Category: blog

Despite our progress on reducing infections and deaths from COVID-19, we still seem stuck with one aspect of the Pandemic: ever changing rules. (I wrote about 2020’s challenges at https://www.sgrvlaw.com/the-paycheck-protection-program-what-a-long-strange-trip-its-been/.)

In today’s race to “get back to normal”, however, businesses again face the same frenetic pace of change – but now at the same time as they try to recover from the shutdown. In recent days, businesses and nonprofits had to digest new rules for schools (https://www.cdc.gov/coronavirus/2019-ncov/community/schools-childcare/index.html), employee safety (Federal Register :: Occupational Exposure to COVID-19; Emergency Temporary Standard), and, of course, the ever-changing mask mandates (Pennsylvania’s universal mask mandate lifts Monday, but businesses can still require them – Philadelphia Business Journal (bizjournals.com)), all in real time – and the list could go on.

Businesses must also balance whether it is worth trying to get any of the massive amount of relief money that is still available (Small-business COVID-19 stimulus funds: What’s still available? (inquirer.com)), against the risk of criminal prosecution if the funds may later be deemed not “necessary”, with 20 – 20 hindsight.

(That choice just became easier with the Small Business Administration’s abandonment of its “loan necessity” questionnaire.  SBA officially drops PPP Loan Necessity Questionnaire requirement – Journal of Accountancy)

But all this talk about “normal” seems more than a bit surreal. After all, the virus is still here.  It is even surging in some parts of the country. People are still getting sick – and dying. Businesses must still devote time to try to keep up with all the rule changes. If all those burdens were not enough, PPP loan forgiveness deadlines are looming, albeit with promises of even easier procedures. SBA preps new PPP loan forgiveness portal for small businesses – Philadelphia Business Journal (bizjournals.com)

Unlike in 2020, however, at a personal level we now have safe and effective vaccines to protect us – for those who choose to be vaccinated. Some are skeptical about their safety, and prefer to “wait and see” – or even to risk avoiding vaccination totally.  Moreover, many are not yet eligible for a shot.  Children, in particular, and those with compromised immunity (such as transplant recipients) remain at risk. (The tests leading to the vaccines’ approval did not include children, although trials are ongoing.)

From an even broader perspective, there are not enough doses for much of the world. Calls for booster shots seem like first world privilege (https://en.wikipedia.org/wiki/First_World_privilege) to those who are still waiting for their first or second shot. And the vaccinated in the first world should care about this – quite a lot, actually. The virus doesn’t care where a potential victim lives.  A mutation in an unvaccinated person in Africa or South America could lead to an infection in the US or Europe that mutates to bypass the vaccines’ protection.

In short, according to Yale infectious disease physician Dr. Jaimie Meyer:

Even though we very much want this pandemic to be over … the fact that some people, including children, aren’t vaccinated means we’re still vulnerable. … While it might be exhausting to continue to take precautions, especially for unvaccinated kids, that becomes increasingly important.

Looking ahead, therefore, businesses’ desire to be done with virus and virus precautions, and get back to business – will not simply “make it so”, despite all our progress so far (with apologies to Captain Jean-Luc Picard). Although skipping protections – eating out without a mask, or attending a concert – may be less risky today than it was in 2020, business compliance costs and burdens have not gone away.

In the face of that reality, perhaps Nirvana’s “Feels Like Teen Spirit” offers a better soundtrack for 2021 than my high school anthem in the title of this alert: “I feel stupid and contagious.”

Copyright 2021 Stanley P. Jaskiewicz, Esquire

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Are you still waiting for a holiday package sent by USPS? On Sunday, January 24, 2021, I received a gift-wrapped box that had been “in transit” since December 7, 2020 – bearing a mailing label, “Expected delivery December 10”. It contained a “one of a kind”, surprise gift from a long-time friend, which could not have easily been replaced if lost.

But at least my package showed up.

As the Philadelphia Inquirer reported, “Still waiting for packages that were mailed in December? It could be a while.” Similar problems were reported across the nation.  See, for example,

Although many attributed the delays, at first, to an increased volume of holiday packages and voting by mail, the continued lag points to a persistent problem, much bigger then a frustrating gift giving concern. Even worse, consider how much of “every day life” is disrupted by late mail, for individuals and businesses;

  • Bills and bill payments are late. (Fortunately, some utilities like PECO have suspended late fees.)
  • Prescriptions by mail are late, risking health problems.

