Knowledge and Insights
Since the beginning of the COVID-19 pandemic and the issuance of stay at home orders and business shutdowns eight weeks ago, there have been many Federal and State moratoriums, executive orders and updates to governmental guidelines to lessen the impacts of the pandemic. Businesses grappling with decisions made, or to be made, will need to understand how those decisions are affected by these ongoing changes. This article will cover some of the most important items that organizations should consider for operating in the new normal.
The Federal Worker Adjustment and Retraining Notification Act, more commonly known as the WARN Act, affects employers with 100 or more full-time employees. The Act outlines the notifications required by an employer, and the time frame to do so, when mass layoffs and worksite closures are on the horizon.
Multi-state businesses need to consider not just the Federal Act, but a state’s own WARN Act, as they differ on employee counts for compliance, notice timing and criteria defining mass layoffs and closures.
For instance, New Jersey’s WARN Act:
- Applies to businesses that have “been in operation in the State of New Jersey for longer than three years” and “employ 100 or more full-time employees.”
- Defines a part-time employee as someone who “is employed for an average of fewer than 20 hours per week.”
This low 20-hour cut-off for full-time status is significantly different from the Affordable Care Act’s greater than 30 hours, or the just released Small Business Administration (SBA) calculation using 40 hours for a full-time equivalent (FTE). Consequently, employers may be unaware that they are subject to New Jersey’s WARN Act.
Another example is New York’s WARN Act, which:
- Covers employers with 50 or more full-time employees.
- Has a longer notification period (90 days vs. 60 days for Federal and NJ).
Collective bargaining agreements have their own nuances and an employer may need to work differently with unions than in previous negotiations.
An offboarding process – if not in place – should be developed, documented and followed. With teleworking as a commonplace now, items such as removing a terminated employee’s remote access rights to company servers and programs, are of utmost importance and must be included as part of your company’s offboarding process.
Insurance policies and the sections relating to business interruption claims and other potential losses, were probably one of the first contracts read carefully and acted upon at the start of the pandemic. But what else may you need to consider?
Insurance companies are conducting telephone interviews in order to get through the increased volume in claims. Ask that the insurance company put its requests in writing. Make sure any responses to the requests are in writing as well. “Get it in writing” is always a best practice in order to help mitigate any misunderstandings that may arise among the parties.
Be aware of potential lawsuits against Directors & Officers relating to “their judgement.” Was a decision or process carefully thought out? Is there documented support for actions taken or not taken? For example, today’s news headlines describe allegations by employees or customers accusing businesses of putting profits before safety.
Consider the possibility of additional relief from state or federal governments down the road that affects insurance claim decisions. It may be prudent to submit a notice for a potential claim in order “to get in line” for the future.
Be familiar with executive orders issued by the state(s) your organization does business in as they may affect business operations and decisions. For example, state statutes normally prevent security deposits to be used against rent payments. However, for landlords and tenants in New Jersey, Executive Order # 128 allows a residential tenant to request in writing that the landlord use a security deposit against rent payments. Additionally, the State of New York issued relief regarding residential and commercial evictions. Tenants there can also use security deposits for rent payments.
Businesses receiving loans under the Paycheck Protection Program (PPP) need to be familiar with the terms of their promissory notes and other related documents. PPP monies are loans until forgiven.
PPP borrowers must also remember to follow the Occupational Safety and Health Act (OSHA) and to remain in compliance during the life of the loan as per the SBA application form. OSHA covers in part, most private sector employers and workers in all 50 states.
PPP Loan Reviews – the SBA published in its FAQs a decision to review all PPP loans over $2,000,000. Be prepared for possible requests which may include:
- any revenue/expense analyses (i.e. cash flow that were prepared at the time);
- a description of the thought process for determining a funding need;
- information on the availability of a Line of Credit or the ability to increase a line.
The items mentioned above are just some of the fast-paced changes that have been made to how business is conducted and should be part of a new normal checklist. Your Mercadien advisor can help you develop and work through your new normal checklist, as well as assist you with PPP loan forgiveness, business interruption claims, evaluating your budget and cash flow needs, and much more. Contact me at firstname.lastname@example.org or 609-689-2355 to discuss further.
DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice, and may not be used and relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.