COVID 19 BLOG UPDATE Chidatma Lex Group
Dated: New York, New York
Thursday, March 26, 2020
Introduction. As new rules, regulations, and laws go into effect to deal with the impact of COVID-19, we want our clients and friends to stay up to date. I have fielded several calls and I have tried to address those calls in this Blog Update. The information provided is what we know as of our sending this email. The situation, however, has been fluid and continues to change rapidly. And not all changes or developments are covered below.
While we will not be sending constant emails with every change, please know that we are available to discuss any issues, questions, concerns or matters that come up and that we stand ready to help. Please contact us. Meanwhile, we hope you stay healthy and safe.
The Virus. Coronaviruses are a group of viruses that can cause either mild illness, such as a cold, or can make people sick with pneumonia. Recently, a novel (new) coronavirus was detected in thousands of people worldwide. The infection, called COVID-19, can be spread from person to person. A “novel coronavirus” is a strain not found in humans. COVID-19 is front-page news and the status is constantly shifting. Fear of the COVID-19 is rampant. We want to advise you of various options to protect your business and everyone’s health.
The Symptoms. People may be sick with the virus for 1 to 14 days before developing symptoms. The most common symptoms of coronavirus disease (COVID-19) are fever, tiredness, and dry cough. Some people have the virus but exhibit no symptoms. Most people (about 80%) recover from the disease with no special treatment.
More rarely, the disease can be serious and even fatal. Older people, and people with other medical conditions (such as asthma, diabetes, or heart disease), may be more vulnerable to becoming severely ill.
An unusual symptom has recently been observed – loss of smell or taste. Sometimes that is the only symptom.
Statistics. This is the scary stuff: the bump, the curve, the mortality rate. Know your source of information. Loud whispers in the internet are no more valuable than a loud whisper in the bathroom. And naysayers be forewarned: Look here for how experts are comparing New York to Italy and China.
The New England Complex systems institute, a Boston based think tank, explains basic concepts (taken from complex systems thinking) which can help us make sense of what is going on. It explains why epidemiologists and public health experts are so alarmed when you and I probably don’t even personally know someone with COVID-19
The statistics vary and only become statistically significant when, to use a well-known statistical concept, we compare apples to apples.
What do I do if I think I have the virus? CALL YOUR DOCTOR. A doctor verifying your symptoms will accelerate getting a test for COVID-19. Also, the CDC has created a “bot” to help determine if you have the virus.
The Lock-down. New York State has put in place strict lockdown procedures to tamp down on the spread of the virus. It is called the 10 Point Pause:. It’s unclear how long the lockdown will last, though officials said earlier this week that the virus may not peak in New York for another month and a half. Restaurants, bars, cinemas, event venues, barber shops, beauty parlors, spas, gyms, nail salons and tattoo studios are closed indefinitely. Only essential business — including grocery and liquor stores, banks, pharmacies, public transportation and public safety agencies, news organizations, gas stations and laundromats — will remain open through the pandemic. Look here for what are considered essential services .
Governmental Relief. Our main concern is people’s health. That is why this paper starts with the health and disease issues. You have to take a long view. We will get to the other side of this. COVID-19 was preceded by SARS, Bird Flu, MERS. The lessons we learn in this setting will be used again. Hopefully not for many years.
The impact is on people and businesses both large and small. Where will rent come from? Will I get a salary? Do I have to honor contract? Do I have to pay my employees? How do I know if employees are working remotely? And so on … Let’s drill down.
Federal. President Donald Trump on Wednesday signed into law a coronavirus relief package that includes provisions for free testing for Covid-19 and paid emergency leave. The Senate had earlier Wednesday approved the House-passed bill. The move allowed the upper chamber to devote its full attention to passing the next relief package in response to the coronavirus crisis. The revised legislation would still provide many workers with up to two weeks of paid sick leave if they are being tested or treated for coronavirus or have been diagnosed with it. Also eligible, would be those who have been told by a doctor or government official to stay home because of exposure or symptoms.