(Since I take several medicines following major surgery, I have developed a great relationship with my local pharmacist. who always fills them on time.)

  • Doctors and other businesses that mail bills each month must receive timely payment, to avoid cash droughts.
  • Taxpayers must receive their W-2’s and 1099’s to file on time.

Charities in particular face great practical problems, especially during “tax season”.

Although they must provide confirmations to donors by a fixed deadline, email can efficiently solve that problem. But not all donors use or want email – many prefer handing a traditional paper receipt to their tax preparer. Moreover, many nonprofits may simply not have collected email contacts, particularly smaller charities, or faith based organizations. Of course, businesses can impose late fees, but no one wants to discourage an otherwise good customer – especially when the delay was not the customer’s fault.  (I even received one bill several days after the grace period had expired.)

Fortunately, I successfully disputed several such late charges.  But I can’t count on doing that every month.  And no business can afford to haggle over every routine bill. From a creditor perspective, delayed delivery of bills doesn’t excuse a customer’s late payment.  Such delays are outside the creditor’s control, and sellers’ cash flow depends on timely payment of receivables. Some credit card firms temporarily suspended all late fees – a windfall for the habitually late (and loss of a lucrative revenue source).

So what can an ordinary business do? The answer seems obvious, if painful: plan for inevitable delays in both the bills you send, and your clients’ payment of them. Apply the same approach to every bill your firm receives.  Every payable is someone else’s receivable.

The steps to do this are certainly not typical for business payments.  They will also take more time, effort and expense – perhaps a lot more. But your relationships with your vendors, customers and credit bureau are worth the effort.

  • Set up online or ACH payments, rather than mailed checks.
  • Schedule credit card payments of regular bills, or pay by phone.
  • Alert delinquent accounts by phone – the customer may have mailed payment on time, and be unaware of the delay.
  • Schedule automatic monthly withdrawals from your checking account in the exact amount of each bill – and be sure to fund the account in advance.
  • Monitor your balances online, regularly, and bill and pay online.
  • Plan for the loss of float in your account when you pay automatically.

You must make sure funds are immediately available to avoid overdraft fees or bounced checks, especially if you have large bills.

Finally, don’t blame the USPS for your problems – it has enough troubles of its own handling its increased workload.  The Pandemic has accelerated the shift from in-person shopping to online buying – and shipping. In addition, although the USPS may be an easy target for your anger, that won’t solve your problem. Instead, channel your energy and attention to taking control of your own finances and credit status in our “new normal” of delayed mail – a great idea for personal management, even had we never experienced the Pandemic.

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Courts appeared to be split as to whether businesses are eligible for a Paycheck Protection Program (“PPP”) loan under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) if you are a business in bankruptcy. The CARES Act was created to, inter alia, provide small businesses with loans under the PPP to keep their workforce employed. Uncertainty quickly arose as to whether businesses in bankruptcy were proper candidates for these loans. Neither the statute nor the initial regulation disqualified them, but the SBA later adopted an application form which specifically disqualified them. The SBA disqualification was under the rubric that business debtors pose an “unacceptably high risk for an authorized use of funds or non-payment of unforgiven loans.” Further, the SBA posits that the PPP loans fall under the category referred to as Section 7(a) loans which embody the standard of the loan being of “sound value or so secured as reasonable to assure repayment.”

Earlier this year, bankruptcy courts in Florida, Washington, New Mexico and Tennessee found debtor’s exclusion from eligibility from the SBA/PPP loans to be unlawful, determining that the exclusion of business debtors from PPP loans while in bankruptcy was “arbitrary and capricious” and a violation of 11 USC Section 525(a), which in essence provides that a government unit may not discriminate with respect to a request for a grant based solely on the fact that they are a bankruptcy debtor. Other bankruptcy courts, such as in Delaware, New York, Maryland, Georgia and Maine, have found to the contrary and upheld the SBA’s position determining that business debtors are ineligible.  Most recent rulings have sided with the SBA’s position that such businesses are ineligible for a loan, noting that while the bankruptcy exclusion may be harsh, it is within the SBA’s authority. For example, see In re Cosi, Inc. Case # 20-10417 ( Bankr. D. Del. April 30, 2020)

On December 22, 2020, a three-judge panel in the 11th U.S. Circuit Court overturned a Bankruptcy Court ruling and upheld the SBA rule that makes bankruptcy business debtors ineligible for the PPP loans. See Gateway Radiology Consultants, P.A. , No. 20-13462 (11th Cir.), wherein the 11th Circuit overruled the Bankruptcy Court which had found that the SBA was “arbitrary and capricious” in exceeding its authority by disqualifying businesses in bankruptcy proceedings from PPP availability. The 11th Circuit now joins the 5th Circuit in finding that the SBA does not exceed its authority in declining to grant PPP loans to business debtors. ( In re Hidalgo County Emergency Service Foundation, 962 F.3d 838 ( 5th Cir. 2020)).

