued federal provisional measures, including Provisional Measure No. 936 (“MP-936”) and Provisional Measure No. 927 (“MP-927”), to socialize the idea that employers may seek to reduce employees’ pay in exchange for greater job security. MP-936 provides for an Emergency Employment and Income Maintenance Program, including an Emergency Employment and Income Preservation Benefit (the “Benefit”), as well as policies for reducing salary and working hours and suspending employment agreements, and provisions for collective bargaining agreement (“CBAs”) meetings by virtual means. In particular, MP-936 and MP-927 provide for the following:

  • Salary and Hourly Reductions: MP-936 allows salary and hours reductions for up to a 90-day period. Each employee’s pay rate, hours and tenure must be preserved and reinstated upon the employee’s return to work. In the event of a reduction in salary and/or hours, the government is responsible for paying the Benefit. Employees who receive the Benefit still may receive unemployment insurance benefits. The amount of the Benefit that employees receive is based upon the amount of unemployment insurance to which they are entitled. For employees who earn less than R$3,135 or more than R$12,202.12 there is no obligation to have collective negotiations. There are various notice requirements for any salary and hours reduction, and an employer’s failure to comply may result in legal sanctions or fines. The presence of a CBA may provide for different reduction and notice requirements.
  • Suspension of Employment: MP-936 provides for suspension of employment agreements (e.g., furlough) for a period of up to 60 days, with the government paying a Benefit of 100% of the unemployment insurance to which employees are entitled. Employers are required to preserve employees’ current pay rate, hours and tenure, and employees are entitled to all employer-provided benefits. For employers who earned a gross revenue exceeding R$4,800,000 in 2019, the government will pay a Benefit of 70% of the employment insurance that employees are entitled to, provided that during the suspension period, employers pay to employeesfinancial support equal to 30% of employees’ salary. There are various notice requirements for any reduction. If employees work during a suspension, including engaging in any telework, then the suspension will be deemed not to have occurred, and legal sanctions and fines may be imposed upon employers. For employers whose income tax is calculated on the basis of actual income, financial support is deductible from the net revenue for purposes of calculating employers’ income tax. Note that redundancy terminations are considered terminations without cause, and employers have the sole discretion to determine selection criteria and severance packages.
  • Use of Accrued, Unused Paid Leave: MP-927 authorizes not only the use of accrued but unused paid leave, but also the use of holidays still being accrued, as well as holidays for which the accruing period has not even started.

India has imposed even broader employee protections that require employers to bear the heavy economic burden to support employees during the national lockdown. In response to the COVID-19 pandemic, the Indian government invoked special provisions of the Disaster Management Act, 2005 (the “DMA”) to implement a series of orders under the DMA (“Orders”) to impose a 21-day nationwide lockdown, effective March 25, 2020.

To counter the negative impact of the COVID-19 pandemic on India’s labor force, the Orders include strict directives for employers. The Orders prohibit employers from terminating any employees or contract labor during the lockdown, except for disciplinary reasons. In addition, the Orders bar employers from reducing employees’ wages. In addition, the Indian government has addressed the following issues that affect employers and employees:

  • Maintaining the Workforce: During the lockdown, employers should not reduce or stop salary payments or terminate employees. Similarly, employers may not reduce work hours and wages during the lockdown. Employers, however, may temporarily halt non-statutory benefits and postpone incentives until the business normalizes, provided that such measures adhere to employers’ internal policies, employee handbook provisions and/or employment agreements. In addition, employers may defer or suspend bonuses and annual increments for employees, subject to some narrow exceptions.
  • Paid Leave: Employers are prohibited from requiring employees to use paid time off during the lockdown. Employees, however, are entitled to use their accrued annual leave at their discretion, subject to internal policies. Employers cannot mandate that employees take unpaid leave.
  • Medical Checks: Employers may take steps to verify employees’ health, as long as such measures protect the health, safety and well-being of other employees. Such steps include, for example, requiring medical check-ups for employees who have travelled internationally. If employers pursue such measures, they must ensure that they have systems in place to ensure that employees’ medical records remain confidential and secure. Employers should be mindful not to discriminate against employees by selecting employees for medical checks based upon race or nationality.
  • Sick Time for Employees with COVID-19: Certain state governments have issued notifications/orders requiring employers to grant 28 days of paid leave to employees who have been infected with COVID-19. Employers may encourage, but not require, employees who have contracted COVID-19 to use their accrued sick leave. If necessary, employers may require COVID-19-positive employees to continue to take leave until such employees medically certify that they may return to work, during which time employers should continue to pay employees’ full wages and benefits.

