Tag: COVID-19

Texas Governor Announces $50 Million Loan Program for Texas Small Businesses through Goldman Sachs/LiftFund Partnership

As discussed in our previous alert on this issue, the CARES Act established a $349 billion U.S. Small Business Administration (SBA) Paycheck Protection Program (PPP) to provide immediate access to capital for small businesses who have been impacted by COVID-19. On April 13, 2020, Texas Governor Greg Abbott provided additional guidance to Texas employers when he announced that investment banking, securities and investment management firm, Goldman Sachs, will partner with San Antonio-based nonprofit organization, LiftFund, to provide $50 million in loans to small businesses. Specifically, Goldman Sachs will provide the capital, and LiftFund and other community development financial institutions will administer the funds. Texas business owners can now apply for a PPP loan and find more information about the program on the LiftFund website.

“What this capital will do [is] provide these companies the resources they need to keep employees on the payroll for the remaining few weeks or so until businesses can begin [the] process of opening back up,” Governor Abbott said. Notably, Governor Abbott indicated that he intends to issue an executive order that will outline strategies to begin the gradual process of reopening businesses in Texas.

This is a matter that is evolving regularly.

Copyright © 2020, Hunton Andrews Kurth LLP. All Rights Reserved.

For more on small business loans for COVID-19-relief, see the National Law Review Coronavirus News section.

What Is the CARES Act and How Can It Help Legal Professionals?

On March 27, Congress passed the 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES) to mitigate the negative economic impact of COVID-19. The CARES Act provides small businesses and individuals with extended unemployment insurance benefits, loans for paycheck protection, refundable tax credit, and business tax provisions. Attorneys who own their own practice can take advantage of the 2020 CARES Act to protect their business and employees during the economic downturn brought on by COVID-19.

How the CARES Act Applies to Lawyers

The CARES Act could alleviate the negative economic impact of COVID-19 on your law firm while the entire world waits for what’s next.

The CARES Act helps law practices with:

  • Paycheck protection program (PPP): completely forgivable loan to cover payroll costs
  • Employee retention credit
  • 2020 Payroll tax deferment
  • Economic injury disaster loan emergency advance (EIDL)

Paycheck Protection Program (PPP) for Attorneys, Legal Administrators, and Staff

For more detail, please refer to the PPP FAQs published by the Treasury Department on Wednesday, April 8, 2020.

Coverage for Payroll Costs

  • Salary, wages, commissions, or tips
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave
  • Allowance for separation or dismissal
  • Payments required for the provisions of group health care benefits including insurance premiums
  • Retirement benefits
  • State and local taxes assessed on compensation

For more detail, please refer to the Tax Foundation’s summary of the SBA Paycheck Protection Program in the CARES Act.

Coverage for Sole Proprietor or Independent Contractor

  • Wages, commissions, income or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee
  • Extends duration of benefits from 26 weeks (available in most states) to 39 weeks
  • Provides an additional $600 per week in benefits for first four months

For more detail, please refer to the summary from the law firm Rudman Winchell.

Paycheck Protection Program (PPP) Loan Forgiveness

Applications are already in play. While there is a lot of money available, it is not unlimited. Apply as quickly as possible.

  • You use the money strictly for allowed expenses
  • 75% of the loan amount is spent on payroll costs
  • You maintain your entire full-time staff until June 30
  • Rehire fired or laid-off employees quickly
  • Caps payment at $100,000 per person
  • You do not cut employees wages more than 25% for any employee who made less than $100,000 in 2019
  • For whatever amount is not covered, PPP loans have a 1% interest rate and payments are deferred six months with interest during the deferment.  The loan must be fully repaid in two years.

For more detail, please refer to the Small Business Administration’s Docket No. SBA-2020-0015.

Employee Retention Credit

You may qualify for a refundable payroll tax credit for 50% of wages if:

  • your law practice was fully or partially suspended due to COVID-19 related shut-down orders.
  • you lost more than 50% in gross receipts compared to last year’s same-quarter performance.

Payroll Tax Deferment

To further lower expenses at your law firm, you may defer your share of payroll taxes and split the deferred payments over the next two years, with half due by Dec. 31, 2021, and the other half due by Dec. 31, 2022.

