The rhetoric from the Biden team has been of tolerance and reconciliation, so there is reason to believe there is good news for immigrants and visa-holders.  That said, the US is not exempt from the heightened security and rising anti-immigrant sentiment around the world, and not everyone is in favor of loosening restrictions put in place over the past four years.

This article looks at some of the specific policy changes under Trump and how those have affected US employers.  In order to determine whether the Trump-era policies have had a positive or negative impact on the US economy, a recent nationwide survey asked employers about their experiences and how they have responded to the changes.

It is important to understand the differences between immigration laws and immigration policies/procedures.  The actual laws are very hard to change because they have to go through Congress.

The Trump Administration, like all other administrations, did not accomplish much in terms of changing the existing statutes.  That, however, certainly does not mean that nothing has changed.

As we have all seen, while presidents cannot unilaterally change immigration laws, they can implement new policies and procedures.  These policies/procedures have a very direct and immediate impact on companies and individuals.

At the end of 2020, a survey of 215 US employers was conducted[1] to gauge how Trump’s policies have affected their companies, as well as their feelings about the expected immigration reforms under Biden.

The survey indicates the 400+ policies and rules put in place between 2017 and 2020 have caused delays and increased costs for employers.  Further, business owners claimed that these policy changes directly led to an increase in offshoring and outsourcing, with only a slight increase in domestic hiring.  From a purely economic perspective, it does make sense that employers would sooner outsource work to cheaper foreign markets than increase expenses by hiring domestic employees.

If these survey results are representative, then the Trump policies intended to increase the hiring of local workers actually had the exact opposite effect.

Between the Pandemic and the Trump regulations, the pipeline for foreign talent was all but closed off entirely.  Between January and April 2020, the number of visas issued to foreign nationals declined by 93.2%. According to the employers surveyed:

Green Cards

36% said there are too few green cards available each year

39% said the number was just right

18% said there are too many

Visas

41% said there were too few employment-based visas available

37% said the amount is correct

17% said there are too many

These results align with current data on the STEM skills gap in the US work force.  Despite the economic downturn due to the COVID-19 pandemic, the December 2020[2] unemployment rates for computer science and mathematical jobs was just 3.0%, which is essentially the same as it was before the pandemic’s onset in March 2020.

Meanwhile, the general unemployment rate peaked at 14.4% in April and stabilized at 6.5% in December 2020.[3]

Specific Trump Policies

In April 2017, the Trump Administration issued the “Buy American, Hire American” executive order, which promised to protect American workers by restricting immigration. The USCIS, DHS and DOL put in place a number of new policies, rules and regulations meant to carry out the purposes of the executive order.

Requests For Evidence

A Request for Evidence, or “RFE,” is issued by the USCIS when they want an applicant to submit additional information.  RFEs always slow down the visa process and are generally considered to be a “bad sign” since the application is undergoing scrutiny.

Between 2017 and 2019, the issuance rate for RFEs rose from 21% to 40.2%. The survey respondents indicate the following:

Public Charge Rule

One heavily litigated policy change was the Public Charge Rule, which was first implemented in February 2020.  This Rule requires employers filing green card petitions for their foreign workers to demonstrate the worker has not and will not rely on any government benefits such as Medicare, food stamps or housing vouchers.

The responses were as follows:

Previously Approved Visas

Also, in 2017, the USCIS changed a long-standing policy of not questioning previously approved applications when evaluating extension requests or new visa petitions.  Under Trump, however, whenever a worker requests an extension of a current visa, or files a petition for a new visa, the examining officers can go back and question whether the initial petition should have been approved to begin with.

Making previously approved petitions fair game for reversal has a strong chilling effect on workers requesting extension or permanent residence.  As a result, employers lose skilled workers. 

Restrictions on Length of Stay

The same year, the USCIS also began requiring detailed itineraries from employers and restricting the duration of visas.  The survey respondents said:

In response to the shorter durations, 35% of the surveyed employers said they began looking at alternative sponsorship options.  More importantly, 37% said they simply decided to fill these jobs by outsourcing offshore.

Consulate Closures

In March 2020, we saw many U.S. Embassies and Consulates close or restrict hours of operations.  The survey respondents comments on how such closures affected their organizations.

Student Visas

Trump’s temporary ban on J-1 visas and F-1 visas for students who could not attend in-person classes had immediate consequences for employers who hire from those pools.  It seems likely the policy will also disrupt talent acquisition in future as well, especially in STEM fields.  Respondents had this to say.