©2020 Epstein Becker & Green, P.C. All rights reserved.

For more employment considerations amid the COVID-19 pandemic, see the National Law Review Coronavirus News section.

Work-from-Home Lessons from a Veteran Virtual Worker

To all of my law firm marketing and PR colleagues, lawyers, and other law firm professionals who are working from home (or “WFH” — the new trending acronym — or so I’m told) amid the COVID-19 pandemic, I say, with mixed emotions, welcome to the club. I just wish the acknowledgment came under better circumstances — more because you want, can and/or should work from home, rather than you must do it in the interest of public health.

I’ve been working from home for nearly 10 years. Jaffe has been an exclusively virtual environment for most of its 42-year existence, so it’s a working and lifestyle model with which I am very familiar. It takes some adjustments and there are challenges aplenty for newcomers to the home office, particularly for those thrown into the fire without proper equipment or conducive working environments, not to mention psychological preparation for what can be a jarring transition.

Consequences of the WFH Lifestyle

First, there are obvious logistical issues for professionals working from home, including obtaining and maintaining laptops and other equipment, as well as other IT issues, not the least of which involves data security. The threat of breaching a client’s security is a major concern for law firms. In fact, the U.S. government’s Cybersecurity and Infrastructure Security Agency has been highlighting the elevated risk of malware, phishing attacks and other ransomware demands during the current pandemic. There also are challenges to dealing with the loss of human interaction that professionals are accustomed to having from being in close physical proximity to each other in an office. Technology allows us to get our jobs done just fine, but interacting with others only virtually is doubly stressful when we don’t have in-person interactions to compensate.

A couple of years ago, I wrote a National Law Journal article about the emergence of the competitive cloud-based law firm and what that looked like compared to the traditional firm model. Since that time, the number of virtual, or cloud-based, law firms has increased slightly, but the traditionally conservative legal industry overall still has barely dipped a toe into that water.

One positive outcome of the currently mandated WFH exercise is likely to be nearly wholesale preparedness for the next crisis that closes physical firm offices. Through this crash course, decision-makers at law firms are likely to realize there are some legitimate efficiencies and benefits to be gained from lawyers based at their homes, principally involving reduction in physical real estate and overhead, and the value proposition for offering a true work-life balance for attorneys and other support staff. The workers themselves also will see benefits from remote working that they probably had not considered or truly appreciated before they were in the trenches. An overarching conclusion of the 2020 State of Remote Work survey (by social media software company Buffer) of thousands of remote workers from around the world is that remote workers almost unanimously want to continue to work remotely (at least partially) for the rest of their careers.

Ultimately — according to many legal industry observers — this forced experiment could expand the virtual model for some firms permanently, at least on a partial or as-needed basis. Traditionalists may be beside themselves and clutching their pearls (so to speak), but this change to the core firm business model is inevitable.

How to Work from Home

Recognizing that a vast majority of legal professionals are now working from home for the foreseeable future, let me offer just a few pearls of wisdom based on having about a decade of applicable experience under my belt (or relaxed-waist sweatpants, I should say, since there are no dress codes at my house). If you haven’t already bought into these, consider what I feel are the most-important best practices and takeaways for working from home.

Dedicate a space for office work.

It also should be devoid of distractions like TV or music (unless you can handle that — I usually can’t). While some people can acclimate to different situations and environments quite easily, for me, a dedicated office helps me replicate an office-like routine and maintain a certain work ethic and discipline. Sure, sometimes, I’ll drag the laptop over to the sofa or to a restaurant (in simpler times, that is), but I’m never as productive as when I’m sitting at my desk in my home office. There’s some humor — much appreciated these days — to be had at the good-natured expense of many of you doing your best to make it work with innovative work-at-home set-ups.

It’s not so much about the number of hours you work, but the productivity that matters.

You will probably find that you can get more done in four or five hours working during the day at home than you did in the office. You have fewer distractions (if you can block out or put restrictions on others living with you). My workday can sometimes stop mid-afternoon and pick up again in the evening, as well as extend into the weekend. Oftentimes, the amount and type of work dictates when I work. That 24/7 mindset also allows for more responsiveness to clients’ needs, which those accustomed to more-traditional work hours cannot or will not necessarily deliver. However, if you find yourself grinding non-stop at the computer for five or six hours, that also can be detrimental to your work proficiency and mental well-being, so…

Take breaks.

