News, Articles & Updates

Federal Relief Bill Information – 3.23.2020

On March 18, 2020, President Trump signed into law H.R. 621, which provides crucial relief to employees and their families who are forced to take leave from work due to being infected by COVID-19, those who have to care for loved ones infected by COVID-19, and those who have to care for children who must remain home due to COVID-19 related school and child care closures.

H.R. 621 also provides tax credits to employers and self-employed individuals in order to offset the burden of providing paid leave. Below please find summaries of the Emergency Family and Medical Leave Expansion Act of 2020 and the Emergency Paid Sick Leave Act of 2020, which are the provisions in H.R. 621 that provide for paid employee leave due to incidents related to the COVID-19 pandemic. Emergency Family and Medical Leave Expansion Act of 2020

This is essentially a temporary expansion of the eligibility requirements for existing FMLA provisions.

Eligibility

  • Applies to companies with more than 50 employees.
  • Covers employees forced to take leave to either care for a family member infected with COVID-19 or children under the age of 18 who are home due to COVID-19 related school or childcare closures.

Requirements

  • Employees are required to provide the employer with notice of leave as soon as practicable.
  • The first ten days of leave are unpaid under this provision. However, employees on leave would likely receive pay under the simultaneously-enacted Emergency Paid Sick Leave Act (discussed below). Otherwise, employees may either elect to use employer provided sick leave, vacation time, PTO, or go unpaid for the first ten (10) days of the leave.
  • Employers are required to pay 2/3 of the employee’s regular pay rate for every day the employee remains on leave after the first ten (10) days. If the employee works an irregular schedule, the employer is required to pay the employee for the average number of hours worked per day over the six (6) months immediately preceding the employee’s leave. If the employee did not work over the previous six months, the employer is required to pay the employee based on the number of hours the employee reasonably expected to work per day upon being hired.
  • Note that the new law relaxes the existing FMLA reinstatement requirements, if the employee’s position is eliminated due to a change in economic or operating conditions attributed to the public health emergency.

Applicable Tax Credits

  • Employers may credit against their quarterly payroll taxes 100% of the family leave wages paid to employees under the Emergency Family and Medical Leave Expansion Act with the following limitations:
    • credits are limited to $200 in wages per employee per day; and
    • the aggregate amount of the credit that can be taken with respect to all calendar quarters is $10,000.

Emergency Paid Sick Leave Act of 2020
Please be advised that the Emergency Paid Sick Leave Act of 2020 goes into effect on Thursday, April 2, 2020, fifteen (15) days after the bill was signed by the President and sunsets December 31, 2020.

Eligibility

  • Employers with fewer than 500 employees are covered under the Emergency Paid Sick Leave Act of 2020.
  • Employers are required to provide each employee paid sick time if the employee is unable to work (or telecommute) due to the employee:
    • being subject to federal, state, or local quarantine or isolation order due to COVID-19;
    • advised by a healthcare provider to self-quarantine due to COVID-19 related concerns;
    • the employee is experiencing symptoms of COVID-19 and is seeking a diagnosis;
    • the employee is caring for someone who is under quarantine due to COVID-19 concerns or who has been ordered to isolate by the government due to COVID-19 concerns;
    • the employee is caring for a son or daughter, if the son or daughter’s school or regular child care provider is closed or unavailable due to COVID-19 precautions; or
    • the employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Requirements

  • Full-time employees are entitled to eighty (80) hours of paid sick leave.
  • Part-time employees are entitled to paid sick leave equal to the total number of hours that the employee works on average in a 2-week period.
  • Paid sick time provided under this Act shall cease immediately up the employee’s next scheduled work shift following the termination for the employee’s need for sick leave.
  • Employers cannot force employees to use other paid leave provided by the employer or another source before using leave provided under this Act. Thus, in the event of a protracted shutdown, employees should first be paid sick leave under this Act, followed by sick leave required by any local ordinance (e.g., San Francisco OLSE regulations), and then the employee’s own accrued sick time, if any.

Employers cannot terminate employees for using paid sick leave under this Act.