H-1B Visa Restrictions

In November 2020, the White House released two new rules placing restrictions on H-1B visas. First, the DHS narrowed the definition of a “specialty occupation” and made stricter degree requirements.  Second, the DOL raised the required wages for sponsored roles. A district court struck down both rules in early December, so there may be additional litigation to come unless the Biden Administration changes course on this.

Just the same, the issue is of some concern to the respondents, who said this.

Increased Wage Requirements

Although new wage requirements are supposedly meant to ensure employers were less likely to hire foreigners for jobs that a U.S. worker could do, survey respondents indicate this:

HLA’s Immigration Practice

The Future

Employers surveyed largely indicated the Trump policy changes to the immigration system were disruptive and costly to their businesses. They did, however, express support for broader immigration reforms.  In particular, employers seem interested in making sponsorship easier and bringing more transparency to the immigration system.

Selection Process

Legislators and stakeholders have called for fundamental changes to employment-based immigration processes. For example, the DHS proposed a new selection process for H-1B visas that would give priority to petitions for higher-paid roles, as opposed to the random lottery currently in use. Respondents say such a change would be positive for their organizations.  However, some employers say such a change would make things very difficult for entry-level employees.

Points-Based System

The United Kingdom recently put in place a points-based immigration system, which promotes employment-based immigration.  Many, including the survey respondents, want to see the U.S. enact a similar model and do away with the current quota system.

To be fair, not all respondents saw the point-based system as being entirely positive.

The “Heartland” Visa

During the last Presidential Election, several candidates talked about setting up a location-based visa that would promote development in non-coastal or rural areas.  Joe Biden included this idea in his immigration platform, along with an expansion of current quotas for visas and green cards.  The survey respondents said this.

 Conclusion

Due to the Pandemic, unemployment rates are currently around 6.5% .  However, the unemployment rate is only 3.0% for math and science occupations.  Even without the Trump policies, there is a shortage of STEM talent in the US work force.  The last four years has forced employers to seek alternatives for filling their positions — which was, of course, the whole idea.

However, a significant percentage of affected employers have responded to the restrictive policies by outsourcing work to offshore locations, whether by hiring a foreign company or allowing a foreign employee to work remotely from outside the US.   It is virtually impossible to ascertain an exact number, but the result has likely been hundreds of thousands of high-skilled jobs moving away from the U.S.

It has been a dramatic four years in immigration, and the Biden presidency will surely bring about many new changes.  We anticipate the new policies will undo many, if not all, of the Trump changes.  The effects of the Biden polices remain to be seen, but we are hopeful they will ease restrictions currently in place and bring jobs back to the US.

~ Jeff Harrington, Esq.

[1] Envoy Global

[2] Bureau of Labor Statistics. “Labor Force Statistics From Current Population Survey” December 2020.

[3] Bureau of Labor Statistics. “Labor Force Statistics From Current Population Survey” April 2020.

Unemployment Benefits under CARES Act

First, understand that unemployment benefits are handled at the State level.  So, that means there will be some delay and inefficiency in getting from Point A (federal legislation) to Point B (actual checks in the mail), and there will be some differences from State-to-State.  Our firm is headquartered in Florida, so we will provide some additional detail for Florida businesses.  That said, here is basically what everyone can expect.  Request Consultation

Pandemic Unemployment Assistance

The CARES Act includes a Pandemic Unemployment Assistance program (“PUA”), which expands the definition of a “covered individual.”

Eligible Workers

• full and part time employees (W-2)
• self-employed
• independent contractors (including gig workers)
• religious workers (workers laid off from churches)
• workers who do not have sufficient work history to normally qualify under State law

Qualifying Criteria

Workers who cannot work due to any one of the following circumstances:

• diagnosed with COVID–19 or experiencing symptoms and is seeking diagnosis
• a member of a household where someone has been diagnosed with COVID-19
• provides care for a family member or a member of the household who has been diagnosed with COVID-19
• takes care of a child or other person in the household who is unable to attend school or daycare as a result of COVID-19
• cannot reach the workplace because of a quarantine or isolation order
• has been advised to self-quarantine due to COVID-19 concerns
• was scheduled to commence employment (i.e. does not currently have a job) but now cannot go in due to COVID-19
• has become the breadwinner or major supporter for a household because the former head of the household died as a result of COVID-19
• had to quit his or her job as a direct result of COVID-19
• cannot work because the place of employment is closed as a result of COVID-19 (telework not an option)

Available Benefits

Covered individuals get the amount they would normally receive under State unemployment law (maximum of $275/week in Florida), plus an additional $600 per week.