Under the revised bill, however, those payments are capped at $511 a day, roughly what someone making $133,000 earns annually. The original measure called for workers to receive their full pay but limited federal reimbursement to employers to that amount.
Workers with family members affected by coronavirus and those whose children’s schools have closed will still receive up to two-thirds of their pay, though that benefit is now limited to $200 a day.
This is a big deal. It is the first time the United States has widespread, federally mandated paid leave, and includes people who rarely get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers.
The relief package gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose childcare provider is unavailable because of coronavirus.
- Which workers qualify?
Most workers at small and midsize companies and nonprofits can get the paid leave, as can government employees, as long as they’ve been employed at least 30 days.
- Which workers are excluded?
Those at companies with over 500 people — 48 percent of American workers — are excluded. Workers at companies with fewer than 50 employees — 27 percent of workers — are included, but the Labor Department could exempt small businesses if providing leave would put them out of business. Employers can also decline to give leave to workers on the front lines of the crisis: health care providers and emergency responders.
- Are part-time and self-employed workers eligible?
Yes. Part-time workers will be paid the amount they typically earn in a two-week period. People who are self-employed — including gig economy workers like Uber drivers and Instacart shoppers — can also receive paid leave, assuming they pay taxes. They should calculate their average daily self-employment income for the year, then claim the amount they take as a tax credit (they can reduce their estimated quarterly tax payments meanwhile).
- How much money do I get while on leave?
If you are sick or seeking care for yourself, you earn the full amount you are usually paid, up to a maximum of $511 a day. If you are caring for a sick family member or a child whose school or day care is closed, you earn two-thirds of your usual pay, up to a daily limit of $200.
- How do I take leave?
The Labor Department must issue guidelines by April 2 to assist employers in calculating how much paid leave their employees should get. After that, employees should be able to simply notify their employer, take the leave and get paid the amount specified by the law.
- How will businesses and nonprofits afford to pay workers on leave?
They will be reimbursed for the full amount within three months, in a payroll tax credit. It’s fully refundable, so if the amount that employers pay workers who take leave is larger than what they owe in taxes, the government will send them a check for the remainder. (That goes for self-employed and gig economy workers, too.)
- Is the paid leave permanent?
No. It’s meant as a response to coronavirus, and expires Dec. 31.
Local Governments. New York State has a more robust sick leave policy. With excellent step-by-step guides.
Many of you run small New York businesses. Shortly, I will have a special supplement to this Blog Update on SBA loans and how to get them. Meanwhile, know that we New Yorkers can take advantage of two special programs:
- NYC Employee Retention Grant Program
- The City is offering small businesses with fewer than 5 employees a grant to cover 40% of payroll costs for two months to help retain employees.
- Eligibility Criteria for the NYC Employee Retention Grant Program
Businesses, including non-profits, must:
- Be within the five boroughs of New York City
- Demonstrate that the COVID-19 outbreak caused at least a 25% decrease in revenue
- Employ 1-4 employees in total across all locations
- Have been in operation for at least 6 months
- Have no outstanding tax liens or legal judgements
- NYC Small Business Continuity Loan Fund
- Businesses with fewer than 100 employees who have seen sales decreases of 25% or more will be eligible for zero interest loans of up to $75,000 to help retain employees and ensure business continuity.
- Eligibility Criteria for the NYC Small Business Continuity Loan Fund Businesses must:
- Be within the five boroughs of New York City
- Demonstrate that the COVID-19 outbreak caused at least a 25% decrease in revenue
- Employ 99 employees or fewer in total across all locations
- Demonstrate ability to repay the loan
- Have no outstanding tax liens or legal judgments
How Can I work When I am not at my office? Let’s see if we can create an opportunity out of this dilemma. It is all about relations. If you work on projects for customers, take this downtime as an opportunity to contact your customers, see how they are doing, and let them know the project you are working on for them is safe and secure. Check-in on old customers and revitalize those relationships. Your customers will appreciate that you are thinking about them.