Limitations on Paid Sick Time

  • Employers may pay up to $511 per day ($5,110 in the aggregate) to employees who are subject to a government mandated quarantine, the employee is advised by a health care provider to self-quarantine, or the employee is experiencing symptoms of COVID-19 and is seeking a diagnosis.
  • Employers may pay up to $200 per day ($2,000 in the aggregate) for employees who are caring for children home due to school and child care facility closures attributed to COVID-19, the employee is caring for someone who is quarantined due to COVID-19 concerns or who has been ordered to isolate by the government due to COVID-19 concerns, or the employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Applicable Tax Credits

  • Employers may credit against their quarterly payroll taxes 100% of the family leave wages paid to employees under the Emergency Paid Sick Leave Act with the following limitations:
    • credits are limited to $200 in wages per employee per day, or $511 if the employee is subject to a government mandated quarantine, the employee is advised by a health care provider to self-quarantine, or the employee is experiencing symptoms of COVID-19 and is seeking a diagnosis; and
    • the aggregate number of days taken into account for any calendar quarter shall not exceed the excess of ten (10) over the aggregate number of days so taken into account for the preceding calendar quarters.

Tax Credit Relief Available to Self-Employed Individuals
H.R. 621 also provides tax credits to self-employed individuals who are unable to provide services due to COVID-19. These tax credits are available under Emergency Family and Medical Leave Expansion Act of 2020 and the Emergency Paid Sick Leave Act of 2020.

Emergency Family and Medical Leave Expansion Act of 2020

  • Self-employed individuals may utilize a tax credit against any self-employment taxes owed if the self-employed individual took leave they would have qualified to receive pay for under this Act if they were an employee. The amount of the credit is determined by the product of
    • The number of days in the tax year, not to exceed 50, that the individual is unable to provide services due to having to care for a family member infected with COVID-19 or a child under 18 who is home due to school or child care closures attributed to COVID-19; multiplied by the lesser of
    • $200; or
    • 67% of the average daily self-employment income for the applicable tax year. The average daily self-employment income is determined by dividing the net earnings of the self-employed person for the applicable taxable year by two hundred sixty 260.

Emergency Paid Sick Leave Act of 2020

  • Self-employed individuals may utilize a tax credit against any self-employment taxes owed if the self-employed individual took leave they would have qualified to receive pay for under this Act if they were an employee. The amount of the credit is determined by:
    • the lesser of $200 per day (or $511 per day if the employee is subject to a government mandated quarantine, the employee is advised by a health care provider to self-quarantine, or the employee is experiencing symptoms of COVID-19 and is seeking a diagnosis);
    •  or 67% of the average daily self-employment income for the applicable tax year. The average daily self-employment income is determined by dividing the net earnings of the self-employed person for the applicable taxable year by two hundred sixty (260).
  • The maximum number of days the self-employed person can take into account for the purposes of the tax credit are ten (10) days over the number of days the self-employed person was unable to perform services in the preceding tax year.

Please reach out with any questions or concerns about the resources highlighted in this email. We will continue to provide you with updates and resources to get you through this challenging time. Please be advised that this email was prepared for information purposes only. This email does not constitute legal advice.

Please contact The Mitzel Group if you have any specific questions regarding your business and the COVID-19 pandemic response.

 

Information on COVID-19 Relief Loans – 3.19.2020

While necessary to stop the spread of COVID-19, the shelter-in-place measures are already having a devastating impact on businesses who rely on people gathering in public, customers coming into a physical location, or employees working together in-person. Businesses such as restaurants, event planners, and fitness studios are closing their doors due to these restrictions. In attempt to mitigate impact, loan programs for small businesses are being offered by federal, state, and local agencies to provide relief for businesses losing revenue due to the COVID-19 pandemic. Below, please find information on loan programs available to businesses located in California.

Small Business Administration (SBA) Disaster Relief Loans
The SBA is a federal agency that provides both educational and financial resources for small businesses. During disasters such as a fire or flood, the SBA provides Disaster Relief Loans for impacted businesses in amounts ranging between $5,000 and $2,000,000. In response to the COVID-19 pandemic, the SBA is providing disaster relief loans to small businesses experiencing a temporary reduction in revenue due to COVID-19. The federal government will be dedicating $250 billion for disaster relief loans in response to COVID-19.

Loan Features

  • Businesses may receive loans for amounts ranging between $5,000 and $2,000,000.
  • Small business interest rate: 3.75%
  • Non-profit interest rate: 2.75%
  • Loan repayment may be structured over 30 years.
  • Repayment to be deferred for 5 months after approval of the loan.
  • Funds may be used for all operating expenses.

Disaster Relief Loan Eligibility

  • Your business must qualify as a small business. Business size standards are based on industry. You may check to see if your business qualifies as a small business by visiting https://www.sba.gov/federal-contracting/contracting-guide/size-standards.
  • Your business has experienced a loss or is projected to experience a temporary loss between January 31, 2020 and December 15, 2020 due to the COVID-19 pandemic.
  • Your business has not yet received disaster relief from another public or private lender.
  • Any person or entity with an ownership stake of 20% or more will be required to provide a personal guarantee for the loan.
  • Your business is currently borrowing less than $5,000,000 from the SBA.
  • Your business must demonstrate that it can repay the debt.