It’s easy to get into a groove and churn out work product at home without the distractions typical of an office environment. Of course, if you have family, especially children, at home, chances are the distractions will find you anyway. Mentally, it’s just good to turn away from the work occasionally to catch up on the news, move around a bit, view a quick video or do whatever eases your mood.

Get exercise.

It’s easy to get lazy when you don’t have to commute back and forth to the office plus run errands or perform other tasks that usually offer daily exercise. No good can come from a sedentary work style over the long haul. Actually, while we’re social distancing, the majority of us don’t even have nighttime or weekend social excursions to get in our daily steps. Try to take a long walk, quick run or whatever other cardio activity works for your lifestyle. You may now have the luxury of building that into your daytime routine rather than relegating it to before or after work.

Also, just take a few moments to marvel at the fact that we can get so much done while never even being in the same room, building, ZIP code or even country as our colleagues. And be kind to your co-workers, clients and stakeholders. Everyone is in the same boat. Cut some slack the next time your boss joins your virtual meeting after turning herself into a potato.

© Copyright 2008-2020, Jaffe Associates

ARTICLE BY Randy Labuzinski of Jaffe.
For more on work from home and other COVID-19 considerations, see the National Law Review Coronavirus News section.

SBA Provides Guidance on Affiliation Rules for Paycheck Protection Program

Many issues have arisen related to the Small Business Administration’s (SBA) “affiliation rules” for determination of whether a small business is eligible for a loan under the Paycheck Protection Program (PPP), which is part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Since April 3, 2020, the SBA has provided guidance relating to the PPP, including guidance titled “Affiliation Rules Applicable to U.S. Small Business Administration Paycheck Protection Program,” and a Letter Re: Size Eligibility and Affiliation Under the CARES Act. The SBA has also provided responses to a number of FAQs posted on the SBA’s website and updated through April 7, 2020. Pursuant to this guidance, the SBA has modified the affiliation rules (which are codified 13 C.F.R. §§121.103 and 121.301, the “Rules”) for purposes of determining eligibility for a PPP loan [1].

What Is a Small Business Generally?

One of the bedrock principles for SBA loans is that they are to be provided solely to “small businesses.” The SBA has generally defined a small business as one with fewer than 500 employees [2]. To ensure loans are not provided to larger businesses, the SBA enacted the Rules, which aggregate the number of employees of multiple affiliated businesses (each, a “Business Concern”). Although affiliation is generally determined based on control, the Rules are encompassing and provide the SBA with significant flexibility to determine if affiliation exists under a variety of circumstances. Such flexibility permits the SBA to look beyond a Business Concern’s creative structuring to determine if affiliation exists and exclude a Business Concern from meeting the SBA’s definition of a small business.

In practice, the Rules have generally prevented Business Concerns backed by private equity and venture capital investors (as a majority or minority investors) from receiving SBA loans because of the multiple investments typically maintained by these investors. Given the breadth of the Rules, many Business Concerns appeared to be initially ineligible for PPP loans, and therefore, the SBA has provided additional guidance which modifies the Rules (the “Modified Rules”) to permit certain Business Concerns to be eligible for PPP loans. Except as specifically addressed in the Modified Rules and the SBA and Treasury guidance with respect to the same, the Rules remain in full force and effect. Of particular importance, the SBA has opined that the Modified Rules waive the affiliation rules with respect to any Business Concern receiving financial assistance from a company licensed under §301 of the Small Business Investment Act of 1958, and such affiliation rules are waived no matter the amount of the financial assistance or whether there are other non-SBIC investors.

