June 9, 2020
PPP Loan Forgiveness Application, COVID-19 Crisis & Changes to Status 
Dear Clients, Colleagues and Friends,

We hope that all of you are gearing up and getting ready for Phase 1 or Phase 2 of the Grand Re-Openings taking place in NY and NJ these days.

There are so many things to know and to keep up with to determine legal requirements for re-opening workplaces, and M&B is the place to turn to for answers to many of your questions. Please check out our website, which has been completely revamped with a fresh new look and a lot of new content on various legal issues, as well as a brand new blog! Check it out at www.mb-llp.com.

In this newsletter, we discuss the latest information regarding PPP loan forgiveness and a new law in NYS allowing building and business owners to take temperatures of employees, visitors and customers entering the premises.

As you are planning for complying with CDC and other regulations, we would like to introduce you to our friend Daniel Rapp of High Resolution. Daniel’s company produces beautifully designed and digitally printed social distancing signage, hand washing reminders and directional footsteps for hallways, as well as a very attractive hand sanitizer station. You can reach Daniel at (212) 625-9192 or through a contact form on his website www.high-res.com, where you can see samples of his work.
Paycheck Protection Program Flexibility Act of 2020 Enacted

_____ On Friday, June 5, President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”), Public Law No. 116-142, which the House had passed on May 28, 2020 and the Senate passed on June 3, 2020. The Flexibility Act amends the Paycheck Protection Program (“PPP”) under the Small Business Act and CARES Act by relaxing some of the more stringent requirements associated with PPP loan forgiveness.

           The Flexibility Act amends the PPP requirements as follows:

  • Extension of Loan Maturity Period. The Flexibility Act increases the maturity date — that is, borrowers’ time to repay any portion of their loans that were not forgiven — from two to five years. The extension technically applies only to PPP loans issued after the effective date of the Flexibility Act, but lenders and borrowers can agree to extend the maturity date of PPP loans previously disbursed under the CARES Act. 
  • Extension of Covered Period for Loan Use. The Flexibility Act extends the covered period — that is, the time in which borrowers must use the loan proceeds in order to qualify for forgiveness — from eight (8) weeks from when they received PPP funds to twenty-four (24) weeks from when they received PPP funds, or until December 31, 2020, whichever comes first. That gives the borrowers additional time to use the loan proceeds while state governments reopen businesses in phases. The Act also gives borrowers the option to use the 8-week covered period and then apply for loan forgiveness, in order to remove the debt from their books.

  • Amended Limits on Payroll and Non-Payroll Costs. The Flexibility Act lowers from 75% to 60% the percentage of the loan that borrowers must spend on payroll costs (including health insurance premiums and pension contributions) and raises from 25% to 40% the percentage of the loan that borrowers may spend on non-payroll costs (as defined by the CARES Act) in order to be eligible for loan forgiveness. The Flexibility Act seemed to state that borrowers who spend less than 60% of their loan on payroll costs would not qualify for loan forgiveness. However, on June 8, 2020, the Small Business Administration (“SBA”) and the U.S. Treasury Department (“Treasury”) clarified that borrowers who spend less than 60% of the PPP loan on payroll costs may be eligible to receive partial forgiveness of their loan. 
  • Extension of Rehiring Deadline. The Flexibility Act extends from June 30, 2020 to December 31, 2020, borrowers’ deadline to restore the number of their full-time employees or full-time equivalent employees (“FTEE”) (as defined in the PPP Loan Forgiveness Application) and their average salary/wages to their levels on February 15, 2020, in order to qualify for loan forgiveness.
  • New Safe Harbor Provisions. The Flexibility Act provides a new safe harbor for borrowers who cannot restore their FTEE or salary/wages even by the December 31st deadline. Loan forgiveness will not be reduced if borrowers, in good faith, can document that they were unable to (1) rehire individuals who were their employees as of February 15, 2020, (2) hire similarly qualified individuals for available positions on or before December 31, 2020, or (3) return to the same level of business activity and operations as prior to February 15, 2020, because of federal requirements or guidance related to safety, sanitation, and social distancing in response to COVID-19. This gives borrowers added protections if they cannot fully reopen because of ongoing restrictions related to COVID-19.
  • Permissible Deferral of Payroll Taxes. The Flexibility Act allows borrowers to defer the payment of half of their share of 2020 Social Security payroll taxes (or self-employment taxes) until 2021 and half until 2022. Under the CARES Act, borrowers whose loans are forgiven could not defer these taxes.
  • Extension of Deferral of Principal, Interest, and Fees. The Flexibility Act amends the requirement that lenders must defer payment of interest and fees for up to six (6) months to one that requires lenders to defer payments due until after the lender receives notice from the SBA regarding the amount of the loan that is not forgiven. In addition, borrowers have ten (10) months from the last day of the covered period to apply for loan forgiveness and will not be required to pay principal, interest, and fees on their PPP loans until after the 10-month period expires.
  • Deadline for Loan Approval. The deadline for approval of a PPP loan application remains June 30, 2020.  

_____The effective date of the Flexibility Act (other than the extension of loan maturity) will be retroactive to the effective date of the CARES Act, which was March 27, 2020.

_____The SBA and Treasury will be issuing new rules and guidance on the PPP, a revised borrower application form, and an updated loan forgiveness application that includes the Flexibility Act’s changes to the PPP.

_____All in all, the Flexibility Act is a win for small business owners. While there are still uncertainties that hopefully future guidelines will address, the Flexibility Act certainly lightens the burden on those that have received, or will be receiving, PPP funds.

_____If you have additional questions and concerns about the Paycheck Protection Program Flexibility Act, please contact Chaim Book at cbook@mb-llp.com, Lianne Forman at lforman@mb-llp.com, Sheryl Galler at sgaller@mb-llp.com, Chris Neff at cneff@mb-llp.com, or Jennifer Kim at jkim@mb-llp.com.

Temperature Checks by Building Operators in NYS Permitted

_____On June 6, 2020, Governor Cuomo issued Executive Order No. 202.38, which permits commercial building owners, retail store owners, and individuals with authority on their behalf to manage public areas within such buildings and businesses (collectively, "Operators”) throughout New York State to conduct body temperature checks on individuals who enter their premises. Operators will have the discretion to prohibit entry to those who (1) refuse to submit to a temperature check prior to entry and (2) have a body temperature of 100.4 °F (38 °C) or higher, which is the definition of fever according to the NYS Department of Health (“NYS DOH”) and Centers for Disease Control and Prevention (“CDC”). Operators’ authority to conduct temperature checks expires on July 6, 2020, unless extended by a subsequent executive order.

_____The executive order does not suspend the Americans with Disabilities Act, New York State Human Rights Law, the New York City Human Rights Law, or any other disability or discrimination laws. Accordingly, Operators should perform temperature checks in a non-discriminatory manner, without considering protected categories, such as gender, age, race, ethnicity, national origin and religion.

_____Employers who conduct temperature checks will have additional obligations, such the requirement to maintain the confidentiality of information regarding employee’s body temperatures and store such information separately from personnel files. Employers should seek legal counsel to determine whether they may have to compensate workers for time they spend waiting for and having their body temperatures checked prior to entering the workplace.

_____Operators and employers should also continue to track guidelines issued or updated by the CDC, NYS DOH, and the NYC Department of Health and Mental Hygiene with respect to COVID-19, its symptoms, and preventative practices in the workplace

_____If you have additional questions and concerns about conducting temperature checks at your business, please contact Chaim Book at cbook@mb-llp.com, Sheryl Galler at sgaller@mb-llp.com, or Jennifer Kim at jkim@mb-llp.com.
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