Economic Injury Disaster Loan Emergency Advance (EIDL)

If you are a sole proprietor, you may be eligible for a EIDL loan of up to $2 million, repayable over 30 years at 3.75% interest rates for small businesses and 2.75% for most private non-profits under the EIDL. Payments are deferred for the first year, but interest accrues during that time.

  • You’ll have to put up collateral for loans over $25,000 and a personal guarantee for loans exceeding $200,00.
  • If you qualify for an EIDL, you can use the money for any business expense (with a few exclusions).
  • Under the same provision, small business owners may be eligible for a one-time grant of up to $10,000 that you won’t have to pay back.

For more detail, please refer to the U.S. Small Business Administration’s “Economic Injury Disaster Loan Emergency Advance” overview page.

What Happens If You Enroll for PPP and EIDL?

If you decide to enroll for both the EIDL and PPP, the amount of the EIDL grant will be subtracted from the PPP amount eligible for forgiveness. In other words, you’ll ultimately wind up paying it back.

The 2020 CARES Act Can Help Your Law Firm

Law firms are uniquely poised to understand the full extent of the CARES Act and its protections. With the financial boost from the CARES Act, attorneys are more likely to retain talent and be ready to hit the ground running when court activity ramps up again.

CARES Act 2020 Resources

 

© Copyright 2020 PracticePanther
ARTICLE BY Reece Guida at PracticePanther.
For more on the CARES Act, see the National Law Review Coronavirus News section.

Regulators Provide No Meaningful Relief or Guidance to Financial Institutions Struggling with Bank Secrecy Act and Compliance Due to COVID-19

While many disclosure and reporting requirements imposed on regulated entities are being relaxed in response to the COVID-19 pandemic, the Financial Crimes Enforcement Network (FinCEN) has taken a different approach with respect to financial institutions’ duties to comply with the Bank Secrecy Act (“BSA”). In an April 3, 2020, release – one of just two issued by the agency in response to COVID-19 – FinCEN recognized that “financial institutions face challenges related to the COVID-19 pandemic,” but confirmed that it “expects financial institutions to continue following a risk-based approach” to combat money laundering and related crimes and “to diligently adhere to their BSA obligations.” 1

Thus, even as financial institutions reduce personnel to attempt to weather the economic downturn caused by the COVID-19 and limit in-office personnel to comply with state quarantine orders, financial institutions must maintain adequate staff and resources to ensure BSA compliance. In the world of broker-dealers in securities, these BSA obligations generally revolve around complying with anti-money laundering (AML) compliance program requirements, analyzing transactions for potentially suspicious activity and preparing and timely filing suspicious activity reports (SARs).

As detailed below, with very limited exceptions, regulators have offered broker-dealers no relief from these obligations as a result of business disruptions caused by COVID-19.  Indeed, these already onerous burdens may be heightened by the increased risks of fraud, insider trading and other unusual financial activity by customers in these times of financial uncertainty. This “business as usual” attitude denies the reality that companies are coping with stay-at-home orders in the best-case scenarios and employees at home infected and unable to work in the worse-case scenarios.

FinCEN Requires Broker-Dealers to Implement Anti-Money Laundering (AML) Programs and SAR Reporting

In the PATRIOT Act of 2001, Congress required that all broker-dealers establish and implement AML programs designed to achieve compliance with the Bank Security Act (BSA) and the regulations promulgated thereunder, including the requirement that broker-dealers file Suspicious Activity Reports (SARs) with FinCEN.2

Under FinCEN’s regulation, a broker-dealer “shall be deemed” to satisfy the requirements of Section 5318(h) if it, inter alia, “implements and maintains a written anti-money laundering program approved by senior management” that complies with any applicable regulations and requirements of the U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) for anti-money laundering programs.3 Required program requirements include the implementation of “policies, procedures and internal controls reasonably designed to achieve compliance with the BSA,” independent testing, ongoing training, and risk-based procedures for conducting ongoing customer due diligence.4  FinCEN also required broker-dealers to establish and maintain a “customer identification program” (CIP) designed to help broker-dealers avoid illicit transactions through “know your customer” directives.5  FINRA largely duplicated these requirements in FINRA Rule 3310.