So, a Florida employee could potentially get $875/week or $3,500/month.

How long do benefits last?

As long as the unemployment is due to the Coronavirus, regular benefits can extend up to 39 weeks in most states. However, the extra $600 per week is only available through July 31, 2020.  Note: Florida only provides 12 weeks of unemployment benefits. So, in Florida, once the 12 weeks runs out, the worker will continue to get just the $600/week under PUA.  Request Consultation

What is “furlough”?

Furlough is an unpaid leave of absence.  So, technically, the workers still retain their positions, but they cease working and do not earn a salary.  The idea, of course, is that furloughed workers will one day return to their jobs.  Also, workers usually continue to receive their company benefits during the furlough.

By contrast, being terminated or laid-off is permanent.  If the worker comes back to the company after being terminated or laid-off, then that “return” is actually new employment.  All previous arrangements are open for renegotiation.  That may be beneficial for the company, or maybe not . . .

Usually, furlough is temporary and short-term.  Otherwise it would make more sense to both the company and the worker to just terminate the employment and move on.  However, there is no defined limitation on how long a furlough can last. So, under the current circumstances, where workers probably cannot get another job for as long as the Coronavirus crisis continues, it seems likely we will see unusually long furloughs.

Advantages to furlough?

Yes, probably.  For most business owners, telling workers they are “furloughed” is a lot easier than saying “terminated.”

Most importantly, furloughed workers are entitled to unemployment benefits, including the extra PUA money.  So, as a business owner or manager, you do not have to terminate workers in order for them to receive benefits.

Let me hasten to qualify this statement by saying that, normally, whether a furloughed worker can collect unemployment or not is determined at the State level. Under PUA, though, the federal government has extended benefits to all furloughed employees as long as the meet the criteria above.

As a business owner, you would probably prefer to bring back your staff out of a sense of loyalty, as well as the fact that they are already trained.  So, the furlough option may be one to carefully consider.  Request Consultation

Potential Drawbacks

Taxable Income

As it stands now, these PUA payments will be counted as income for tax purposes as well as for determining eligibility for some welfare programs, though not for Medicaid or Children’s Health Insurance.  This may be only a minimal concern, though, since nobody is going to get rich off of unemployment payments, even with the extra PUA money.

Unemployment Tax Liability

If you are wondering if your business is going to have to pay higher unemployment rates in order to compensate for the additional payments to employees, the answer is “maybe.”  The CARES Act does not address this issue, probably because unemployment is administered at the State level.  So, the answer could be different on a state-by-state basis.  It is still too early to provide much guidance in this regard.  And, as a practical matter, it probably will not affect your decision-making, especially given the CARE Act tax breaks for businesses.

Other Considerations

Immediate Availability.  The normal one-week waiting period is waived under the PUA. So, unemployed or furloughed workers can apply immediately for unemployment benefits.

This is important because we are still waiting for the Families First business loans to become available.  However, the paid leave requirements went into effect April 1, 2020.  So, for companies that are in real danger of running out of money, terminating or furloughing can be a stop-gap measure.

Short Term/Work Share Programs.  This might make sense to a lot of employers. The concept of Work-Sharing or Short-Term compensation is where the company does not have enough work to give someone a full-time position but does have some work to offer. The conundrum for some workers is that they face losing their unemployment benefits if they take on work. That creates a sort of all or nothing scenario for them. It can be a disincentive to taking on partial or temporary work.

This kind of perverse disincentive is resolved by States that allow such short-term/work-share without penalty. Florida does have a short-term/work-share program, which could be very useful for businesses that have not completely shut down but are significantly affected by the Covid-19 crisis.

Our firm plans to discuss this option on a client-by-client basis.  Request Consultation

Conclusion

So, now you have all the pieces of the puzzle and can put together a plan of action for your business: business loans, tax breaks, paid leave, and unemployment. We all want what is best for our employees and, presumably, helping the company survive the Coronavirus crisis is in the employees interest. They will understand that. Now, it is a numbers game.