On December 27, 2020, President Trump signed the Bipartisan-Bicameral Omnibus COVID Relief Deal, which temporarily amended the bankruptcy code to allow PPP loans to some business debtors, but with the caveat that this change only would become effective if the SBA agrees to allow PPP loans in bankruptcy. Query as to whether this amendment changes the status quo on this issue at all, and why the SBA would do a 180 turn at this juncture.

To avoid the denial of a PPP loan, some businesses who otherwise would need bankruptcy protection have chosen to not file for bankruptcy relief at all, or once in a bankruptcy dismiss their bankruptcy to pursue PPP loans. Questions to ponder here are: whether a debtor who receives a PPP loan and then files for bankruptcy protection (as part of a pre-ordained plan) must disgorge the PPP loan, whether PPP loans received prior to a bankruptcy filing may be used as cash collateral in a later bankruptcy filing for purposes other than those allowed under SBA guidelines, the commingling of PPP loan funds with other bankruptcy proceeds, etc.

To discuss issues regarding PPP loans, creditors rights and bankruptcy or business workouts, please contact Leslie Beth Baskin, Esquire at 215-241-8926 or at lbaskin@sgrvlaw.com.

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As a result of recent amendments to the Internal Revenue Code, fewer taxpayers get a bang for bucks donated to charitable organizations. Except… Buried in the debris of frenzied responses to the scourge of COVID-19, a glimmer of light. Whether or not you itemize, cash gifts of up to $300 (in the aggregate) to qualifying charitable organizations made before December 31, 2020, are deductible in determining your 2020 tax bill, period, end of thought. No less an authority than the IRS has just sent out a reminder. (Do you suppose this means they have a beating heart? Nah.)

The reduction in tax may not change your life, but from the point of view of many smaller charitable organizations, truly every little bit helps. If you are stuck, any of us at SGRV could suggest a worthy recipient of your smallish but still important largesse.  Certainly everyone should try to scrape together $300 to take advantage of this (relatively) tax freebie.

For those one in ten of you who still itemize deductions, there is another tax saving opportunity. Under the CARES Act there is a suspension of the normal rule that charitable contributions for the year may not exceed 60% of adjusted gross income. For 2020 the limitation is 100% of AGI, with (as under prior law) a 5 year carryover for excess gifts. As in the provision above, this higher limit only applies to cash gifts. So, are you a potential donor who might be induced to jump at a larger cash gift this year, wipe out your tax liability and maybe have some carryover to boot? If you otherwise have the disposable cash, it may just be a question of hating the IRS as much as (or more than) you love your favorite charity.

As in all things tax, it is important to get advice on your particular circumstances from your return preparer, CPA, or financial adviser. Morgan Maxwell, our Of Counsel for tax matters, can also be helpful.

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In August 2020, a federal court in New York struck down several parts of the Department of Labor’s (“DOL”) Final Rule providing guidance to employers and employees on the scope of the Family First Coronavirus Response Act (“Family First Act”). The decision of the United States District Court for the Southern District of New York struck down: (1) the Rule’s requirement that work must be available before the employer is required to provide paid sick leave; (2) the Rule’s definition of “health care provider”; (3) the requirement that an employer consent to an employee’s use of intermittent leave; and (4) the requirement that an employee provide appropriate documentation prior to taking Family First Act leave. As expected, the DOL has issued revised Regulations to address the issues raised in the New York decision, changing some of the prior requirements and keeping others with additional explanation or clarification.
 
The Family First Act, which is in effect through the end of 2020, requires employers with 500 or fewer employees to provide at least 80 hours of paid sick leave to any employee who:
  1. is subject to a federal, state, or local quarantine or isolation order related to COVID–19;
  2. has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  3. is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
  4. is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2) (at 2/3 pay); or
  5. 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.
 