FinCEN also promulgated broker-dealer SAR filing requirements that largely mirror those applicable to banks. In short, a broker dealer is required to file a SAR on any transaction “conducted or attempted by, at or through a broker-dealer,” involving an aggregate of at least $5,000, where the broker-dealer “knows, suspects or has reason to suspect that the transaction” or “a pattern of transactions” involves money laundering, structuring, unusual and unexplained customer activity or the use of the broker-dealer to “facilitate criminal activity.”6  Broker-dealers must file SARs within “30 calendar days after the date of the initial detection” by the broker-dealer “of facts that may constitute a basis for filing a SAR.”7

These requirements are strictly enforced and sanctions for noncompliance can be extreme for both broker-dealers and their responsible officers and employees. Enforcement actions for “willful” noncompliance frequently result in civil money penalties against firms exceeding $10 million. In December of 2018, the U.S. Attorney’s Office for the Southern District of New York brought the first ever criminal action against a U.S. broker-dealer for a willful failure to file a SAR to report the illicit activities of one of its customers.8 In addition, because the primary purpose of an AML program is to detect and report suspicious activity, a failure to file SARs frequently gives rise to separate claims for violations of both the SAR filing and AML compliance program requirements.

Regulators Offer No Meaningful Relief from BSA Obligations Regardless of the Logistical issues Resulting from the COVID-19 Crisis

Despite recognizing the challenges broker-dealers and other financial institutions face in responding to the COVID-19 pandemic, to date regulators have offered no meaningful relief from the regulatory burdens imposed by the SAR and AML program requirements of the BSA. These steps are currently limited to:

  • FinCEN has created an “online contact mechanism” for “financial institutions to communicate to FinCEN COVID-19 related concerns while adhering to their BSA obligations,” but indicated that volume constraints may limit it to responding “via an automated message confirming receipt to communications regarding delays in filing of BSA reports due to COVID-19.”9

  • FinCEN also opaquely encouraged “financial institutions to consider, evaluate and, where appropriate, responsibly implement innovative approaches to meet their BSA/anti-money laundering compliance obligations.”10

  • FINRA “reminded” broker-dealer members that they have until December 31, 2020 to perform the annual independent testing of the member’s AML compliance program.11

The creation of a hotline and a directionless suggestion to “innovat[e],” at the risk that doing so incorrectly may expose a firm to criminal charges or regulatory enforcement actions, are of little practical use or comfort to firms. In short, it is business as usual for broker-dealers and other financial institutions with respect to their AML and SAR obligations under the BSA, even as they grapple with heightened compliance challenges because of COVID-19.

Heightened BSA Compliance Challenges Surrounding COVID-19

The AML program and SAR reporting requirements under the BSA create substantial compliance burdens even in the best of times. These obligations are resource-heavy, requiring yearly testing, ongoing monitoring of customers and transactions at the broker-dealer for potentially suspicious activity and dedicated personnel and systems to review transactional and customer information and to prepare SARs.

In addition, determining when a SAR filing is required is no easy task. The SAR regulation, as detailed above, is both expansive and vague, equally applying to transactions that may be criminal in any respect, may involve funds from other illegal activity or that may simply be unusual for a customer. Most broker-dealer compliance personnel are not trained in law enforcement, and yet are expected to analyze a host of characteristics about a particular customer and a particular trade to determine whether the transaction crosses an ill-defined threshold of suspiciousness, and to do so within 30 days. Law enforcement and regulators, such as the SEC, by contrast, frequently take years to investigate potentially illicit activity. While guidance issued by regulators has identified a number of “red flags” designed to help compliance personnel identify suspicious transactions, any of these red flags may seem innocuous or explainable in a given transaction, particularly in the limited time provided for review, leaving firms and compliance personnel open to regulatory second-guessing, with the benefit of hindsight, and at the risk of significant sanctions for interpreting the situation incorrectly.

