This article is the marvelous work of our current law clerk Kieran O’Day, who will be finishing his stint with us shortly and heading on to clerk with the Supreme Court for the State of Wisconsin!

Now that many of the initial small businesses who received PPP loans are in full swing on using such funds, many are looking toward the loan forgiveness provided by the CARES Act. Additionally, in anticipation of forgiveness applications, there have been significant updates from the federal government including (1) releasing the forgiveness application and guidance related to it; (2) publishing guidance on the forgiveness process generally; and (3) passing the Paycheck Protection Program Flexibility Act (PPPFA). This post briefly discusses updates (2) and (3), the forgiveness guidance and the PPPFA, respectively. The PPP loan forgiveness application can be found here. 

PPP Forgiveness Guidance

On May 22, 2020, the Department of the Treasury issued guidance to clarify PPP forgiveness under the CARES Act. Certain portions of the guidance are affected by the PPP Flexibility Act discussed below. However, there remain important aspects of the guidance that business owners should keep in mind. Such provisions include clarifications on:

  • Timing of payroll costs and alternative payroll periods. Payroll costs are paid when the employer distributes paychecks or initiates ACH transactions. Such costs are “generally incurred on the day the employee’s pay is earned.” Businesses can select an “alternative payroll period” if a business’s payroll period does not fall perfectly in line with loan disbursement. Ordinarily, the covered period is 8 weeks from loan disbursement, however, the under the alternative payroll period, the 8-week covered period can begin on the first payroll period after disbursement and continue 8 weeks from that date. The alternative payroll period is only permitted for those businesses that use a bi-weekly or shorter payroll cycle.
  • FTE employee calculations. Business should calculate the number of full time equivalent (FTE) employees. According to the guidance, FTE employees are those who work an average of 40 hours per week, and each FTE employee is capped at a quotient of 1.0. Meaning, for example, an employee who works an average of 48 hours per week is 1.0 FTE employee. For calculating part-time employees, employers have the option of either calculating the average number of hours worked divided by 40 (e.g. average 30 hours per week/40=.75, which is .75 FTE employee) or treating each part-time employee as .5 FTE employee. It does not matter which calculation employers use provided they remain consistent for all part time employees.
  • Eligible expenses. Payroll expenses and permissible non-payroll expenses are those that are either paid or incurred during the covered period. This means that even those payments that were incurred before the covered period may be forgiven as long as they were paid for during the covered period. The same principle applies for expenses that are incurred during the covered period but not paid for until after. For the latter category of expenses, they must be paid in the next payroll period after the covered period (in the case of payroll expenses) or the next regular billing date (for non-payroll expenses).
  • Reduction in FTE employees. Under the PPP, the amount of PPP Loan forgiveness is reduced proportionately to the of reduction in FTE employees during the covered period. The guidance clarifies that employers are to choose a reference period and compare the number of FTE employees during the reference period to the number of FTE employees during the covered period. The guidance provides the example that if an employer had 10.0 FTE employees during the reference period and that number was reduced to 8.0 FTE employees during the covered period, then the borrower’s forgiveness amount would be reduced by 20%. [1] The guidance further clarifies that FTE employee reductions are not calculated for employees that are fired for cause, voluntarily resign, or voluntarily request a schedule reduction.
  • Reduction in salary or wages. Similar to reducing the number of FTE employees, the amount of forgiveness is affected by reductions in employees’ salary and wages of more than 25% during the covered period. A reduction in salary or wages “only applies to the portion of the decline in employee salary that is not attributable to the FTE reduction.” This means that borrowers will not be penalized twice for the same employees if the reduction was a reduction in hours that did not change the salary or wage of the employee. The example provided in the guidance and reprinted in the footnote below is informative on this issue.[2]

PPP Flexibility Act

On Friday, June 5, President Trump signed the Paycheck Protection Program Flexibility Act (PPPFA) into law. The PPPFA contains several key provisions that are designed to maximize forgiveness for loan recipients. Some of those key provisions are the following:

 