The Family First Act also provided up to 10 weeks of paid leave at 2/3 pay (after 2 unpaid weeks) for employees who must care for their child because the child’s school or place of care has been closed, or the child’s childcare provider is unavailable, due to COVID-19 precautions. 
 
Work Availability
 
The DOL’s final Rule clarified that the paid leave provisions did not entitle an employee to paid leave “where the Employer does not have work for the Employee.” The New York court found that this qualification was not included in the Family First Act itself and, therefore, the DOL exceeded its authority when it added the qualification. Under the court’s ruling, an employee who otherwise qualifies for Family First Act leave would be entitled to that leave even if his or her employer is closed or the employee has been furloughed or laid off due to Covid-19 restrictions. 
 
In its revised Regulations, the DOL retained the qualification that, before a leave is payable, work must otherwise be available. The revised Regulations specifically rely on longstanding FMLA regulations making it clear that periods of time when the employee would not otherwise be expected to work may not be counted as part of the employee’s FMLA leave entitlement. The revised Regulations also rely on the wording of the Family First Act that the leave must be “because of” or “due to” one of the six reasons listed in that act, which the revised Regulations interpret as a requirement that one of the six reasons listed in the Family First Act be the “but for” reason for the leave. The revised Regulations also specifically noted that requiring employers who were not paying other employees because the workplace was closed down or employees were furloughed to pay employees for Family First leave would be an “illogical result” that Congress clearly did not intend.
 
Definition of “Health Care Provider”
 
The Family First Act permits employers to, at their option, exclude “health care providers” from paid leave benefits, but does not define “health care providers.” The DOL’s final Rule defined “health care providers” as any employee of “any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institutions, Employer, or entity.” The court found that this definition was too broad as it focused on the employer rather the employee and the employee’s actual duties, even though it conceded that employees who do not directly provide health care services to patients may nonetheless be essential to the health care system’s ability to function. The court left open the possibility that the DOL could provide a different interpretation of “health care provider” for purposes of the Family First Act than it does for the FMLA, but until it does, the only current regulatory definition for “health care provider” was the much narrower definition that is contained in the general FMLA regulations.
 
The DOL’s revised Regulations did change the definition of “health care provider” for purposes of which employees may be excluded from paid leave, but narrowed the definition from that contained in the original Regulations. Relying on the Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019, the revised Regulations’ definition of “health care provider” includes “only employees who meet the definition of that term under the Family and Medical Leave Act regulations or who are employed to provide diagnostic services, preventative services, treatment services or other services that are integrated with and necessary to the provision of patient care which, if not provided, would adversely impact patient care.” The revised definition excludes individuals who provide services that affect, but are not integrated into, the provision of patient care. The revised Regulations also provide examples of employees who are not considered to be “health care providers” who can be excluded from paid leave, specifically information technology (IT) professionals, building maintenance staff, human resources personnel, cooks, food service workers, records managers, consultants, and billers. This list is intended to be illustrative, not exhaustive. 
 
Intermittent Leave
 
The Family First Act does not address the issue of intermittent leave. In its final Rule, the DOL significantly limited the availability of intermittent leave under the Family First Act, specifying that the employer and employee must agree to the employee’s use of intermittent leave and limiting the use of intermittent leave for employees working on the employer’s premises to leave for the employee’s need to care for a child whose school or place of care is closed or where child care is unavailable. The court agreed that the limitation that intermittent leave could only be used by employees who needed to care for a child was reasonable in light of the need to minimize the risk that an employee could spread Covid-19 to others. However, the court found no reasonable basis for the requirement that the employer consent to the employee’s use of intermittent leave, and struck that part of the Rule.
 
The DOL’s revised Regulations reaffirmed that employer consent was required for intermittent leave, but clarified the difference between intermittent leave and consecutive requests for leave. The revised Regulations state that “the employer-approval condition would not apply to employees who take Family First leave in full-day increments to care for their children whose schools are operating on an alternate day (or other hybrid-attendance) basis because such leave would not be intermittent. In an alternate day or other hybrid-attendance schedule implemented due to COVID-19, the school is physically closed with respect to certain students on particular days as determined and directed by the school, not the employee.” Under this interpretation, each day the school is closed creates a separate reason for Family First leave that ends when the school opens again for that student.
 