Modified Affiliation Rules

Although the Modified Rules are more limited in determining affiliation, the principle of aggregating the number of employees for a Business Concern that is controlled by a common entity or person (the “Presumed Owner”) remains in place. Under the Modified Rules, affiliation exists, and therefore the number of employees of a Business Concern is aggregated, in the following situations:

  • Affiliation Based on Common Ownership: If the majority of equity (stock, membership interests, partnership interests, etc.) of two or more entities is owned by the Presumed Owner, then the employees of such entities will be aggregated as the same Business Concern. In the most obvious instance, this would involve a Presumed Owner that owns greater than 50 percent of the equity of one or more business entities. As noted below, however, a Presumed Owner cannot circumvent the Modified Rules by divesting its equity in exchange for options, convertible securities or similar contractual rights to ownership.
  • Affiliation Based on Control: If the Presumed Owner has contractual rights to control two or more entities (even if such rights are not exercised), then the employees of such entities will be aggregated as the same Business Concern. Mere ownership of equity is not the sole determinative factor, and a Presumed Owner that owns a minority amount (or no amount) of the equity of an entity can be determined to be in control of such entity if such Presumed Owner has potential ownership of the entity (via options to purchase equity, convertible securities or equivalent) [3] or can control the management of such entity (via contractual rights that prevent a quorum of the governing body or otherwise prevent the governing body or equity holders from controlling the direction of such entity) [4]. This determination is based on contractual rights and therefore, agreements to negotiate future acquisitions, consolidations or mergers (such as letters of intent) do not alone cause an affiliation of entities.
  • Affiliation Based on Common Management: If two or more entities are managed by common management (same governing bodies, officers, managers, directors, partners, etc.), then the employees of such entities will be aggregated as the same Business Concern. Affiliation is also determined if a Presumed Owner can control, directly or indirectly, the management of two or more entities.
  • Affiliation Based on Familial Relations: If two or more entities are owned or managed by “close relatives” [5] and have identical or substantially identical business or economic interests, then the employees of such entities will be aggregated for SBA loan eligibility purposes. Unlike the Modified Rules for control and common management, this presumption may be rebutted by a potential borrower that can show that the interests are separate (e.g., in the case of estranged parties).

Based on the guidance provided by the SBA, the Modified Rules only supersede the Rules in specific instances, such as the elimination of the economic-dependence and common-investment affiliation rules that were in effect under the Rules. The remainder of the Rules, however, including the ability of the SBA to assess size eligibility and affiliation issues based on the totality of the facts and circumstances with respect to a Business Concern, should be presumed to remain in full force and effect.

The guidance provided by the SBA has been fluid in nature and is subject to ongoing modification. Given that and the potential criminal sanctions upon borrowers that seek PPP Loans in contradiction with the Modified Rules, we recommend having an open dialogue with your lender and that you err on the side of over-disclosure in all applications relating to PPP loans. In addition, if you have heeded the SBA’s advice and already applied for a loan under the PPP, you are entitled to rely upon the laws, rules and guidance that were available to you at the time you submitted your application; provided, if your application has not yet been processed, you are also entitled to update such application if your underlying assumptions and analyses are affected by subsequent regulations and interpretations.

If you have questions about small business loans and the PPP’s affiliation rules, we encourage you to reach out to your Much attorney.

  1. Under the Act, the Rules are waived for any business a) with 500 or fewer employees, that as of the date the PPP loan is disbursed, is assigned a North American Industry Classification System code beginning with 72, b) that is operating as a franchise with a franchise identifier assigned by the SBA, or c) that receives financial assistance from a company licensed under §301 of the Small Business Investment Act of 1958 (15 U.S.C. 681). Furthermore, under the Religious Exemption Guidance, the Rules do not apply to persons or entities that are affiliated based on a faith-based relationship.
  2. Under the guidance, the SBA has stated that the determination of whether a Business Concern is a “small business” can also be determined based on the applicable employee-based/revenue-based standards or the alternative size standard, each of which is provided under the SBA’s regulations, provided the Rules are applied with respect to these standards, if applicable.
  3. Affiliation is not created if the options, convertible securities, or equivalent, are subject to certain conditions precedent that are a) incapable of fulfillment, b) speculative, conjectural or unenforceable under federal law, or c) the probability of exercise is extremely remote.
  4. Under the guidance, the SBA has stated that if a Presumed Owner irrevocably waives or relinquishes such rights, then such Presumed Owner would not trigger the Rules (assuming no other circumstances relating to the Presumed Owner would trigger the Rules).
  5. “Close relatives” is a defined under the SBA and means a spouse, parent, child or sibling, or the spouse of any such person.

Disclaimer: We are providing the current SBA Loan Application and links to related information as a convenience. The application and related requirements may change and we are not responsible for updating this information. By providing this information, we are not giving legal or tax advice. For advice on your specific situation, please contact your advisors.