Understanding the interplay between the available business loans, tax breaks, paid leave obligations and unemployment benefits is the whole game at this point.  You have to weigh your options and make the best choices you can for your business. 

April 1, 2020 is here, so it is time to make decisions.  Our firm is here to help.  Request Consultation

~ Jeff Harrington, Esq.

The paid leave requirements come under the Families First Coronavirus Response Act (FFCRA).  There are two separate Acts that apply to all businesses (and non-profits) with fewer than 500 employees: the Emergency Paid Sick leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (EFMLEA).  Request Consultation

Beware: Both the EPSLA and the EFMLEA are in effect from April 1, 2020 to December 31, 2020.  And there are penalties for non-compliance.

Emergency Paid Sick leave Act (EPSLA)

What workers are eligible?

All W-2 employees, both full and part time, that have one of these six (6) situations:

Personally affected:

1. Is subject to a federal, state, or local quarantine or isolation order
2. Has been advised by a healthcare provider to self-quarantine
3. Is experiencing COVID-19 symptoms and is seeking medical diagnosis

Caretaker of affected person:

1. Is caring for an individual subject to a quarantine/isolation order or medical advice to self-quarantine
2. Is experiencing any other substantially-similar condition specified by the Secretary of Health & Human Services
3. Is caring for a child whose school or care provider is closed or unavailable

How much time and pay?

Full-time employees get up to 80 hours, and part-time employees get up to two weeks. As for calculating the amount of pay the employee can get, it actually depends on the reason for the leave.

If the employee falls into the “Personally Affected” category above, then

• Pay at regular rate under the FSLLA (capped at $511/day and $5,110 in the aggregate over a 2-week period)

For those employees that fall into the “Caretaker” category above, then you have to break it down a little further:

• If the employee is caring for someone else who is subject to a quarantine or isolation order (or who has been advised to self-quarantine) OR who is subject to another substantially similar condition specified by the regulatory agencies, then

Pay at 2/3 their regular rate under the FLSA (capped at $200/day and $2,000 in aggregate over a 2-week period, up to 80 hours).

• If an employee is caring for a child because school or care is unavailable, then

Pay at 2/3 of regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $12,000 in the aggregate (over a 12-week period – two weeks of paid sick leave followed by up to 10 weeks of paid expanded family and medical leave).

And, as Employer, you cannot _

• offset this emergency sick leave with other sick leave already provided by employee contract or state law
• require your employee search for a replacement worker to cover the hours for which he/she is receiving paid sick leave
• require your employee use other paid sick leave prior to using this emergency paid sick leave.

The only carve-back is that employees cannot carry over the emergency paid sick leave to subsequent years.

An employee may choose to substitute accrued vacation leave, personal leave or medical/sick leave for the first two weeks of the leave.  That is up to the employee, though. You, the employer, do not get to decide.

How can your company afford this?

There are two forms of aid coming your way. The first, and probably the most important, is the business loans  under the Paycheck Protection Program and Economic Injury Disaster Loans.  Read more here.  Florida, and other states, will offer business loans as well, though with terms less favorable than the federal programs.

The other help is tax breaks.  For details on the Employee Retention Tax Credit and Payroll Tax Delay, go here. There is even a way to get some of the credits paid to your business in advance.

For some companies, though, these aids may not be enough. In that is your situation, then you will have to make your case for exemption.

Are there any Exemptions?

Yes.  You will have to apply to the Department of Labor (DOL) and show your business has fewer than 50 employees and that compliance with the new provisions would jeopardize the viability of the business.  Additionally, the Act does not apply to employees who are healthcare providers or first responders.

For many, the magic words are “jeopardize the viability of the business.” We will find out more about what exactly that means as the DOL starts making decisions.

If your business cannot afford to comply with the paid leave requirements, consider hiring counsel to help obtain the exemption.  Request Consultation

Emergency Family and Medical Leave Expansion Act (EFMLEA)

Here the situation is a little different because we already have the Family and Medical Leave Act.  The EFMLEA is just an amendment to the existing law. So, all the provisions of the Family and Medical Leave Act that do not conflict with the following continue to be in full effect.

Who is eligible?

Employees that

1. have been with the company for at least 30 days prior to the leave
2. are unable to work (or telework) because they need to care for a minor child due to (i) closure of school or daycare center or (ii) care provider’s unavailability.

How much time and pay?

