Host Jeana Goosmann talks about the business effects of COVID-19 and what you need to know as a business leader or business owner. Jeana provides clarity on topics that have many of you wondering “How does this impact me? And what do I need to be doing right now?” During this episode you will learn:
Learn more about these topics at Goosmann Law Firm's COVID-19 Resource Toolbox. All resources regarding COVID-19 are posted there by our Rapid Response team.
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Do complex legal issues hold you back? Let's get energized and bring clarity to your top legal questions. This is Law Talk With The Flock by Goosmann Law Firm.Jeana Goosmann:
Hi, I'm your host Jeana Goosmann, host of Law Talk With The Flock. I'm a CEO, lawyer and business owner here to help navigate you and your way through your business, your life as a leader and the law. And the lie has been changing a lot right now as we are living with COVID-19 and this new worldwide pandemic. I am here practicing social distancing. I'm podcasting solo today and we will be having a series of podcasts that we talk about these different issues and all these changes. I want to help the business owners and the business leaders find their way through all these rapidly changing laws. But before we get into some of that, first I want to thank our first responders and all the people that are working so diligently to help us keep us safe. Whether they're in the healthcare field, they're firefighters, they're police officers, and our government officials. I think they've been working long and hard in order for our safety and thank you to all of you for doing your part as well.:
Now let's get into some of these new changes in the law and these have been bigger, more sweeping changes than I have ever seen in my entire career and I think just like we are experiencing things that we've never experienced when it comes to this pandemic. The same is true in the law and things that you thought you knew a week ago are now different and there have been huge changes and they are affecting business owners and employees and I don't know if there's anyone that's going to be untouched by what's going on and the pandemic and with all these huge changes. Now if you're anything like most people when you hear the media talk about "there has been a $2 trillion relief bill". Most people kind of tend to roll their eyes and think, well yes, but how does that actually impact me? And you never think you're going to see a penny of this. But I think with these laws and these changes, it really does make an impact on small business owners and large business owners and everybody that works in these companies as well. So what are some of the things that we're going to focus on? I want to talk with you about the Cares Act, and that's the $2 trillion relief bill that was just passed, they call it the Cares Act. So if you hear that term, that's what it's referring to and it has provisions in there for small businesses as well as large businesses. We're going to talk a little bit about some payroll tax changes. Also what you need to know about the Companion Law, which is federal families, excuse me, the Families First COVID-19 Response, which is about to go into effect. And we're also going to talk about implementing crisis plans as well as what you should be doing under some of the guidance from the CDC as well as for OSHA. And after we get through all of that, I don't know if we're going to have time to cover all those pieces, but to the extent that we don't, there is additional resources that the Goosmann law firm is putting out. We have formed a rapid response team and our rapid response team is essentially it's a group of our attorneys who have agreed to absorb these new laws and then write summaries that we can post and do client alerts and put on our website. So at www.goosmannlaw.com on our homepage you'll see the COVID-19 and all the resources that we have. So just click on that and we're going to continuously update that. So I want to talk now about the Cares Act and some of the components that I think are going to be huge for small business. Small business, first of all, it's not all that small. The way it's defined in the act is 500 or fewer employees. And then if you go to sba.gov they have a formula or a little test that you can fill out for your business. And it's usually revenue based based on your different industry. So it's a really quick and simple tool and I can tell you that they will have the type of business you are, how much your annual revenue was last year, and then do you qualify as a small business. So the first thing is if you have 500 or less employees and then you can go to sba.gov to find out what those revenue thresholds are, they're not super low. So a lot of times people think that, Oh, I have to be really tiny to qualify for SBA, or I have to just be a startup. And that's not true in these circumstances. I know for a law firm, for example, it 12 and a half million dollars annual revenue was the threshold to be a small business so that's a lot of revenue for a law firm. And I think that the same is true when you look across the industries. You'll tend to find that most of t he small businesses will qualify for these SBA loans. So once you find out if you are a small business or not, and then it determines whether or not you fit into these different loan programs. Now the one for small businesses that I think is really exciting is the forgivable loan program. That's right. Forgivable. How huge is that? Have you ever had a loan forgiven in your life? Probably not. And this is a circumstance where you're thinking, okay, $2 trillion, there could be some real money that's coming into your small business to help sustain you through this difficult time. So how much are these loans going to be for ? That is all determined based upon your payroll and how many full time employees you've historically had in your business. So to term determining these different numbers, a lawyers , we can walk you through it or your banker might be able to walk you through it, but we're constantly helping people figure these different things out, right? In order to do that, we're looking at what have you submitted and payroll taxes, how many full time employees have you historically had in 2019 as well as the periods in 2020 and there are various periods of time that are relevant. But essentially what the law has done is say, how many employees did you have right before we enacted this law? And