If you are service-oriented, you communicate with your customers and team using videochat. Zoom is revealing itself as the de facto leader. It is free for individuals and small businesses. If your team is working on projects together, and there is no more bumping into each other in the hall, use Asana for teamwork and Slack for quick communications and sharing documents. To access your office computer remotely most people use TeamViewer which has a free license for personal use. I use Splashtop because I am a business. I can be at home or anywhere and access my office computer. Large business will already have Citrix or some other solution in place.
Help – I have a retail business! If you are a retailer use this downtime as an opportunity to contact your customers, see how they are doing, and let them know how your business is still running, even if in a limited capacity. Check in on old customers and revitalize those relationships. Your customers will appreciate that you are thinking about them.
The Department of Homeland Security has laid out guidelines for businesses across the country to follow when deciding whether to stay open as “essential.” The agency is careful to note that its definition of a “critical” work force is not an official standard, leaving it up to businesses to decide for themselves. Most non-essential businesses have closed, while some such as Michael’s and Guitar Center have stayed open to assist people at home. Some companies with over 500 employees that have closed stores are paying typical wages to affected employees for the next two weeks
Like other employees of companies with less than 500 employees, retail employees of companies that size are considered general unemployed. Online shopping is allowing many retailers to continue doing business without the harm being inflicted on restaurants. The National Retail Federation (NRF) has launched an online resource for retail employees to learn about job openings if their current positions have been affected by temporary or permanent closures. As of March 25, 2020 the NRF to has also provided a Summary of Key Provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act guide retailers through the pandemic.
I can’t go to my office; do I have to pay rent? Relations are everything and the answer is both yes and no. There are difficult choices to be made when you have to insure you have enough money to buy food. In New York, one judge has said there would be no evictions during the Pause. Governor Cuomo made that part of the state lockdown policy. Similarly, last week Fannie and Freddie Mac, the giant government-run finance firms that back the mortgages of 28 million homeowners, ordered a suspension of foreclosures and foreclosure-related evictions for at least two months. Cuomo adopted that order for New York State.
Do I have to comply with other contracts? There is a legal concept called force majeure or act of god incorporated into most contracts. It might look like this:
7.1 Neither party shall be liable to the other in respect of anything which, apart from this provision, may constitute a breach of this Agreement arising by reason of force majeure, namely, circumstances outside that party’s reasonable control including (but not limited to) fire, flood, storm, sabotage, delays in transportation, strikes or lock-outs, riot, war, rebellion, terrorism or acts of local government or parliamentary authority.
7.2 Each party shall give notice as soon as practicable to the other upon becoming aware of an event of force majeure which prevents that party from performing its obligations under this Agreement, and of the cessation of the said event. Such party shall in addition use all reasonable endeavors to minimize the effect of the event of force majeure on its performance of its obligations under this Agreement.
But it is a contractual term. And not every contract contains it. Three legal principles will assist if failure to comply with a contract becomes an issue after the Pause. Frustration of purpose, impossibility, and material adverse change. Frustration of purpose occurs where an unforeseen event, not caused by either party, changes the circumstances surrounding the agreement so performance of the contract differs significantly from the parties initially intended. Like force majeure, this doctrine is very narrow and usually limited to “where a virtually cataclysmic, wholly unforeseeable event” makes the contract worthless to a party. Under New York law, this requires more than a contract becoming more expensive to fulfill. Frankly, COVID-19 seems to be “an extraordinary event which is determined to both constitute a public health risk to other States through the international spread of disease; and to potentially require a coordinated international response” would seem to qualify. The world Health Organization has so stated.
Does Insurance help me. Many businesses have business interruption insurance. But beware: the coverage is often limited and insurance companies will attempt to deny any claim they can. This article will be updated later this week with a special piece on business interruption insurance. Stay tuned.