• Unpaid leave for the first 10 days, although employees can elect to use any other accrued paid leave, including personal, vacation or sick leave (including emergency paid sick leave).
• After 10 days the emergency leave becomes paid leave. The total leave can extend up to 12 weeks.
• Employees are required to be paid at a rate equal to at least 2/3 their regular rate of pay multiplied by the number of hours in their average work week, not to exceed $200 per day or $ 12,000 total (over a 12-week period).
• Employees who take emergency leave are entitled to job restoration rights unless the employer has fewer than 25 employees.
  • Fewer than 25 employees – the employer meets its obligations if the previous position no longer exists due to the emergency and the employer makes reasonable efforts to return the employee to an equivalent position — including benefits, pay and other terms of employment — at some point during the one-year period beginning from when the employee’s leave ends or 12 weeks after the leave begins, whichever comes first.

WHAT ELSE SHOULD YOU KNOW?

This part applies to both Acts:

Posted Notice

Employers must post a notice of FFCRA requirements in a conspicuous place at the job site.

Penalties and Enforcement

Employers in violation of the first two weeks’ paid sick time or unlawful termination provisions of the FFCRA will be subject to the penalties and enforcement described in Sections 16 and 17 of the Fair Labor Standards Act 29 USC 216; 217.

• Employers in violation of the provisions providing for up to an additional 10 weeks of paid leave to care for a child whose school or place of care is closed (or child care provider is unavailable) are subject to the enforcement provisions of the Family and Medical Leave Act.
• The Department will observe a temporary period of non-enforcement for the first 30 days after the Acts takes effect, so long as the employer has acted reasonably and in good faith.
• For purposes of non-enforcement, “good faith” means the violations are remedied and the employee is made whole as soon as practicable by the employer, the violations were not willful, and the Department receives a written commitment from the employer to comply with the Act in the future.

Prohibitions

Employers may not discharge, discipline, or otherwise discriminate against any employee who takes paid sick leave under the FFCRA and files a complaint or institutes a proceeding under or related to the FFCRA.

Understanding the interplay between the available business loans, tax breaks, paid leave obligations and unemployment benefits is the whole game at this point.  You have to weigh your options and make the best choices you can for your business. 

April 1, 2020 is here, so it is time to make decisions.  Our firm is here to help.  Request Consultation

~ Jeff Harrington, Esq.

Payroll Taxes

For most companies, the most notable tax relief under the CARES Act relates to payroll taxes coming due from April 1, 2020 – December 31, 2020. There are two categories, each with slightly different benefits and criteria.

Employee Retention Tax Credit

There is a “refundable tax credit” equal to 50% of employee compensation available to all businesses, both big and small, that _

(i) continue to pay their employees
(ii) do not receive Paycheck Protection loans
(iii) have been fully or partially suspended as a result of government order OR suffered a 50% reduction in quarterly receipts due to the Coronavirus crisis

Amount of Credit

Businesses with fewer than 100 employees – May claim a credit for wages paid to employees, with a cap of $10,000 per employee.

Businesses with more than 100 employees – Get a credit for employees who are furloughed or whose hours are reduced as a result of business closure or economic hardship.

Applying for the Tax Credit

So, what is a “refundable tax credit”? How does this actually work?

When you file your company’s quarterly payroll tax, you can take a credit equal to 50% of what you pay employees.  If the credit you claim is greater than the tax liability, you will receive a refund for the difference.

What are the limitations?

There are no restrictions on business size.  You do have to meet the three criteria above, though.

Payroll Tax Delay

You know the employer portion of the payroll taxes you normally have to pony up every pay cycle?  Under the CARE Act, your business can defer those payments through the end of 2020. In effect, the delay is like an interest-free loan.

Requirements

(i) continue to pay employees
(ii) do not take a Paycheck Protection loan

Payback

The deferred payroll taxes can be paid back in two installments. The first half (50%) is due by December 31, 2021, and the second half (50%) by December 31, 2022.

Defer-able Portion of Payroll Taxes

Your company can defer all of the following:

– employer portion of FICA taxes
– employer and employee representative portion of Railroad Retirement taxes
– half of SECA tax liability

Other portions of your company’s payroll taxes, such as amounts charged by your State, are not affected by the CARE Act.

Advance Payment of Tax Credits for Paid Leave

If your business is required to provide paid leave to employees due to the Families First Act, then you may be wondering how you can afford that. This may help.

