The COVID-19 pandemic has ushered in a time of unprecedented uncertainty for families and businesses across the Commonwealth.
Two major federal pieces of legislation – the Families First Coronavirus Response Act (“FFCRA”) and the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) – have been passed and signed into law. Both of these laws will have an enormous impact on individuals and employees in the Commonwealth.
Within our state government, emergency legislation has been enacted by the Department of Unemployment Assistance (DUA) that expands access to unemployment benefits to claimants whose employers have temporarily closed or instituted furloughs as a result of the COVID-19 crisis.
The president announced on March 29 that federal guidance on social distancing would remain in place through April 30. Here in Massachusetts, schools will be closed through at least May 4. So it appears that all of us will be navigating this new territory for the foreseeable future.
Here are a few immediate financial resources and considerations for businesses during these trying times. For more complete information visit the Conn Cavanaugh website (https://www.connkavanaugh.com/ckcic) where we have set up a COVID-19 Information Center containing advisories about the FFCRA, the CARES Act and other critical legal issues related to COVID-19.
Financial Help For Small Businesses
One of the key provisions of the CARES Act is the introduction of a new Paycheck Protection Program, which makes significant changes to the Small Business Act administered by the Small Business Administration (SBA). Under the new Paycheck Protection Program, businesses with 500 or fewer employees may take out low-interest loans for assistance with payroll, rent, and other designated expenses.
Critically, businesses in the Accommodation and Food Services Sector (those with a NAICS Code of 72) are also eligible as long as they employ not more than 500 employees “per physical location.” As an example, a restaurant franchisee who employ more than 500 employees spread across multiple restaurant locations (but no more than 500 employees at any one location) could qualify for the loans.
All or a portion of the loan will be forgiven, depending on how the proceeds from the loan are used, and whether the business retains its employees. Any part of the loan that is not forgiven bears interest at not more than 4 percent. The loan term may be up to 10 years, and there is no prepayment penalty.
Business Interruption Insurance Coverage
Business owners should consult their property insurance policies to determine if any business losses are recoverable through business interruption coverage. Business interruption (BI) insurance is designed to reimburse business owners for lost revenue in the event a business has to stop operations unexpectedly. Relatedly, another type of coverage called contingent business interruption (CBI) can cover losses resulting from damage to the property of a customer or supplier on which the business depends for its business.
Unfortunately, both BI and CBI insurance are typically triggered by “direct physical loss or damage” to property, such as a fire, hurricane, or earthquake. That said, some policies extend coverage to losses caused by “communicable or infectious diseases,” which do not require physical damage to property. Moreover, not all insurance policies are created equally, and policy wording often varies from insurer to insurer. With all of these issues at play, the COVID-19 pandemic will undoubtedly trigger litigation between businesses facing large losses and their insurance companies.
In sum, business owners should consult their policies now. Business owners can contact their insurance brokers or legal counsel for guidance, or can simply move forward with putting the insurer on notice of a claim. Once the insurer is put on notice, it is the insurer’s obligation to review the claim and determine whether coverage exists.
Document, Document, Document!
Whether you are preparing to make an insurance claim or file a loan application, business owners should diligently document any period of business disruption now. The information required to support these claims can be extensive. Over the coming weeks and months, businesses should rely on their insurance brokers, attorneys, accountants, and any other key business advisors to guide them in documenting and preparing claims and/or loan applications.
Reliable Resources On employment Issues
The volume of information we are receiving from our government, colleagues, families, newspapers and social media about the COVID-19 crisis on a daily basis can feel overwhelming. When it doubt, below are some reliable and accessible, federal and state government guidance on employment-related matters in the COVID-19 context:
- U.S. Department of Labor: https://www.dol.gov/agencies/whd/pandemic.
- U.S. Equal Opportunity Commission: https://www.eeoc.gov/facts/pandemic_flu.html.
- Massachusetts Department of Unemployment Assistance: https://www.mass.gov/info-details/employee-unemployment-faq-covid-19.
- Massachusetts Attorney General – Fair Labor Division: https://www.mass.gov/service-details/frequently-asked-questions-about-covid-19-employee-rights-and-employer-obligations
Weathering The Storm Together
Notwithstanding the sense of anxiety that has permeated our national psyche in recent weeks, we are also witnessing remarkable mobilization efforts within our government, the private sector, and our individual neighborhoods and communities to survive this crisis. Our hospitals and medical professionals are doing especially exceptional and selfless work under highly stressful and challenging conditions. Grocery store and pharmacy employees, delivery drivers, and warehouse workers are all stepping up to keep our families fed and supply chains moving.
Governments, businesses and individuals must continue to lean on each other and work together to weather this historic crisis. In the end, our collective experience will make us smarter, stronger and more prepared for crises in the future.
Kathleen R. O’Toole, Esq., is a Centerville native, Dorchester resident, and attorney at the Boston law firm of Conn, Kavanaugh, Rosenthal, Peisch & Ford LLP. Feel free to send questions to firstname.lastname@example.org.
This column, which may be considered advertising under the ethical rules of certain jurisdictions, is intended as a general discussion of the topics covered, and does not constitute the rendering of legal advice or other professional advice by Conn, Kavanaugh, Rosenthal, Peisch & Ford LLP or its attorneys.