Documentation Requirements
 
The final Rule also required that, before taking Family First Act leave, employees must submit documentation to their employer that indicates the reason for, and duration of, the leave, and where relevant, the authority for the isolation or quarantine order qualifying them for leave. The court found that the requirement that an employee submit documentation before beginning a leave was unreasonable, but left in place the requirement that documentation be presented to support the need for the leave. The Revised Regulations were amended to address this concern and now provide that, like documentation for a leave under the FMLA, documentation for a Family First leave must be provided as soon “as is practical.”
 
Employers should discuss any leave decisions regarding Family First Act compliance with counsel to avoid any potential exposure to liability relating to employee leave applications.
 
           
If you have any questions regarding the foregoing, please contact Nancy Abrams at (215) 241-8894 or nabrams@sgrvlaw.com.
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In these troubled times, this seems like a not unreasonable statement and it is oft-expressed. Particularly when some heartless retailers charged Pennsylvania sales tax on face masks and other personal protective equipment that INNOCENT and VIRTUOUS CITIZENS acquired to protect THEMSELVES and OTHERS, truly ALL OTHERS, in this pandemic. And so, consistent with the sentiment above, SUE THE BASTARDS!!

Which is what has happened: Garcia v. American Eagle Outfitters Inc. et al., recently filed in the Court of Common Pleas for Allegheny County.

Garcia is not a tax case, strictly speaking. It was brought as a class action under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (the “UTPCPL”). The claim is that the retail sellers of face masks and other PPE should have known that these items were (or had been declared) exempt from the sales tax (the substantive quality of this premise will be considered below), and thus when they charged sales tax, they engaged in activity prohibited by the UTPCPL. Recoverable damages under the UTPCPL include $100 per violation (which may be trebled in extreme cases) and attorneys’ fees.

The UTPCPL specifies twenty acts defined as unfair trade practices. They all fall in the category of false, deceptive, misleading, or intentionally confusing claims. None of the specified acts can be reasonably be stretched to cover a retailer that overcharges sales tac. However, the UTPCPL has a catch-all prohibition of “any other fraudulent or deceptive conduct which creates likelihood of confusion or of misunderstanding.

At this point, I, a mere tax lawyer, have a little trouble completing a summary of the plaintiff’s claims that would begin “In other words…” I would think that the false, misleading, deceptive or confusing statements, in order to be actionable under the UTPCPL, would have to create some unfair advantage to the seller, to make a sale more likely than would have been the case had the consumer been fully and fairly informed. The argument has to be that the seller, knowing that sales tac was being overcharged, mislead the consumer by concealing this fact and thus made the sale more likely than if the consumer had been aware of the overcharging. But I still have trouble in figuring out what’s in it for the retailor carrying out this deception. I assume that the retailor, having collected the sales tax, simply paid it over to the Department of Revenue in the ordinary course, if not the retailor has a world of trouble with the department, and we would be talking about a run-of—the-mill, grimy sales tax case. Surely, the retailor is marginally better off being truthful if the items are exempt from the sales tac, since the total price to the consumer would be less and thus the sale should be marginally more likely.

What interests me, as a tax lawyer, is looking at it from the point of view of the duties that are imposed upon the “taxpayer” and how the law is administered. In the case of the sales tax, I had to put taxpayer in quotes because the consumer is the taxpayer, but all of his duties are imposed on the retailer. That’s where the action is. The retailor has to collect the tax, account for it and report to the Commonwealth, and pay the collected taxes over to the Department of Revenue. A misstep, mistake. Or intentional malfeasance with respect to any of this results in the retailor (and perhaps its owners and others personally) being responsible for the tax, penalties, interest, possible loss of its sales tax license, banishment to outer darkness.

From the point of view of the consumer, the taxpayer, the sales tac is pretty simple. The consumer may have some vague understanding that certain purchases are sales tax exempt, but in general, the consumer simply has to pay the price for the desired goods.

From the point of view of the retailor, the tax collector, the sales tax can be mindlessly complicated. There are hundreds of published sales tac cases in Pennsylvania law books, and few if any deal with the consumer. They deal with the collector.

The sales tax applies to tens of millions of transactions in Pennsylvania annually. In the vast majority, it is easy to.  Identify the transaction as a “sale at retail” (which is the legal incidence of sales tax) and the only complication is whether only the state-level 6% rate applies, or there is an additional county-level tax. But when we get to exclusions it can get tricky. To navigate this trickiness, we obviously have to delve into what the law (in its grand generality) provides, and we have to determine what we mean by “the law” This may risk getting a little boring at times, you really were not expecting a civics lesson, but stick with me. I will try to keep it interesting, after all, if we are going to concede that the Government can impose duties on its citizens, we ought to be able to determine pretty clearly how, with reference.