© 2020 Much Shelist, P.C.

For more on the SBA PPP Loans, see the National Law Review Coronavirus News section.

New Jersey Closes all Non-Essential Construction Projects

On April 8, 2020, New Jersey Governor Phil Murphy signed Executive Order No. 122, requiring the closure of all non-essential construction projects beginning at 8:00 p.m. on Friday, April 10, 2020. The executive order does not define “non-essential construction project”; instead, it lists the following “essential construction projects” that may continue to operate:

  • Projects necessary for the delivery of health care services (e.g., hospitals, health care facilities, and pharmaceutical manufacturing facilities);
  • Transportation projects;
  • Utility projects;
  • Affordable housing residential projects;
  • School projects (e.g., pre-K-12 schools and higher education facilities);
  • Projects already underway involving single-family homes or apartments with a construction crew of five or fewer individuals;
  • Projects already underway involving a residential unit for which a tenant or buyer has legally agreed to occupy by a certain date and the construction is necessary for the unit’s availability;
  • Projects involving facilities in which “the following takes place: the manufacture, distribution, storage, or servicing of goods or products that are sold by online retail businesses or essential retail businesses (as defined by Executive Order No. 107 (2020) and subsequent Administrative Orders)”;
  • “Projects involving data centers or facilities that are critical to a business’s ability to function”;
  • “Projects necessary for the delivery of essential social services, including homeless shelters”;
  • “Any project necessary to support law enforcement agencies or first responder units in their response to the COVID-19 emergency”;
  • “Any project that is ordered or contracted for by Federal, State, county, or municipal government”;
  • “[A]ny project that must be completed to meet a deadline established by the Federal government”;
  • Any work on a non-essential construction project that is required to physically secure the site, ensure building structural integrity, abate hazards, or confirm that the site is protected and safe during the suspension of the project; and
  • “Any emergency repairs necessary to ensure the health and safety of residents.”

The New Jersey State Director of Emergency Management (who is the Superintendent of the State Police) has the discretion to amend this list of essential construction projects.

Essential construction projects that continue to operate must continue to adhere to guidelines and directives issued by the New Jersey Department of Health, the Centers for Disease Control and Prevention (CDC), and the Occupational Safety and Health Administration to maintain a clean, safe, and healthy work environment for employees. These businesses must also implement policies and protocols to enforce best practices regarding social distancing and good hygiene, including but not limited to:

  • Prohibit all non-essential visitors from entering the worksite;
  • Limit worksite meetings and groups to fewer than 10 people;
  • Require individuals to maintain a minimum 6 feet of social distancing when possible;
  • Stagger work start and stop times to limit the number of individuals entering and leaving the worksite at the same time, to the extent possible;
  • Stagger lunch breaks and work times to enable operations to safely continue while utilizing the fewest number of individuals as possible;
  • Limit the number of individuals who can access common areas at the same time;
  • Provide employees with cloth face coverings and gloves, and require workers to wear them while on premises unless there is a medical reason prohibiting it (Note: If any individual (employee or visitor) declines to wear a face covering on premises due to a medical reason, the business cannot require the individual to produce medical documentation verifying his or her condition.);
  • Require essential visitors to wear cloth face coverings while on premises (Note: If a visitor refuses to wear a face covering for a non-medical reason and if a covering cannot be provided to the visitor, then the business must deny entry to the individual);
  • “Require infection control practices, such as regular hand washing”;
  • “Limit sharing of tools, equipment, and machinery”;
  • Provide hand sanitizer and wipes to employees and visitors; and
  • “Require frequent sanitization of high-touch areas” (e.g., restrooms, breakrooms, equipment, and machinery).

These businesses must also implement policies and protocols in the event the worksite is exposed to COVID-19, including but not limited to:

  • “Immediately separate and send home workers who appear to have symptoms consistent with COVID-19”;
  • “Promptly notify workers of any known exposure to COVID-19 at the worksite, consistent with the confidentiality requirements of the Americans with Disabilities Act and any other applicable laws”; and
  • “Clean and disinfect the worksite in accordance with CDC guidelines when a worker at the site has been diagnosed with COVID-19.”
© 2020, Ogletree, Deakins, Nash, Smoak & Stewart,P.C., All Rights Reserved.