A recent GAO report from August 2019, evaluating the effectiveness of BSA reporting, indicated that affected industry participants have raised questions about “the lack of a feedback loop or clear communication from FinCEN, law enforcement and supervisory agencies on how to most effectively comply with BSA/AML requirements, especially BSA reporting requirements.”12  Representatives from the securities industry in particular raised concerns that “compliance expectations are communicated through enforcement actions rather than through rulemaking or guidance.13

Of course, these are not the best of times. On March 16, 2020, FinCEN warned financial institutions to “remain alert about malicious or fraudulent transactions similar to those that occur in the wake of natural disasters.”14 As relevant to broker-dealers, FinCEN warned about an increase in insider trading, imposter scams, and COVID-19 related “investment scams,” such as promotions that falsely claim the products or services of publicly traded companies can prevent, detect or cure coronavirus.15

While this conduct, if occurring, is undoubtedly criminal, it is often unclear what steps a broker-dealer must take and what indicia of suspicion it must find before it is required to identify a trade as sufficiently suspicious for SAR reporting.  For example, with respect to the COVID-19 related “investment scams,” at what point does the broker-dealer, in the exercise of due diligence, unearth enough indicia that this issuer may be misrepresenting the efficacy of its product or services in preventing or treating COVID-19 to create at least a “reasonable suspicion” of fraud?  The signs may be very subtle and overlooked by compliance personnel at the time, but characterized as glaring red flags by regulators after the fact.

Similarly, a sudden spike in trading volume and price could be indicative of a pump-and-dump scheme, particularly where media coverage and a microcap stock are involved. However, with the current volatility of this market, large volume and price swings are increasingly common. And, the media is adding to the frenzy, and following the lead of the administration, by rushing to report any and all potential COVID-19 treatments.  Such developments can make it difficult for firms to separate suspicious trading activity from innocuous activity, causing them to either fail to file a SAR where they should or filing a SAR where they should not.

Compounding the difficulty of the analysis, the broker-dealer’s customer – and the putative subject of the SAR – will not be the issuer, but generally someone who is trading in the stock.  Accordingly, even if the there is a reason to suspect that the issuer or persons associated with the issuer are involved in an “investment scam,” this does not necessarily mean that the transaction at issue is suspicious within the meaning of the SAR regulation. The trading customer may simply be reacting to the news in buying or selling the securities at issue, as either an opportunistic trader or a victim of a potential issuer fraud, neither of which would appear to raise any indicia of suspicion for SAR reporting.

An examination of the totality of the circumstances of a transaction can help firms make the crucial distinctions between transactions that warrant a SAR and those that do not.  For example, determining the source of the publicity –is it a CNN article or a paid newsletter – or whether the customer is affiliated in some way with the issuer or the promotion are questions, among many others, that must be investigated.

It is unfortunate that FinCEN has failed to provide any meaningful or practical guidance for financial institutions dealing with these heightened risks of fraud during a period when they may have difficulty in even staffing their offices. Performing this work remotely creates its own challenges, given high level of confidentiality of SAR filings under Section 5318(g)(2), and the consequences – including criminal liability – for violating these confidentiality provisions.

Nonetheless, that is the situation broker-dealers are in, and this is likely the point:  FinCEN, law enforcement and regulatory agencies do not want to relax these requirements because of the heightened risks of financial crime during the pandemic and the government has become accustomed to this front-line reporting from private businesses. Even in these unprecedented times of economic disruption, broker-dealers must protect themselves from regulatory criticism and enforcement actions by continuing to follow their AML compliance programs and conducting the necessary due diligence on each transaction they process.

1  https://www.fincen.gov/news/news-releases/financial-crimes-enforcement-network-provides-further-information-financial

2  31 U.S.C. §5318(h), (g)

3  31 C.F.R. § 1023.210

4  Id.

5  31 C.F.R. § 1023.220

6  31 C.F.R. § 1023.320(a)(2)

7 31 C.F.R. § 1023.320(b)(3)

8 https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-bank-secrecy-act-charges-against-kansas-broker-dealer.

9 https://www.fincen.gov/news/news-releases/financial-crimes-enforcement-network-provides-further-information-financial

10  Id.

11  https://www.finra.org/rules-guidance/key-topics/covid-19/faq#aml

12   See GAO-19-583, Agencies and Financial Institutions Share Information but Metrics and Feedback Not Regularly Provided (August 2019), at pp. 3-4.

13   Id. at 24

14  https://www.fincen.gov/news/news-releases/financial-crimes-enforcement-network-fincen-encourages-financial-institutions.

 15  Id.

Copyright © 2020 by Parsons Behle & Latimer. All rights reserved.

For more on COVID-19’s financial implications, see the National Law Review Coronavirus News section.