Consider: Did the plaintiffs sue the department to recover the sales tax? Nah, $100 per violation, maybe trebled, plus attorneys’ fees, is more than a couple of bucks of sales tac (and good luck trying to get the tax back. From the Department, by the way) Did the plaintiffs sue the Department for failing to issue guidance that it arguably could have done? Nah, Did the plaintiffs sue the Governor for issuing a vague executive order, or failing to issue one at all? Nah.

But I’m just a tax lawyer.

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Have you read the Small Business Administration’s latest revision of the rules for its Paycheck Protection Program (“PPP”) yet? If not, that’s OK – the rules just changed again.

I am exaggerating, but not by much.  At times, rules were issued and revised on almost a daily basis. Major changes occurred in the night, or over weekends. But was that any way to spend $659 billion – one of the largest economic programs in our history? Congress certainly didn’t plan to save the economy on an ad hoc basis, when it first began to act in April. Similarly, many states’ planned on closings measured in weeks – over six months ago. But as job losses kept rising, Congress was ready to try anything that might work – and to change when it the economy continued to sputter.

For example, the Paycheck Protection Flexibility Act in early June fixed some of the problems that arose in the early funding, particularly requirements to rehire employees – even though many businesses were closed by government order. But giving money away wasn’t easy. In just six months, 24 separate PPP “interim” final rules were announced, according to a lenders’ trade group.  https://www.naggl.org/resource/resmgr/ppp/IFR_Chart.docx

Of course, the PPP wasn’t the only effort to spend our way out of the problems.  So many federal, state and local relief efforts were approved that it became difficult to keep up with all of them. So what have 5,212,128 approved PPP loans, totalling $525,012,201,124 bought us?

(The data is through the program close on August 8, 2020, according to the SBA’s PPP dashboard.  https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program.)

Not much, apparently. But Congress worked so much that the legislators needed a vacation. As a result, President Trump reacted by to bypassing Congress with Executive Orders of questionable legal legality to try to fix some of the problems, and avoid further economic meltdown. But across the nation, businesses remain closed.

One respected political journal proclaimed, “The Paycheck Protection Program Was a Flop”.  (https://slate.com/business/2020/07/paycheck-protection-program-was-a-flop.html)

At the same time, PPP fraud became a stumbling block to further relief.  “Paycheck Protection Fraud Is Massive and Unsurprising”, as massive fraud became apparent in loans to ineligible borrowers, or without any job preservation.  (www.forbes.com/sites/peterjreilly/2020/08/29/paycheck-protection-fraud-is-massive-and-unsurprising/#7dfbb8ac4df6)

Despite their pain, larger businesses ignored significant relief programs, particularly the Main Street Lending program perceived to be expensive and onerous. Schools that tried to reopen have switched to online learning – with all of the problems it presents for students from families without reliable internet access, or for those with disabilities. On a positive note, the national unemployment rate climbed fell from a high of 14.7% in April, to 8.4% in August, perhaps as a result of the PPP largesse.

Continuing its frenetic pace, Congress will likely consider another massive relief bill when it returns from its recess. However, further aid must overcome political disputes over key provisions:

  • Maintaining increased unemployment benefits that ended in late July.
  • “Liability reform” to protect reopening schools and businesses against claims by both employees, students and customers who may contract the virus.
  • Restoring lost business deductions for routine expenses paid with PPP funds – causing increased taxes for businesses already hammered by the effects of the virus.
  • Another round of PPP grants and stimulus payments – they worked so well the first time, why not spend again?
  • Blanket PPP forgiveness for borrowers under $150 million (85% of all such loans), to avoid the delays and expense of manual review of millions of loans for compliance with the complex program rules.
  • Emergency relief for hospitality and transit firms, as safety concerns discourage both business and personal travelers.
  • Support for the Postal Service, critical for both Presidential voting and shopping “by mail”.

Despite all of the stops and starts since March, one thing has become absolutely clear: “man plans, the virus laughs”. Until a vaccine has been finalized and tested for safety, the virus is in control. Business and political planning can only remain a hope – contingent on the success of our public health efforts, and universal compliance with its recommendations. Clear rules will also help – conflicts between states and federal leaders’ advice don’t help to build a national consensus on how to beat the virus. We need the same unanimity our country had in times of crisis, such as World War 2, or the oil shortages of the 1970s.