Virginia Enacts Robust LGBTQ Anti-Discrimination and Civil Rights Legislation

On April 11, 2020, Governor Northam signed the Virginia Values Act (SB 868), monumental anti-discrimination legislation that makes Virginia the first state in the South to enact comprehensive protections for the LGBTQ community.  In particular, Senate Bill 868 1) prohibits discrimination in public accommodations on the basis of sexual orientation, gender identity, or status as a veteran; 2) prohibits discrimination in credit on the basis of sexual orientation, gender identity, pregnancy, childbirth, or related medical conditions, disability, and veteran status; and 3) prohibits discrimination in housing based on sexual orientation, gender identity, and status as a veteran. The Virginia Values Act will become effective on July 1, 2020.

In a press release, Governor Northam stated, “This legislation sends a strong, clear message—Virginia is a place where all people are welcome to live, work, visit, and raise a family. We are building an inclusive Commonwealth where there is opportunity for everyone, and everyone is treated fairly. No longer will LGBTQ Virginians have to fear being fired, evicted, or denied service in public places because of who they are.”

The Virginia Values Act amends the Virginia Human Rights Act (VA HRA), Va. Code §§ 2.2-3900 et seq., by barring discrimination on the basis of sexual orientation or gender identity and creating a private cause of action for employment discrimination.  The amended VA HRA authorizes a victim of discrimination to bring a civil action in district or circuit court after receiving a notice of right to file a civil action from the Division of Human Rights of the Department of Law.  Remedies include uncapped compensatory and punitive damages.

What law in Virginia bars employment discrimination?

The VA HRA, amended by SB 868, bars discrimination in private employment on the basis of race; color; religion; sex; sexual orientation; gender identity; marital status; age; veteran status; national origin; or pregnancy, childbirth, or related medical conditions including lactation.

How does the amended VA HRA define gender identity and sexual orientation?

The enacted SB 868 defines gender identity as “the gender-related identity, appearance, or other gender-related characteristics of an individual, with or without regard to the individual’s designated sex at birth.”  It defines sexual orientation as “a person’s actual or perceived heterosexuality, bisexuality, or homosexuality.”

What damages or remedies are available for victims of discrimination in Virginia?

A court or jury may award a prevailing discrimination plaintiff compensatory and punitive damages and reasonable attorneys’ fees and costs.  A court may also grant other equitable relief, such as a permanent or temporary injunction or a temporary restraining or other order, including one enjoining the defendant from engaging in further discriminatory practices.

What is the burden to prevail in a Virginia Human Rights Act case?

To prevail in a VA HRA employment case, plaintiffs must prove only that their protected characteristic was a motivating factor for any employment practice.  This means that a plaintiff can prevail even if other factors also motivated the practice.

How do I bring a discrimination claim in Virginia?

A victim of discrimination in Virginia should file a written complaint with the Division of Human Rights of the Department of Law.  The Division of Human Rights will then issue a charge of discrimination to the offending party and inform all parties of the employee’s rights and the timeline for exercising those rights.  The parties may then agree to go to mediation without waiving any rights.

After issuing a charge of discrimination, the Division of Human Rights will conduct an investigation into the complaint to determine whether there is reason to believe that discrimination occurred, and the Division will issue a report on its findings.

If the Division concludes that there is no reasonable cause to believe that the alleged unlawful discrimination has been committed, then it will dismiss the charge and issue the employee a notice of right to commence civil action.  If the Division concludes that there is reason to believe discrimination occurred, it will attempt to remedy the discrimination through informal methods and discussions with the offending party.  If and when the Division determines that informal methods will not suffice to eliminate the discrimination, it will close the case and give the employee a notice of right to commence civil action.

At any time after the Division issues the charge of discrimination, the complaining party may petition a court with jurisdiction for temporary, equitable relief including for a restraining order or injunction if the circumstances are such that continuing discrimination during the course of the investigation will cause irreparable injury.

An employee may also submit a written request for notice of right to commence civil action, and the Division will issue that notice after either 180 days have passed since the complaint was filed or the Division has determined it will not complete its investigation within 180 days.

After receiving a notice of right to commence civil action from the Division, an employee may file a civil action in a court with jurisdiction over the defending party.

 

© 2020 Zuckerman Law  Posted by: Dallas Hammer , Katherine Krems & Jason Zuckerman

COVID-19 and Cybersecurity: Combating “Zoombombing” and Securing Your Remote Working Videoconferences

As COVID-19 has prompted a massive shift by organizations to the implementation and use of remote working solutions for their employees, there has been an unfortunate, but not surprising, corresponding rise in malicious actors seeking to exploit remote working solutions.