Make Remote Access for Your Employees Safer & Quicker with Disciplined User Rights

During times of disruption as well as an unpredictable future, your organization’s focus on “the basics” regarding a fundamental remote access strategy and design is essential. The newly widespread remote working environment dictated by various states’ stay at home orders due to the Coronavirus pandemic, demand that successful organizations of tomorrow fully grasp the fundamentals of safe and remote access protocols and prepare for the elastic growth of a disciplined remote access initiative.

The landscape of remote access is forever changed. Regardless of your organization’s existing hardware, software or network (WAN) and cloud design,  basic planning activities – which pave the runway for successful remote access – ensure your organization’s sustainability and enhance your competitiveness in a crowded marketplace.

First and foremost, it’s recommended you audit your current infrastructure design – including a review of your hardware, software, infrastructure, bandwidth, security etc. Any high performing organization’s s remote access strategy should maintain SLAs (Service Level Agreements) or project deadlines and objectives with all internal users and exercise resiliency when confronted with the performance, compliance, and security demands needed to scale.

Three core strategic planning activities are highly recommended prior to, or in parallel with, an audit of your remote access posture:

Clean Up Your Users

Identity hygiene is a constant necessity of any organization to ensure its security stance and guarantee fluidity in the face of dynamic change. Legacy user account cleanup falls into this category, but the lesser practiced aspects of identity hygiene include organization unit restructuring and security group management. These components of a well-tuned identity management infrastructure represent the organizational layout of a business and mapping of processes to business roles which too often grow organically as companies mature. Complacency to organic growth has led many organizations to make drastic and costly decisions to start over rather than re-organize, in order to remove the cancer that has developed in their identity management infrastructure.

Segment User Roles

Likewise, segmenting roles is critical to identity hygiene. Most enterprises have adopted the bifurcation of administrator and personal accounts to ensure audit trails but considerably fewer have aligned security stance to personnel role. As tenure grows and roles change to meet the needs of the organization, new rights and responsibilities are created and added to those individuals with few taken away as the firm’s requirements change. Aligning roles to responsibilities, and more importantly permissions, assures audit compliance without complex explanations and eases transition should those trusted employees ultimately leave the company.

Assign Least Access Rights to Segmented Roles

Finally, the selection of rights assigned to those segmented roles solidifies a corporate identity management strategy. Whether assigned through a workflow engine or maintained through formalized manual processes, assuring least access aligned to each role eliminates the organic growth of unnecessary permissions or access to no longer appropriate applications. This last part is a key facet of a comprehensive strategy that many organizations – including large enterprises – develop complacency around. And the removal of access is no longer strictly necessary. It is too easy to allow excuses that support and even justify this laxity but it’s this very lassitude for least access which opens doors to ransomware propagation, disgruntled and disaffected IT administrators and glaring audit infractions.

In summary, organizational resilience is steeped in discipline. Crisis management and the daily “X factor” can create havoc even with the best laid plans for systems maintenance. The ways in which your firm interacts with clients, partners, suppliers, and others will undoubtedly change with the heavy reliance on remote access capabilities. Those who grasp this concept now will be ahead of the game.

Remote access prowess is now an entry ticket to conducting business post-COVID-19 and absolutely can be viewed now as a true competitive differentiator. When organizations run with elephants there are only two types: 1/ the quick and 2/ the dead. Let’s encourage each other to be in the former category, rather than the latter.

© 2020 Plan B Technologies, Inc.. All Rights Reserved.

For more on remote work considerations during the COVID-19 Pandemic, 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.

Board Oversight in the Age of COVID-19: Part Four

Part 4 of a weekly series detailing approaches that independent board members are utilizing to address coronavirus-related matters and highlighting emerging issues. Part 1, Part 2 and Part 3 of the series may be accessed on our website. 

The surreal nature of the current coronavirus environment in the United States continues. The number of new cases appears to have peaked in New York City and the Bay Area, while the S&P 500 ended the week down only about 13.5% year to date, and is higher now than on January 1, 2019. Yet, unemployment claims surged and are approximately 8.5 times higher than levels from the 2008–2009 financial crisis, and scores of businesses across the country remain shuttered and face bankruptcy. So the question of the past four weeks remains — where exactly do we go from here?

What Are Boards Doing Now?