The CARE Act allows the US Treasury to send advance payments of tax credits. The details are still sketchy, but it appears the calculation will be based on a projection as follows:

Company liability for payroll taxes minus Payroll Tax Credits available under CARE Act =

(A) remaining amount due to be paid to the IRS

OR

(B) excess credit due to the company

If, in your case, the result is (B), then you can apply to have the refund sent to you in advance. Having those funds in-hand may help your company meet its obligations to pay for employee leave during the crisis.

The emergency paid leave provisions go into effect April 1, 2020. For more details on your company’s obligations under Families First Coronavirus Response Act, click here.

Net Operating Losses

The Tax Cuts and Jobs Act of 2017 put restrictions in place regarding Net Operating Losses (NOLs), such as (i) limiting NOLs to 80% of taxable income, and (ii) eliminating NOL carrybacks to prior years. The CARE Act modifies these restrictions . . . in your favor.

CARRYBACKS

Your business can now carryback NOLs for the last five (5) years, meaning 2015 to 2020. This effectively delays the 80% taxable income limitation until 2021, while at the same time providing retroactive relief for the past five (5) years.

CARRYFORWARDS

First, your business can now deduct its NOLs up to 100% of taxable income, as opposed to be limited to 80%. Second, for taxable years after 2021, the business can write off all its NOLs for tax years prior to 2018. Finally, your business can take a deduction up to 80% of modified taxable income for NOLs arising in tax years after 2017.

Other Limitations on Losses (less common)

The CARES Act retroactively suspends the current rule that limits deductible business losses. The limitations were previously effective as of 2018 but have now been pushed back to 2021. The same is true for active farming loss rules.

Corporate Alternative Minimum Tax
The CARES Act allows corporations to claim 100% of AMT credits in 2019 as fully refundable and also provides an election to accelerate claims to 2018. Previously, there were limits to how much AMT credit a corporation could take.

Business Interest Deduction
The CARE Act permits businesses to elect to increase the interest limitation from 30 percent to 50 percent of ATI for 2019 and 2020. Further, businesses may elect to use 2019 ATI in calculating their 2020 limitation. There is a special rule for partnerships, which allows 50 percent of any excess business interest allocated to a partner in 2019 to be deductible in 2020, rather than being subject to the ATI limitation. The remaining 50 percent of excess business interest from 2019, however, is subject to the ATI limitation.

Property Improvement
This one may interest our clients who own restaurants or commercial building, as well as those in real estate investment (i.e. fix and flip). The CARE Act will permit you to immediately deduct the expenses of property improvements or depreciate over 20 years. Previously, you had to depreciate over 39 years.

Alcohol Taxes on Hand Sanitizer
The CARES Act exempts undenatured spirits from excise taxes for those distillers that are producing hand sanitizer on an emergency basis.

So, what is our take-away from all of this?  For one thing, you are going to be spending some quality time with your accountant and/or tax attorney.  Beyond that, my feeling is that these tax benefits will be of great interest to businesses that have done well in past years and do not really need or want business loans.  For a lot of businesses that are “at risk,” these tax breaks may not be enough.

Understanding the interplay between the available business loans, tax breaks, paid leave obligations and unemployment benefits is the whole game at this point.  You have to weigh your options and make the best choices you can for your business. 

April 1, 2020 is here, so it is time to make decisions.  Our firm is here to help.  Request Consultation

~ Jeff Harrington, Esq.

Business owners and executives need a clear, concise explanation of how the recent Coronavirus laws affect their companies and what the best strategies are for surviving the crisis.  Here it is.

First a caveat.  The Families First Coronavirus Response Act goes into effect April 1, 2020, so this guide is needed NOW.  Our firm’s clients cannot afford to wait weeks for all details to crystallize, and neither can we.  So, this article provides the best information currently available, and we will update as things develop.   Request Consultation

Aid to Businesses

Let’s start with the good news, so you do not stress out too much when we get to the part about your company’s obligations to employees.  The federal government is offering aid to businesses in two primary forms: (i) SBA loans, with forgiveness provisions, and (ii) tax breaks.

BUSINESS LOANS

Paycheck Protection Program

Under the CARES Act (Coronavirus Aid, Relief and Economic Security), $350 Billion is set aside for government-backed loans.  The loans are through the Small Business Administration (SBA), so you can apply with any lender that offers SBA loans.  Our firm has close relationships with three banks that offer SBA loans, and we offer a flat-rate service that includes preparation and submission of the application, along with counsel to maximize loan eligibility and safeguard forgiveness provisions.  Request Consultation

These loans are part of the Paycheck Protection Program, one of the largest sections of the CARES Act, and they can be forgiven when used to maintain payroll through June 2020.  