Can My New York Real Estate Transaction Proceed? Parties should review their purchase and sale agreement to discern if COVID-19 disruptions have caused breach of the seller’s representations and warranties. They should also make sure they can comply with all covenants in the agreement. This is important for operating properties that may experience rent disruptions. Borrowers should also review financing terms.
The New York State Real Estate Finance Bureau (REFB) is open with its staff telecommuting. Condo and Co-Op offering plan submissions, amendments, and no-action applications are being reviewed, although delays should be expected. Many regional abstract companies and title insurance companies remain able to facilitate closings “in escrow” and the New York City Register remains open for recording deeds and related documents. The NYC Register also generally permits electronic recording. However, general considerations and challenges remain. For example:
- The NYC Register permits electronic recording, provided the original document for recording is already on file with the title company.
- Original recording documents still require wet signatures by all signatories and notaries.
- Some title companies are only accepting wires, not checks.
- Abstract and title companies will likely insist on indemnities
- Closing agents may require additional fees
- Closing in escrow requires more logistical coordination than a traditional, in-person closing
My Business is in Litigation. Can it proceed? Can I File a Lawsuit? On March 20, Governor Cuomo issued Executive Order No. 202-8 suspending statutes of limitations and filing deadlines until April 19; effectively tolling the statute of limitations for any cause of action that accrued in New York before March 20 for 30 days and extending deadlines for motions and other proceedings. The same day, the Southern District of New York announced that civil cases will proceed at the discretion of individual judges permitting federal litigation to continue.
On March 22, New York Chief Administrative Judge Lawrence Marks issued Administrative Order AO/78/20, clarifying that until further notice, New York courts will accept filings only in certain enumerated “essential proceedings.” Discovery is permitted to continue if the parties agree that it will present no health concerns. At first blush, Section E of the list of essential proceedings encompasses business disputes. However, on March 23 the Court further clarified that it would construe Section E restrictively, assuring that filings by emergency application only be accepted in “rare” cases. This highly suggests that Section E will be limited to requests for injunctive relief and parties seeking such relief will be held to the high burden of proof for such requests.
All routine New York state business litigation is indefinitely on hold although the parties may continue discovery.
What do I do about Child Care? Due to childcare being an essential service to many, even while working from home, most New York day care centers remain open but have limited their density and try to keep children spread out. The state is also working on plans to quickly open new day care centers if needed, potentially at hospitals and SUNY schools. Some of those centers will be dedicated to ensuring that health care workers and first responders have access to childcare so they can continue to do their jobs.
Self-employed childcare workers such as nannies will get the same benefits that employees working for a company of less than 500 people will receive, but in a tax credit. These workers must show they had to comply with a self-isolation recommendation or that they had to care for a child whose school closed due to the coronavirus. Their benefit is capped at $511 per day for paid sick leave and $200 for family leave (or the average daily income the person usually receives if it is less than those amounts).The tax credit can be applied against income taxes, and it is refundable, meaning taxpayers will get a government rebate if their sick or family leave pay was greater than their tax bill.
If you pay your babysitter or nanny on the books (as opposed to informally) and can’t afford to pay them when they’re not working, see if they are eligible for short-term disability or unemployment benefits. Eligibility varies, but some state governments are expanding benefits during the pandemic. The Families First Coronavirus Response Act, which passed in the Senate on 3/25 might make it easier for families to provide paid leave to sitters. Families would give their caregivers paid leave and then be reimbursed by the government.
What do I do about my/my child’s higher education tuition? Some higher education institutes are offering partial refunds for losing in-person learning, other schools are still debating the concept for several reasons. This debate arises out of schools making “reasonable accommodations” such as remote teaching through group video chat services and closing dorms while ordering students to return home. Some schools are also accommodating the reality of remote learning by allowing students to continue classes for a pass/fail assessment instead of a letter grade or have informing students that online courses will be graded more leniently.
Conclusion. We care about you. Call with questions. Our switchboard is open. Meanwhile Pause, stay safe, keep your distance, be healthy and cooperate with your friends and families. We will get through this and we will see you on the other side. Thanks.
Chidatma Lex Group