Board Communications. Boards continue to evolve the nature of the periodic updates they are receiving. In addition to hearing about fund performance and operational matters, now some are including presentations from those asset management employees that focus on macro-economic themes, including the head of fixed-income research or those in similar positions.

Future Board Meetings. Boards continue to evaluate their June board schedules, and more are expecting to hold these meetings virtually. Some are also considering the need to hold additional telephonic board meetings to address items already deferred from meeting agendas in March, and expected to be deferred from June meeting agendas, as boards continue to assess the maximum length and most efficient structure of virtual board meetings.

15(c) Requests. Boards and their independent counsel continue to evaluate additional questions for 15(c) Request Letters to address COVID-19 matters. While the nature and extent of these requests is dependent on the types of periodic updates the board is already receiving, most are expecting to request and receive some form of “bring down” update from Fund management closer to the date of the meeting during which 15(c) renewals will be considered.

What’s Next – Emerging Issues

Below are some emerging issues that came to light over the past week, which boards may want to consider as they continue to exercise their fiduciary duties.

Liquidity: Some complexes are filing Form N-LIQUID with respect to funds that have breached the 15% limit on illiquid securities, and related reports are being made to the board, along with a remediation plan. Breaches may be due to a more careful review of holdings or to changes in the character of holdings. Alternatively, some complexes are reporting issues with liquidity categorizations provided by third party service providers causing Liquidity Risk Program Administrators to consider overriding or challenging the liquidity classifications provided. The SEC staff has been open and willing to discuss such filings and related matters, and we are aware that OCIE staff has been participating on some of these calls.

Service Providers: As the impact of the virus is expanding globally, boards are considering the types of risks that may be presented by service providers with operations in less developed countries, including India, where BCP plans may be less robust, do not contemplate “work from home” opportunities for all employees and may be harder to implement. This may be a heighted concern for ETFs, as these funds tend to have more unaffiliated service providers with offshore operations.

Index providers: Fund management has noted the benefit of advance communication with index providers to address the potential impact of market halts or bankruptcies of companies included in an index. While most index rebalances have been suspended, the impact of other market developments remains.

Back Office Issues: Fund management continues to consider operational matters, including the speed and efficiency of processing customer orders and the working relationship with financial printers, where production delays and other operational concerns are occurring.

Borrowing Relief: So far, we are not seeing many Funds utilizing this relief to access liquidity, as fund management considers operational issues.

Closed End Funds: The advantages of holding virtual annual shareholders meetings are being weighed against potential disadvantages, including that certain proxy solicitation firms may object to hosting a virtual meeting if it is contested and concerns that activists could take advantage of this format to hijack the meeting.

Interval Funds: Boards are closely monitoring management’s preparation for upcoming periodic repurchase offers to assess liquidity and valuation issues. In addition, boards are discussing whether repurchase amounts should be set at levels that seek to clear out shares tendered or to prorate, and considering the impact of such decisions on the management of the portfolio, continuing sales and liquidity for future repurchase offers.

© 2020 Vedder Price

For more on COVID-19 impact on various industries, see the Coronavirus News section of the National Law Review

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.

Class Actions Follow Universities’ Moves to Online Learning

After switching to online learning in response to the COVID-19 pandemic and sending students home, colleges and universities are beginning to face class action lawsuits seeking refunds of tuition, housing costs, meal plans, and fees. One such lawsuit is Church v. Purdue University, No. 4:20-CV-0025, in the U.S. District Court for the Northern District of Indiana.

The lawsuit asserts contract and unjust enrichment claims for three general classes, seeking partial reimbursement for: (1) tuition; (2) housing; and (3) meals and fees. Among the many important issues will be whether the damages are so individualized that they are not susceptible to class-wide proof. If so, they would predominate over common, class-wide issues and prevent class certification. The Church complaint, for example, acknowledges that the diminished value may vary for each student. It alleges that academic performance drops from online learning and the adverse effects hit lower ranked students progressively more harshly. Also, the named plaintiff is an engineering senior who is missing out on his senior project of building an airplane. Many other students will have similar stories, but they each will be unique. These and other problems will be a struggle for plaintiffs as they seek to find a class-wide damages model for some or all of the sub-classes they seek to represent.

These suits also may entail issues arising from recent federal legislation enacted to combat the economic fallout from COVID-19, as well as issues regarding financial aid.