With US coronavirus deaths alone approaching 200,000, our leaders, political and cultural, must now help build that consensus to restore our economy and our health. Without it, as the Grateful Dead once sang, “Ain’t it a shame?”

P.S.: While you were reading this, the PPP rules changed again.

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To most businesses that engage in the negotiation and performance of contracts, life should be simple.  When parties engage in preliminary negotiations, they are not bound by formal obligations until a final agreement is signed, but after a final contract is signed, all parties are bound by the agreements’ terms going forward.

But life is not always so cut-and-dried.  Often, after negotiations break down, one party will claim enforceable obligations arose from negotiations; just as often, after a contract is signed, one party will attempt to “get out from under” contractual provisions, or change the obligations in the contract to those more favorable.

For example, because generally all that is required for contract formation is a “meeting of the minds,” negotiating parties sometimes argue that enforceable obligations arose from mere negotiations, because they agreed on relevant provisions despite the lack of a signed contract.  Other times, a negotiating party will allege that because it relied upon, and took action based upon, representations or a course of performance, an enforceable “quasi-contractual” obligation arose despite the lack of a formal contract.  Further, even if negotiations have concluded, one party may still allege that the other has a “good faith” duty to continue negotiations to consummate an agreement.

After a contract is executed, parties sometimes assert contractual provisions were changed or modified to their benefit.  For example, one party may contend that the failure of the other to enforce certain provisions gives rise to a waiver, preventing later enforcement of those provisions.  Likewise, one can assert that a course of performance is conclusive evidence of the understanding of the parties, even if the signed agreement contains contrary language. In addition, under a theory of fraud in the inducement or justifiable reliance, a party may argue that pre-contractual representations and promises are enforceable, even though they were not contained in the final agreement.

So can a business take steps to prevent it from being bound to pre-contractual discussions, and ensure that the obligations in an agreement will not be subject to change after it is signed?  The answer is that a business should always take care to define and limit the scope of pre-contractual negotiations, and have specific provisions in business agreements precluding post-contractual attempts to deviate from contractual terms.

As to pre-contractual negotiations, Pennsylvania courts enforce pre-contractual provisions that no contract will exist unless there is an offer and acceptance in a specific “mode and manner,” and that no contract can arise until one or both parties have made a “further manifestation of assent.”  Practically speaking, this permits parties to execute a term sheet or pre-contractual description of deal points, while preventing the formation of a valid and enforceable agreement until some specified future event (such as the execution by a specific person of a definitive written agreement) occurs. For example, in  GMH Associates, Inc. v. Prudential Realty Group, 752 A.2d 889, 901 (Pa.Super. 2000), the court found that no enforceable obligation, including a duty to negotiate in good faith, could arise where a term sheet between negotiating parties contained the following provisions:

NOTWITHSTANDING THAT EITHER OR BOTH PARTIES MAY EXPEND SUBSTANTIAL EFFORTS AND SUMS IN ANTICIPATION OF ENTERING A CONTRACT, THE PARTIES ACKNOWLEDGE THAT IN NO EVENT WILL THIS LETTER BE CONSTRUED AS AN ENFORCEABLE CONTRACT …  AND EACH PARTY ACCEPTS THE RISK THAT NO SUCH CONTRACT WILL BE EXECUTED.

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Any Contract which may be negotiated shall not be binding … until it has been approved by the senior corporate officers and the Law Department of Seller … Such approvals are conditions precedent to the Seller’s obligation to perform … and may be withheld for any reason or for no reason.

To provide even greater protection, other “belt and suspenders” disclaimers can be used, such as a provision that no duty or obligation to negotiate in good faith or to continue negotiations can arise, and “no reliance” and “no course of dealing” provisions, which are discussed below.

Once a written agreement is signed, Pennsylvania courts enforce various contractual provisions precluding the parties from contending after a contract is signed that it is not enforceable as written.  For example, Pennsylvania courts generally enforce “anti-waiver” provisions to prevent the parties from later asserting that contractual provisions have been waived.  Generally, an “anti-waiver” provision will state:

Failure of [the parties] to demand strict compliance with any of the terms, covenants or conditions of this Agreement shall not be deemed a waiver … nor shall any waiver or relinquishment by the [parties] of any right or power hereunder at any one time or more times be deemed a waiver or relinquishment of such right or power at any other time.