Over the past few weeks, the most notable and prevalent “digital hijacking” has occurred on the Zoom teleconferencing application. Since the start of the COVID-19 pandemic, there has been an explosion in the number of individuals using the Zoom application. Prior to the pandemic, Zoom averaged approximately 10 million users per day. However, Zoom now estimates that approximately 200 million users per day utilize its videoconferencing application. These users not only include remote workers, but also many school children and teachers who utilize the Zoom application for remote learning.

The phenomenon commonly known as “Zoombombing” involves the infiltration of Zoom videoconferences by hackers. Once they have infiltrated a videoconference, hackers have undertaken a variety of malicious acts including, among other things, posting hate speech, stealing personal identifying information, and posting pornography or other offensive or inappropriate content to the other participants in the videoconference. Typically, hackers look to exploit Zoom conference links that are posted publicly and/or open to the public without the need for a password or access key. In response to the increase in Zoombombing attacks, some governments and organizations have restricted or prohibited the use of the Zoom application by their employees. Recognizing the threat that hackers pose to their platform, Zoom recently added new default security features and recommended that users employ additional security safeguards.

Of course, it is not only Zoom that has been targeted by malicious cyber actors. Similar attacks have occurred on numerous other commonly use videoconferencing platforms. Attacks on these other platforms exploit similar flaws or security vulnerabilities that are seen in Zoombombing attacks.

Given the rise of attacks on videoconference applications during the COVID-19 pandemic, the FBI recently issued a warning discussing Zoombombing and other similar attacks aimed at remote working employees and students. The FBI advised that videoconference application users take the following steps:

  • Do not make meetings public and, if the option is available, utilize passwords for access to meetings;
  • Do not share links for meetings publicly;
  • Only allow meeting hosts to have the option to share their screens with other participants;
  • Ensure that you are using the most recent version of the application; and
  • Ensure that your organization’s remote working policies address requirements for videoconferencing security.

Other important security tips include:

  • Ensure that your teleconferencing sessions have active password protections in place;
  • Keep password protection on by default to prevent unauthorized users from joining or hijacking your sessions; and
  • Use a unique, one-time ID number for large or public teleconferencing calls.

The COVID-19 pandemic has made remote working a reality for many in a world handcuffed by social distancing. It is more important now than ever to understand the power, and the corresponding dangers, these new remote connection technologies hold in order to ensure that you maintain the safety and security of your organization’s data and information.

© 2020 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.

For more work from home considerations among the COVID-19 pandemic, see the National Law Review Coronavirus News page.

Quick Q&A: Handling Holiday During COVID-19

As employees settle into working from home, it is important for employers to consider their approach to annual leave while the COVID-19 crisis is ongoing. Regular rest breaks help to ensure the physical and mental wellbeing of employees during a stressful period with additional work, health and family pressures. It is also important from a business continuity perspective to ensure that employees do not return work with a significant amount of holiday outstanding. With this in mind, Katten looks at common queries that have come up recently regarding holiday accrual and pay.

Does holiday entitlement continue to accrue while staff are furloughed, laid off or on short-time working?

Yes, employees continue to accrue holiday as they remain employees of the company. If an employee is entitled to more than the statutory minimum amount of 28 days’ paid holiday (inclusive of bank and public holidays) then you can, by agreement, negotiate a reduction in their contractual entitlement provided that doesn’t go below the statutory minimum.

Can I ask staff to take holiday at a specific time?

Yes, employees can be required to take holiday at a specific time, provided they are given notice of at least twice the length of the period of leave that they are being required to take (e.g., for a five day holiday they would need to be given 10 days’ notice). We would recommend that employees continue to record their holiday in your usual holiday tracker system. You can ask an employee to take holiday regardless of whether it has already been accrued.

How much should I pay staff who take holiday while furloughed?

While the guidance is not clear cut, we expect that holiday pay will be payable at an employee’s reduced furloughed rate of salary for any holiday taken while furloughed. This will be reimbursable as salary up to the Her Majesty’s Revenue & Customs (HMRC) limits under the coronavirus job retention scheme.

Can staff carry over accrued but untaken holiday?