Application Requirements

An SBA loan may be applied for online or by completing a hard copy application form. To apply online, please visit https://disasterloan.sba.gov/ela/Account/Login. To access the hard copy application form, please visit https://disasterloan.sba.gov/ela/Documents/Disaster%20Business%20Loan%20Application%20(SBA%20Form%205).aspx.
The following documentation must accompany your application for a Disaster Relief Loan:

  • IRS Form 4506T must be completed for each applicant and each of the applicant’s principals owning 20% or more of the business, each general partner or managing member, and any owner who holds more than 50% of an affiliated business. For Form 4506T, please visit https://www.irs.gov/pub/irs-pdf/f4506t.pdf.
  • At least 3 years of complete federal business income tax returns for the applicant business. If tax returns are not available, an explanation of why the returns are not available may be submitted with profit & loss statements for the last 3 years as a substitute.
  • A Personal Financial Statement (SBA Form 413) must be completed by the applicant, each principal owning 20% or more of the applicant business, each general partner, and each managing member. For SBA Form 413, please visit https://www.sba.gov/sites/default/files/forms/SBA_Form_413_7a-504-SBG.pdf.
  • A schedule of all liabilities and fixed debt. SBA Form 2202 may be used to create this schedule and can be found at https://www.sba.gov/document/sba-form-2202-schedule-liabilities.

Timeline

  • Due to expected high volume of loan applications, processing times are expected to be 4-8 weeks.
  • Once a loan application is approved, funds will be released within approximately 2-3 weeks.
  • SBA will offer a more streamlined application process for loan applications under $25,000.

Limitations

SBA loans are not available for businesses that are speculative in nature or any businesses that violates federal laws, such as cannabis businesses.

California Disaster Assistance Loan Guarantee
In addition to the SBA, California’s Small Business Finance Center (SBCF) partners with privately held financial institutions to guarantee small business loans to help mitigate losses caused by disasters such as the COVID-19 pandemic. These loans are made available when the governor declares a state of emergency. These loans are available to businesses with a maximum 750 employees.

Program Features

  • SBCF will guarantee 90% of any small business loan amount up to $2,500,000.
  • SBCF will guarantee loans with up to a 7-year term.
  • Funds may be used for repairing or replacing real property, fixtures, machinery, inventory, equipment, and leased improvements.
  • Interest rates are negotiated between the applicant and the lender.

For more information about the California Disaster Assistance Loan Guarantee, please visit the Northern California Small Business Development Corporation website at https://nor-calfdc.org/.

San Francisco COVID-19 Small Business Resiliency Fund
The City of San Francisco has partnered with the Northeast Community Federal Credit Union to provide relief for San Francisco small businesses experiencing losses in revenue due to COVID-19. San Francisco will provide $10,000 loans businesses can use to pay for employee salaries and rent.

Loan Eligibility

  • Businesses with 1-5 employees.
  • Demonstrating a loss of revenue of 25% or more.
  • Have less than $2,500,000 in gross receipts.
  • Engaged in activities that are regulated by the City and County of San Francisco and have a license/permit associated to that regulation.

Application Requirements

Please reach out with any questions or concerns about the resources highlighted in this email. We will continue to provide you with updates and resources to get you through this challenging time.

Message From Your Mitzel Group Team – 3.17.2020

During this time when we know a lot of our clients and friends are experiencing high levels of anxiety and stress, The Mitzel Group is open and here to help.  Our operations continue to run uninterrupted. We are all working from home with cloud capabilities and we have secure communication infrastructure in place.  Due to high demand for our counsel and strategies, we may need a little extra time to get back to you.   Please be assured that we are as available to you as before via email, phone or video call. We are doing our best to support as quickly and efficiently as possible.  Please feel free to call or email our entire team and whoever has the quickest availability will respond.

We are all sending you our thoughts and positive energy as we work as a community to handle these tough issues and remain positive and united.  We look forward to connecting.

Thank you in advance for your patience.

Warmly,
Krista & Lisa

Legal Team emails:
Krista Mitzel:  kmitzel@mitzelgroup.com
Lisa Liu:  lisaliu@mitzelgroup.com
William Metke:  wmetke@mitzelgroup.com
Stephanie Margossian:  smargossian@mitzelgroup.com
Sara Shok:  sshok@mitzelgroup.com
Ernie Mejia:  emejia@mitzelgroup.com

Operations & Administrative:
Amber Gates:  agates@mitzelgroup.com
Christianne Bua:  cbua@mitzelgroup.com