  • Extended the original “covered period” under Section 7(a)(36)(A)(iii) of the Small Business Act to February 15, 2020 to December 31, 2020. The original Covered Period was February 15, 2020 to June 30, 2020.
  • Extended the “covered period” under Section 1106(a)(3) of the CARES Act to “the period beginning  on the origination date and ending the earlier of the date that is 24 weeks after said origination date or December 31, 2020.” Additionally, any place where “June 30, 2020” appeared in reference to the PPP was changed to “December 31, 2020.” The original period ended 8 weeks after it began.
  • Added an exemption for the reduction in forgiveness proportionate to the reduction in full time equivalent employees, if the employer is able to document either (a) an inability to rehire individuals who were employees on February 15, 2020 and an inability to hire similarly qualified employees on or before December 31, 2020 or (b) an inability to “return to the same level of business activity as such business was operating at before February 15, 2020” due to complying with safety requirements related to COVID-19.
  • Amended the ratio of loan amount that can be used for payroll expenses vs non-payroll expenses (see SSM’s prior post on the PPP for allowable non-payroll uses) from 75% to 60%.
  • Allows eligible recipients that received their loans prior to the enactment of the PPPFA (June 5, 2020) to elect to use the previous 8-week covered period rather than the 24-week period as amended.
  • Extended the deferral period for loan repayment commencement from “no less than 6 months but no more than 1 year” to “the date that forgiveness is determined under Section 1106 of the CARES Act.”
  • Added a provision that requires payments of principal, interest, and fees to begin if an eligible recipient does not apply for forgiveness within 10 months of the last day of the covered period.

If you have any questions about PPP Loans or such loan forgiveness, please call our business attorneys at Schober Schober & Mitchell, S.C. at (262)785-1820.

[1] Note that FTE reduction is directly affected by the PPFA as discussed below.

[2]Example: An hourly wage employee had been working 40 hours per week during the borrower selected reference period (FTE employee of 1.0) and the borrower reduced the employee’s hours to 30 hours per week during the covered period (FTE employee of 0.5). There was no change to the employee’s hourly wage during the covered period. Because the hourly wage did not change, the reduction in the employee’s total wages is entirely attributable to the FTE employee reduction and the borrower is not required to conduct a salary/wage reduction calculation for that employee.”

This post was drafted primarily by our talented law clerk, and recent Marquette University Law School Graduate, Kieran O’Day, who will soon begin a clerkship with the Wisconsin Supreme Court. Congrats to Kieran on his graduation!

On May 13, 2020, the Wisconsin Supreme Court declared the extended Safer at Home Order unlawful, which meant businesses originally deemed “nonessential” could reopen. After the order was issued, a handful of counties and other municipalities implemented their own orders that largely reflect the former statewide order. For the most part, as of May 26, 2020 (the date the Safer at Home Order was scheduled to end), non-essential businesses are legally allowed to be open. Despite the Safer at Home Order no longer being in place and it now being legally permissible for non-essential businesses to reopen across the entire State of Wisconsin, the novel COVID-19 virus hasn’t gone away. Business owners looking to re-open now need to be aware of the potential liability they face if an employee or customer contracts the disease as a result of the operation of their business and how to minimize that risk. This post will briefly discuss some potential avenues of liability that Wisconsin business owners may face if employees or customers contract COVID-19 and are able to trace it to their business and what steps should be taken to minimize that liability.

Worker’s Compensation

Worker’s compensation insurance is required for most Wisconsin businesses. It is used to cover the medical costs for an employee injured on the job. The Wisconsin Department of Workforce Development (DWD) has provided a guidance page discussing the relationship between worker’s compensation and COVID-19. According to the page, if an employee can prove that the employee contracted COVID-19 “while performing services growing out of and incidental to . . . employment,” the employee would be covered under the State’s worker’s compensation statute and may be able to make a claim against the employer. As such, though it is likely impossible for employers to completely prevent the contraction of COVID-19 by its employees in the workplace, employers can and should take steps to minimize the likelihood of this, primarily by adhering to state, local, and federal governmental health officials who provide guidance to businesses on how to minimize the spread of the disease. The CDC and state agencies in Wisconsin have issued recommendations on this.