The UK Government has amended the Working Time Regulations so that employees and workers can carry over up to 4 weeks’ paid holiday over a 2-year period, if it was not reasonably practicable to take the leave due to the coronavirus. This is a change from the current position where the ‘basic holiday’ of 4 weeks must be taken each year as a health and safety measure, meaning that it was only previously possible to carry over the balance of holiday above 20 days (which in the UK would be a minimum of 8 days). So in practice, employees can now carry forward 4 weeks as a matter of law. We recommend considering the impact of holiday accrual on the business when things return to ‘normal’ (i.e., employers should consider whether they want to require employees to take holiday even while they are furloughed).

Can I force employees to cancel a booked holiday?

Employers are still able to refuse an employee permission to take holiday on particular days (e.g., if they are critical to the business at this time and the employer needs them at work), provided that they give notice to the employee which is at least as long as the holiday requested. However, the law has changed to say that employers can only exercise this right where there is “good reason to do so”.
©2020 Katten Muchin Rosenman LLP
For more employment considerations during the COVID-19 pandemic, see the National Law Review Labor & Employment law page.

Techplace Tickler: eDiscovery Challenges in a Remote Work Environment

In the first episode of our Techplace Tickler series, Danielle Ochs, Tom Lidbury, and Traer Cundiff discuss various eDiscovery-related issues that have arisen during the COVID-19 pandemic when many people are working remotely. They cover data security concerns while working from home, remote document review, and best practices for collecting, capturing, and transferring data remotely.

© 2020, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

For more legal & data security issues amid the COVID-19 Pandemic, please see the National Law Review Coronavirus News section.

NLRB Ends Suspension of Union Representation Elections

Amid the ever-increasing impact of the COVID-19 crisis across the country, the National Labor Relations Board (“NLRB” or “Board”) announced on Wednesday that the two-week freeze on representation elections currently in effect would end on April 3, 2020.  In the weeks leading up to the nationwide postponement of elections, which included both manual and mail ballot elections, the Board implemented an agency-wide telework policy and announced the closure of several Regional Offices.  According to the Board’s website, at least six Regional Offices remained closed as of March 30, 2020, with another 14 Regional and Subregional Offices closed to the public.

In the press release announcing the moratorium on elections, the Board stated that the two-week suspension was “necessary to ensure the health and safety of our employees, as well as those members of the public who are involved in the election process.”

Concerning the resumption of elections, NLRB Chairman John Ring stated on Wednesday that the Board’s “General Counsel now has advised that appropriate measures are available to permit elections to resume in a safe and effective manner, which will be determined by Regional Directors.” Neither that announcement nor any other documents made public by the NLRB to date have explained those measures, though most observers anticipate that the NLRB will move to a greater if not exclusive reliance on employees voting by mail ballots.

In a letter to Chairman Ring the day before the NRLB announced that it would resume elections, Representative Bobby Scott (D-VA) urged the Board “to permit Regional Directors to direct elections to take place as soon as practicable if, in their discretion, the elections can safely be done, especially when considering the possibility of mail ballots.”  The announcement the Board issued the following day, however, does not require that forthcoming elections be conducted by mail ballot only, or provide any specific parameters for conducting elections as the effects of the COVID-19 crisis continue to mount.

As a practical matter, mail ballot elections appear to be the most likely manner of conducting elections in the immediate future given the growing restrictions implemented by the Federal, state, and local governments to curb the spread of COVID-19 cases.  Informally, some NLRB Regional Offices have indicated that they are preparing guidance regarding procedures for the resumption of elections, and will release such guidance once finalized.  Other Regional Offices have indicated that they are not presently scheduling any elections, even as the two-week suspension of elections concludes.   At least one Regional office has begun informing parties that the ballots will be counted via Skype conferences and not in person following the voting by mail.

Given the differing routes that Regional Offices currently appear to be taking, as well as the varying impact of the COVID-19 crisis in different areas of the country, it appears that Regional Offices will evaluate local conditions and resume elections based on pertinent circumstances.

Employers and advocates should remain up to date on the legal restrictions applicable to the areas in which workforces are located, as well as any guidance issued by Regional Offices, and be prepared to navigate the Board’s representation procedures, implement communication strategies, and monitor the election process without the in-person interactions normally accompanying election proceedings.

©2020 Epstein Becker & Green, P.C. All rights reserved.

For more from the NLRB, see the National Law Review Employment Law section.