The idea behind the loans, obviously, is to help you avoid laying off workers.  See Unemployment Benefits below to best weigh your options in this regard.

Eligibility for Paycheck Protection Program Loans

• self-employed
• sole-proprietors
• freelance & gig workers
• small business (fewer than 500 employees)
• some medium-sized businesses (fewer than 1,500 employees)
• 501(c)(3) Non-Profits (fewer than 500 workers)
• some 501(c)(19) Veteran Organizations

Special Advantages with Paycheck Protection Program Loans

1. Loan Forgiveness. All or some of these PPP loans can be forgiven.  Essentially, as long as you continue paying employees at their normal rate during the eight (8) weeks following origination of the loan, then you will be eligible for forgiveness of loan portions used to pay

• • payroll costs
  • mortgage interest
  • rent
  • utilities

1. There are only a few carve-outs to the forgiveness parameters at the moment.  Our firm offers counsel and assistance applying for PPP loans, so you can make sure to take best advantage.  Request Consultation
2. Low Interest Rate.  Interest rates should be no higher than 4% per year.
3. Non-recourse.  These loans do not require collateral, so you will not be saddled with a mortgage or have a lien against any company assets.
4. No Personal Guarantee.  This is big, and almost sounds too good to be true.  We will not know until clients get into the application process whether there might be exceptions but, in principal, you should not be asked to sign as guarantor of the loan.
5. Deferment of Payments.  Lenders are expected to defer payment of principal, interest and, even, lender fees for no less than six (6) months.

How Much Money Can You Get?

The basic formula is this:

Loans can be up to 2.5 times the company’s average monthly payroll costs in 2019.  If your business was not operational in 2019, then it will be the average of January and February 2020. 

You also need to know what qualifies as “payroll costs.”

Payroll Costs for Employers:

• worker compensation – salary, wage, commission or similar
• cash tips or equivalent
• payments for insurance premiums or other group healthcare benefits
• payments for paid leave – vacation, parental, family, medical or sick
• severance package – allowance for dismissal or separation
• retirement benefits
• state or local taxes assessed on worker compensation

Payroll Costs for Sole Proprietors, Independent Contractors and Self-Employed:

• net earnings from self-employment – salary, wage, commission or similar

What does NOT qualify as “payroll costs”?

• compensation in excess of $100,000/year, based on proration from February 15 – June 30, 2020
• payroll taxes  –  See related article regarding CARE Act tax breaks
• railroad retirement taxes
• income taxes
• compensation of employees whose residence is outside the US
• sick leave or family leave wages covered under Families First Coronavirus Response Act – See related article regarding Paid Leave.

The maximum loan amount under Paycheck Protection is $10 Million.

Economic Injury Disaster Loans

Besides the Paycheck Protection Program, the CARES Act also expands Economic Injury Disaster Loans.  The program already existed, but the CARES Act opens eligibility and makes it easier to apply.  The key changes are as follows:

1. Forgiveness.  The EIDL program provides for a $10,000 emergency cash advance that can be forgiven if spent on (i) paid leave, (ii) payroll, (iii) costs incurred due to supply chain disruptions, or (iv) rent or mortgage payments.
2. Eligibility – Now available to sole proprietors, independent contractors, Tribal businesses, cooperatives, all non-profits, and Employee Stock Ownership Plans.
3. Qualifying.  Approval can be based just on your credit score.
4. Guarantee.  If the loan is smaller than $200K, it can be approved without a personal guarantee.

Can you get loans through BOTH programs?

Yes.  You cannot use the funds to cover the same expenses.  However, small businesses can indeed obtain loans under both the Paycheck Protection and the Economic Injury Disaster programs.

Our firm will be watching closely as lenders begin implementing the PPP and EIDL.  There are, of course, many more details you will need to know in order to successfully apply for these loans.  What if my business is part of a franchise?  What special exceptions are there for the hospitality sector?  What about the assistance my company is already receiving from the SBA or a Small Business Investment Company?

HLA offers counsel to individual businesses, tailored to their specific circumstances.