These damage issues will be hotly litigated as these cases face motions to dismiss and oppositions to class certification.

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

For more litigation resulting from COVID-19, see the National Law Review Coronavirus News page.

CMS Waives Certain Penalties Classes of the Stark Law

On March 30, 2020, the Centers for Medicare and Medicaid Services (CMS) announced it will waive certain penalties classes of violations of the Physician Self-Referral Law, known as the Stark Law. The affected penalties are those listed under Section 1877(g) of the Social Security Act (42 U.S.C. 1877). These blanket waivers are effective retroactively to March 1, 2020.

The Stark Law is a strict liability statute generally prohibiting a physician from making referrals of Medicare- and Medicaid-designated health services to an entity with which the physician or an immediate family member has a financial relationship. Typically, if such a relationship exists between a physician and an entity, then the arrangement must satisfy an express Stark Law exception for the physician to bill for the referred services.

The blanket waivers temporarily allow payments and referrals between physicians and covered entities if the relationship falls into one of the express categories during the COVID-19 pandemic, even if such an arrangement would otherwise not meet a Stark Law exception. The blanket waivers apply to payments and referrals between an entity covered under the Stark Law and (1) a physician, (2) the physician’s organization defined under 42 C.F.R. 411.354(c) or (3) the physician’s immediate family member.

The blanket waivers must relate to one of the explicitly defined COVID-19 purposes and meet the following conditions:

  1. The providers are acting in good faith to provide care in response to the COVID-19 pandemic.
  2. The financial relationship or referral is protected by one of CMS’s 18 permitted relationships (discussed below).
  3. The government does not determine that the financial relationship creates fraud and abuse concerns.

Defined COVID-19 Purposes

To apply, the blanket waivers must be related to COVID-19 purposes. Such purposes include:

  • “Diagnosis or medically necessary treatment of COVID-19 for any patient or individual, whether or not the patient or individual is diagnosed with a confirmed case of COVID-19;
  • Securing the services of physicians and other health care practitioners and professionals to furnish medically necessary patient care services, including services not related to the diagnosis and treatment of COVID-19, in response to the COVID-19 outbreak in the United States;
  • Ensuring the ability of health care providers to address patient and community needs due to the COVID-19 outbreak in the United States;
  • Expanding the capacity of health care providers to address patient and community needs due to the COVID-19 outbreak in the United States;
  • Shifting the diagnosis and care of patients to appropriate alternative settings due to the COVID-19 outbreak in the United States; or
  • Addressing medical practice or business interruption due to the COVID-19 outbreak in the United States in order to maintain the availability of medical care and related services for patients and the community.”

Those wishing to use the blanket waivers need not provide advance notice to or receive approval from CMS. Those who rely on a blanket waiver, however, must retain records relating to its use, and the records must be available for the U.S. Department of Health and Human Services to review upon request.

The Blanket Waivers

The blanket waivers do not suspend the entire Stark Law. Rather, they apply only to 18 expressly enumerated relationships. These relationships can be divided into two classes: those that address payments and those that address referrals.

Allowed Payments

  1. Personally Performed Services: Remuneration paid by an entity to a physician above or below the fair market value (FMV) for the physician’s personally performed services to the entity is permitted.
  2. Office Space and Equipment Rental Payments: Remuneration paid by an entity to a physician or by a physician to an entity below FMV for rental of office space or equipment is permitted by the waivers. Rental payments exceeding FMV are not covered.
  3. Purchase of Items or Services: Remuneration paid by an entity to a physician or by a physician to an entity below FMV for the purchased items or services, including use of the entity’s premises, is permitted by the purchase waivers. The purpose of these waivers is to permit parties to rapidly source critical items or services without overpaying for the service.
  4. Additional Incidental Benefits to Medical Staff: Remuneration from a hospital to a physician in the form of medical staff incidental benefits that exceed the $36-per-item limit set forth in 42 CFR § 411.357(m)(5) is protected. This waiver permits a hospital to offer a range of benefits to its medical staff members to facilitate participation in the health care workforce, such as childcare services or clean clothing for the physician while at the hospital.
  5. Nonmonetary Compensation: Remuneration from an entity to a physician in the form of nonmonetary compensation that exceeds the $423 annual limit set forth in 42 CFR § 411.357(k)(1) is permitted. Similar to the medical staff benefit waiver, this waiver allows an entity to provide additional services that would otherwise exceed the limits established by the regulations to facilitate participation in the health care workforce during the COVID-19 pandemic. Currently, it is unclear how this waiver will be assessed when the blanket waiver period ends because the public emergency declaration caused by the COVID-19 pandemic is terminated. More guidance from CMS on the application of this waiver may be issued.
  6. Low-Interest or Interest-Free Loans: Remuneration among individuals and entities in the healthcare industry in the form of a loan, with an interest rate below FMV or on terms that are unavailable from another independent lender, is allowed. Essentially, CMS is attempting to increase cash liquidity within the health care industry to mitigate potential cash flow problems among health care workers and providers during the COVID-19 pandemic.