Similarly, to preclude a later argument that the parties agreed to an “oral modification” of a contract, Pennsylvania courts generally enforce “no oral modification” provisions, which state generally “this Agreement may only be amended by written agreement signed by both parties hereto or by their duly authorized representative,” or “no agent, representative, employee or officer of [the company] has or had authority to make or has made any statement, agreement or representation, either oral or written, modifying adding or changing the terms and conditions herein set forth.”   To protect against an argument that the parties’ course of performance created a change to a contract, the following provision can be utilized:  “No present or past dealings or custom between the parties shall be permitted to contradict or modify the terms hereof.”

To protect against an argument that pre-contractual representations not included in the final contract induced one party to sign the agreement, Pennsylvania courts generally enforce “integration” clauses, such as “this agreement constitutes the entire agreement between the parties and supersedes and extinguishes all previous drafts, agreements, arrangements and understandings between them, whether written or oral, relating to this subject matter.”  Under most circumstances, such clauses will prevent parties from claiming fraudulent inducement to contract based on statements not included in a signed agreement.  Additionally, Pennsylvania courts will generally enforce “no reliance” provisions to preclude fraud and quasi-contract claims arising from the negotiations and performance of a contract.  This is a sample “no-reliance clause:

[Company A] acknowledges and agrees that [Company B] has not made any representations or warranties to [Company A] except as expressly set forth in the [Written Agreement] and, in making its decision to enter into the [contract], [Company A] is not relying on any representation, warranty, covenant or promise of [Company B] other than as set forth in the [Written Agreement].  Neither party shall rely upon or be bound by any statements (written or oral) different from those in this [Written Agreement] that may appear subsequently in communications between the parties.

Use of these provisions during business negotiations and performance of business agreements can ensure certainty as to contractual obligations, and prevent unexpected contractual liability.

Andrew J. DeFalco is a trial and appellate lawyer and a Member of Spector Gadon Rosen Vinci, P.C.  He represents and advises companies and individuals in complex business disputes.  His e-mail is adefalco@lawsgr.com, and you can connect with and follow him on LinkedIn at www.linkedin.com/in/andrew-defalco-6b63275/.

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As businesses begin to reopen, business owners face numerous challenges regarding the safety of their employees and their customers and clients. There are several steps that can minimize these risks and help protect the business from claims made by employees or customers.

Health Screening for Employees

            It is permissible, and advisable, to do a certain amount of screening of employees returning to the workplace. Employers may take employee temperatures and may ask questions regarding whether or not they have been exposed to COVID-19, are suffering from any symptoms associated with COVID-19, or have recently traveled outside the area to a COVID-19 “hotspot.” Employers should refrain from asking about any other medical condition unless the employee indicates that they have a medical condition that makes them more at-risk for contracting COVID-19.

Safety Protocols

            All employers should put into place safety protocols that help to promote social distancing and enhanced sanitation. These protocols can include staggering work schedules, separating work stations either by distance or by providing physical barriers, limiting gatherings and meetings, limiting outside visitors to the workplace, requiring that face masks be worn in common areas, and providing enhanced cleaning and hand sanitizing products. Employee contacts should also be tracked in case an employee is exposed to or is diagnosed with COVID-19.

Employees Hesitant to Return to Work

            Employees recalled to work may express an unwillingness to return to the workplace. If an employee has a health condition that makes them particularly susceptible to contracting COVID-19 you may be required to extend a “reasonable accommodation,” which could include permission to work from home or an unpaid leave. A request of this type should be handled like any other request for a reasonable accommodation and a medical certification from the employee’s doctor may be required.
         If an employee is simply afraid to come back to work or does not want to come back because they are being paid more in unemployment compensation than they would earn working, an employer may insist that the employee return to work and, if the employee does not, treat the separation as a voluntary resignation. Any refusal to return to work, particularly if it is because the employee does not want to return because they are making more in unemployment compensation, should be reported to the Unemployment Compensation Bureau.

Customer/Client Waivers

            Employers who serve the general public may want to consider having customers or clients sign a liability waiver. In any event, customers/clients should be asked the same health screening questions posed to employees and should be required to wear face masks.
            If you have any questions or need assistance drafting return-to-work policies or waivers, please contact Nancy Abrams at 215 241-8894 or nabrams@sgrvlaw.com.
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