then they will use those numbers to determine how much should you receive in your loan money. In general, the rule is two and a half times your monthly payroll. So for example, if you have $100,000 monthly payroll, two and a half times, that would be $250,000 and that would be your loan amount. Now there are caveats to it because the law can't be simple and they exclude any of your employees that make more than a hundred thousand dollars a year. And it also covers your full time employees. So theres also though, inclusions in this law, which are different than normal for people that are independent contractors. If they work for you full time. So even your 1099s might get included in these different considerations. Now, once you know your loan amount , people will say, well, what do I have to do to get it? Well, the business owner has to certify that you've been impacted by COVID-19 and I think that's something that most businesses would be able to claim. It doesn't mean you had to shutter your doors but you've had some impact as a result of everything that's going on.Jeana Goosmann:
Also, there's been a lot of rumor and speculation about, okay, but do I have to pledge my firstborn kid to get this money? No, you don't. It's not personally guaranteed and you don't have to put up more collateral in order to get this loan. One other thing that you should know is there is a cap of $10 million. So if you have a large payroll, that is the maximum amount that you're going to be able to seek under these loans. So I'm saying loan a lot and people are well, but you said it was forgivable. We get into that part in a minute. How do you go about getting this? Where do you go? You go to your regular bank so your regular bank will be actually processing the paperwork and working with you in this process and they are backed by the SBA and the government is then backing these loans and that's how that process will work. So you don't have to go form a brand new relationship, you should talk to your regular banker and they will be able to work with you in this process.:
Okay, so now you get the money. What can you use the money for? You can use the money to pay your payroll, which includes all your benefits. You can also use it for your mortgage or your rent and your utilities and any other indebtedness that you had previously incurred. So you can't go buy a new fleet of sports cars for your executives, but you can pay your regular bills with this money and after you do that, then you're going to be able to submit for loan forgiveness. And that's the part that's really exciting here. Now that loan forgiveness, how it works is the amount forgiven will be dependent upon how many full time employees you have at the end of the time period.Jeana Goosmann:
Right now the end of the time period is June 30th and they'll be comparing how many full time employees you had on June 30th compared to what you previously had. Okay. And I said previously had, well when is that? They actually have two different formulas that you can look at to compare what was your number of full time employees before there's a time period from 2019 and there's a time period from earlier in 2020. So what if you do have less, because a lot of businesses have already made layoffs. If you do have less, it doesn't mean you don't get any loan forgiveness. It just means you get a lower percentage forgiven . So if you have 80% of the full time employees you had before, that factor goes into how much of the loan is forgiven, but it's still a loan. So you can pay off together component of a really favorable terms on these SBA loans. But if you want to get back up to your prior levels, if as long as you do so and you have the same number of full time employees by the end of June, on June 30th then they won't discount you and your forgiveness amount so you can rehire people and it doesn't mean that you have to rehire the same exact people. That's been another question people have been asking, well what if whoever it is they got laid off, they don't want to come back to work for me. What do I do now? Well, as long as you hire a replacement full time employee and you get your numbers back up, it's all about the numbers of full time employees, then you won't be knocked in the forgiveness amount for doing so as long as your numbers are back up to where they were by June 30.:
Same is true for wage reductions. So people that have cut pay and the pay percentage is 25% so if you've cut pay as long as you get them back up to above 25% of that reduction by June 30th that also won't be credited against you when they're figuring out how much of your forgiveness they should do for this particular loan. So there are a lot of details here and I have a my rapid response team and fielding questions and calls and we're looking at paperwork and helping people through this process in order to make different choices cause it really affects business owners. And which of these programs do you you look for and what makes the most sense for you and your business and your employees? But I think that that one's really exciting cause that could help cover a lot of people and a lot of business owners and really help keep employees employed through this process because you know that even when you're carrying that payroll, there's forgiveness on the other end for these loans.Jeana Goosmann:
Okay. So there's a lot in the Cares Act. It's about 1200 pages long, I think . What if you have more than 500 employees? Well, if you have more than 500 employees, there's a whole other section of the Cares Act that applies to you and there's a whole other allocation of money and there is additional loan programs and there's additional funding that can come into play. Now there's also some emergency loans, so beyond the forgivable ones the emergency loans actually say that you can submit, again, talk to your regular banker about this, and you could get $10,000 for your business right away within three business days. That's huge. So if you need money now, this is a way to get money now. And that $10,000, it's non-recourse, which essentially means you don't have to pay that back. And that is true even if they don't actually even end up approving your business for those loans. So that's also really powerful.:
I think that we should also talk, there's a lot to do with payroll and the taxes. People have been talking about are they going to do payroll forgiveness? Are they going to eliminate the payroll tax? Well, they didn't do that in the Cares Act, but they have deferred it in general. So you're able to take your 2020 taxes that would be due and defer them and pay half of them in 2021 and half of them in 2022 but you still have to pay your regular payroll tax in addition to the part that you're going to be deferring into the future. So that's what happened under the Cares Act. So you have some delay and when you have to pay kind of like , everyone's individual taxes right now, that would normally be due April 15th. These payroll taxes are also going to be delayed.Jeana Goosmann:
Now, there's all kinds of things going on and this is not going to be a summary of everything that's in the law, but there's also the Family First Act related to COVID-19 that has to do, and this was the one that they passed prior to the Cares Act. People have been talking about this a little bit longer, but now they kinda interplay and people are making decisions. Well, how does this all come into effect and , and work together? And this is the one that's just about to be effective. So it kicks in in April and essentially it provides for paid leave for employees, even of small employers. So if you are a small business, normally FMLA has not applied to you if you had less than 50 employees. But now small businesses also could have to pay paid leave to their employees and emergency FMLA family medical leave. So paid leave is essentially it's 80 hours or two weeks if they were a part time employee. And that kicks in in, in certain circumstances there's about six different circumstances and I don't know if I'm going to be able to rattle them all off, but they're on our website and they"re in our summary. But they would include if they get sick themselves, the employee or if one of their immediate family members get sick themselves or if they have been ordered to be quarantined they would get this pay for those two weeks. And so that's important to know that there is actually paid leave for those individuals. Now, what about the extended FMLA, which is now about 12 weeks? Well, that can come into effect as well, where you would need to pay your employees for 12 weeks in certain other circumstances. So just knowing that while traditionally if you had less than 50 employees, FMLA didn't apply to you, well now under the federal families first act, this is something that is applicable to you.:
And so people are making choices right now before this goes into effect on what are they going to do with their workforce? Because I know a lot of people are concerned if they're not working, how am I going to be able to afford to pay them? Well, that's part of why they did these forgivable loans in the Cares Act. There's a lot of interplay between these different laws and how they work. The same time, if you do lay people off, which is another option, there's lots of different kinds of layoffs. There's people are talking about furlough versus layoff. And furlough generally means that you're going to bring them back similar to a temporary layoff and you might do a partial layoff. So people that are working full time, you might be reducing down to part time.Jeana Goosmann:
And I think we have a lot of recommendations for folks that are going through those analysis and how to actually go through that process and make it clean because documentation is going to be key. So for example, if you were considering a partial layoff where you're going to have somebody work two days a week and instead of five , you might have them call in every single Friday and see what are their hours going to be for this next week? And that would certainly apply to your hourly employees. And there's differences between your salaried employees and your hourly employees and how those get treated under these different acts and so on and so forth. So we're here to help guide people through all these various complex laws. And I think that there are so many questions and we're happy to help with those answers. And the one thing that I have found more than anything though, is that what you knew a week ago may not be the case today. So things like, well this doesn't apply to independent contractors or I have a seasonal workforce. They have thought of a lot of these different nuances and components and these different laws that they have passed and we stand ready in order to help you through these complex decisions that people are facing that you've never had to face before. Because this is definitely some uncertain times.:
Now, I know I talked to you about implementing a crisis action plan and also what does the CDC and OSHA recommend right now there are different things in different parts of the country and I think we're going to see that as the virus goes into different populations in different cities and different communities, we're going to have the curve they talk about, we're g oing t o have swelling right now. Obviously it's in cities like New York and in other bigger cities across the country, but eventually since it's a novel virus, they're planning for it to spread all across the United States. And as that does different governors are going to make different laws that will impact your community in different ways. And I think that depending on their guidance you can be prepared to respond accordingly with your business. So it always helps to have a plan and to plan ahead and to be as proactive as possible. And you definitely want to follow whatever it is that they are recommending that you do in your community and to follow those guidelines. So we're here to help you navigate those and plan and make sure that you have a proper response plan. And in the meantime, keep washing your hands and practicing social distancing. Certainly don't have more than 10 people in a room. And I use your technology all that you can and be prepared too for telework. To the extent that you have employees that are able to telework, I think that will also give you some reprieve under the emergency FMLA. If you have people set up to be able to do telework they're then able to work from home even while they're caring for their children, for example, in some circumstances. So lots of things to consider here. We're happy to help navigate you through it and we'll continue this dialogue . Thanks so much. And in the meantime, stay safe. Be worth it.Speaker 1:
Thanks for joining us for Law Talk With The Flock by Goosmann Law Firm. We hope you feel energized and ready to soar past your goals. Become a flock fan and subscribe to our podcast for weekly episodes. Learn more at goosmannlaw . com.