Allowed Referrals

  1. Referrals by Physician-Owner of a Hospital: Referrals by a physician-owner of a hospital that temporarily expands its facility capacity above the number of operating rooms, procedure rooms and beds for which the hospital was licensed on March 23, 2010 without prior application and approval of the expansion of facility capacity will temporarily not be prohibited by the Stark Law. (In the case of a hospital that did not have a provider agreement in effect as of March 23, 2010, but did have a provider agreement in effect on December 31, 2010, the effective date of such provider agreement applies.)
  2. Referrals by Physician-Owner of Ambulatory Surgical Centers that Temporarily Convert to Hospitals: Referrals by a physician-owner of a hospital that converted from a physician-owned ambulatory surgical center to a hospital on or after March 1, 2020 are permitted provided that:
  • The hospital does not satisfy one or more of the requirements of Section 1877(i)(1)(A) through (E) of the Act.
  • The hospital enrolled in Medicare as a hospital during the period of the public health emergency described in Section II.A of this blanket waiver document.
  • The hospital meets the Medicare conditions of participation and other requirements not waived by CMS during the period of the public health emergency described in section II.A of this blanket waiver document.
  • The hospital’s Medicare enrollment is not inconsistent with the Emergency Preparedness or Pandemic Plan of the state in which it is located.
  1. Referrals by Owners to a Home Health Agency: Referrals are now permitted by a physician of a Medicare beneficiary for the provision of designated health services to a home health agency (1) that does not qualify as a rural provider under 42 CFR 411.356(c)(1) and (2) in which the physician (or an immediate family member of the physician) has an ownership or investment interest.
  2. Referrals for Services at Locations Other than the Health Care Facility: Referrals are now permitted by a physician in a group practice for medically necessary designated health services furnished by the group practice in a location that does not qualify as a “same building” or “centralized building” for purposes of 42 CFR 411.355(b)(2). Also, referrals by a physician in a group practice for medically necessary designated health services furnished by the group practice to a patient in his or her private home, an assisted living facility, or independent living facility where the referring physician’s principal medical practice does not consist of treating patients in their private homes will not violate the Stark Law.
  3. Referrals to Immediate Family Members in Rural Areas: Referrals are now permitted by a physician to an entity with which the physician’s immediate family member has a financial relationship if the patient who is referred resides in a rural area.
  4. Relaxing Compensation Arrangement Written Requirements: Stark Law compensation arrangement exceptions frequently require the arrangement to be in writing. However, referrals are now permitted by a physician to an entity that the physician (or an immediate family member of the physician) has a compensation arrangement that does not satisfy the writing requirements of an applicable exception but satisfies all other requirements of the applicable exception, unless that requirement is waived under one or more of the blanket waivers above.

CMS encourages providers to contact CMS with questions regarding the applicability of the blanket waivers. Providers should send any requests to 1877CallCenter@cms.hhs.gov and include the words “Request for 1877(g) Waiver” in the subject line. All requests should include the following minimum information:

  • the name and address of requesting entity
  • the name, phone number and email address of the person designated to represent the entity
  • the CMS Certification Number (CCN) or Taxpayer Identification Number (TIN) of the requesting entity; and
  • the nature of the request.

The contours and applications of these blanket waivers are complex and often require a nuanced understanding of how they are couched into the existing regulatory framework addressing the provision of health care services under the Social Security Act, the Stark Law, and a number of other statutes and regulations.

© 2020 Much Shelist, P.C.

For more on healthcare blanket waivers amidst COVID-19, see the National Law Review Coronavirus News section.