We will also be very alert to any hidden loopholes or unexpected interpretations of the new laws that may develop.  Consider hiring counsel to help your company avoid pitfalls that might jeopardize the excellent benefits offered under the available programs.  Request Consultation

~ Jeff Harrington, Esq.

Under the FLSA, there are no limits to the number of hours an employer may require an employee to work in per day or week. However, employers are required to pay employees an overtime rate of one-and-a-half (1 1/2) times their regular rate for all hours worked in that week beyond the standard 40 hours, unless some exemption applies. 29 CFR 778.107.

In Florida, as long as an non-exempt employee does not work more than 40 hours in a week, the employer is not required to pay overtime even if (i) the employee works more than eight (8) hours in one day, or (ii) the employee works on a holiday, a Saturday, or a Sunday.

So,  to calculate the appropriate amount of overtime owed to an employee, determine the employee’s regular rate and hours worked by the employee in the applicable week.

Exempt Employees

Most employers must pay  employees overtime pursuant to the Fair Labor Standards Act (FLSA). However, there are some categories of employees that are exempt from overtime pay. Section 213(b) of the Fair Labor Standards Act (FLSA) provides for several exemptions from its overtime requirements. 29 USC 213

(a) Minimum wage and maximum hour requirements 

The provisions of sections 206 (except subsection (d) in the case of paragraph (1) of this subsection) and 207 of this title shall not apply with respect to—

Believe it or not, that is about as simple as we can lay it out.  Naturally, it would be wise to consult a labor attorney where any doubt exists.

~ Jeff Harrington, Esq.

Are you allowed to require employees to attend meetings and training sessions without counting those hours under the FLSA and paying them for the training time?

~ Jeff Harrington, Esq.

Many of my foreign business clients are used to employing unpaid interns.  That concept exists here in the US as well, but be careful.  The practice is fraught with potential peril.

If you are reading this article then, like all business owners, you want a quick and concrete answer to the question “Can I use unpaid interns in my business?”  Like a typical attorney, my answer is “Well . . . maybe.”

The first question is what body or bodies of law apply to your business.  The most prevalent is the Fair Labor Standards Act (FLSA), which is federal labor law.  There are particular criteria that you can look at to determine whether the FLSA applies to your business, but I’m going to save you some time.  Assume that it does.  Why do I say that?

Courts have gone so far out of their way to find that the FLSA applies — even to businesses that seemingly have nothing to do with interstate commerce — that we might as well say the FLSA applies to every business in every state.

I’m sure there are exceptions but, even if your business is the paradigm of an exempt employer, it would still be dodgy to count on that.  So, assume the FLSA applies to your company.

Department of Labor’s Standard

The Wage & Hour Division of the US Department of Labor has kindly given us some factors to consider in order to determine whether your company’s interns must be considered “employees” and paid minimum wage:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

So, that does give you something to go by.  The Courts have a similar but different list of criteria . . . and the decisions have not be uniform throughout the country.

The Judicial Standard

1. The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school.
2. The training is for the benefit of the students.
3. The trainees or students do not displace regular employees, but work under their close observation.
4. The employer that provides the training derives no immediate advantage from the activities of the trainees or students, and on occasion his/her operations may actually be impeded.
5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period.
6. The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

If you’re going to use unpaid interns, you had better (i) have a carefully-written internship agreement, and (ii) really try not to make an enemy of the intern.

The Enforcers: Labor Law Attorneys

There are attorneys out there who do nothing other than market to these disgruntled workers.  And, they take these cases on contingency, so it doesn’t matter that the intern cannot afford a lawyer. 

Labor attorneys take the cases for free because labor laws always award attorneys’ fees in a successful lawsuit.  But, that isn’t the worst of it.

Labor attorneys can turn a single disgruntled worker into a gold mine by putting together a class action.  I won’t go into detail about how they do that, but it is quite easy . . . and quite effective.  So, even though all your other happy interns are happy and uninterested in suing your company, they can still be pulled into the class.

The bottom line is your company’s exposure is not limited to the single unhappy intern.

Conclusion

It seems to me internships should probably be limited to training that forms part of a course of study–and, even then, you’re completely safe.  But, if you are the owner of a private company bringing on “interns” who are not participating in any kind of educational program, it may not be possible to put together a program that is 100% safe from legal exposure.

You can do it, but be sure you hire a lawyer to give you some legal analysis and draft the Internship Agreement.  And . . . be nice to your interns.

~ Jeff Harrington, Esq.