These precautions may include, but are not necessarily limited to, putting into place policies regarding required masks for employees, requiring social distancing of employees, allowing employees to work from home if possible, practicing proper sanitation practices, requiring that any employees feeling ill stay home from work, and/or required temperature checks to come into the workplace. Though of course not a guarantee that employees will not contract this virus while working, taking these steps may result in a much greater chance of minimizing the spread of the virus, and therefore minimize liability from worker’s compensation claims.

Negligence

It is also possible that a business could be held liable for negligence if a customer or employee were to contract COVID-19 which is caused by the business, whether the person contracts it on the business premises or not.   In Wisconsin, “a person is negligent if the person, without intending to cause harm either acts affirmatively or fails to act in a way that a reasonable person would recognize as causing an unreasonable risk of injury.”[1]  To hold a business liable for contracting COVID-19, the infected person would have to be able to prove that the business breached a reasonable standard of care and that that breach was the cause of the person’s infection. Though there are of course proof problems inherent with an infected person proving that they contracted the disease from a particular business, a business’ failure to take reasonable steps to prevent a reasonably foreseeable harm to employees or customers poses substantial risk of exposure to liability for the business.   Given the availability of recommendations from federal, state, and local health experts to avoid and minimize the spread of COVID-19, businesses failing to adhere to these recommendations may be ripe for being sued by customers or employees who contract the disease as a result of the business not taking such steps. Time will tell on whether these claims will succeed, but businesses looking to avoid being embroiled in litigation are advised to err on the side of caution and put into place a plan based upon health experts recommendations.

Wisconsin Safe Place Statute

Finally, Wisconsin has a unique statute that places an additional burden on employers and owners of properties open to the public. This is the Wisconsin Safe Place Statute, or Wisconsin Statute section 101.11. The statute states that “[e]very employer shall furnish employment which shall be safe for the employees therein and shall furnish a place of employment which shall be safe for employees therein and for frequenters thereof . . . .”[2] It also imposes a duty upon employers to “adopt and use methods and processes reasonably adequate to render such employment and places of employment safe, and shall do everything reasonably necessary to protect the life, health, safety, and welfare of such employees and frequenters.”[3] Frequenters are “[persons] other than employees and trespassers at the place of employment.”[4] This means that customers of a business actually on the premises of the business and who may be injured by contracting COVID-19 may have a claim under the Wisconsin Safe Place Statute.

The safe place statute places a higher burden upon employers and building owners as compared to negligence.[5]  The Safe Place Statute is intended to cover liability for unsafe workplace or business conditions, not negligent acts or omissions. Id. Safe place statute violation claims have three elements for an injured party to succeed: “(1) there was an unsafe condition; (2) the unsafe condition caused the plaintiff’s injury; and (3) the defendant had either actual or constructive notice of the unsafe condition before the injury occurred.”[6]  The relative risk of any given hazard is a factual case-by-case analysis. More specifically, “[w]hat constitutes safe depends on the facts and conditions present and the use to which the place was likely to be put.”[7]

It remains to be seen how COVID-19 may fit into this scheme (i.e. how COVID-19 might be deemed to be an unsafe condition on a premises, or how a business owner may have had actual or constructive notice of the unsafe condition of COVID-19). There will likely be litigation on this in the future that will clarify this. However, at this point, given the rapid spread of the virus, especially in places of business that we’ve seen throughout the country and world, business owners looking to avoid becoming embroiled in litigation or being potentially liable to employees or customers under the Wisconsin Safe Place Statute would be prudent to adhere to federal, state, and local health officials’ recommendations for minimizing the spread of the disease. Taking those steps will, in the very least, show an effort to “do everything that is reasonably necessary to protect the life, health, safety, and welfare of employees and frequenters”, as is required under the statute.

Conclusion

It is incredibly important for businesses to begin reopening to get the economy in the right direction and persons employed in the midst of this unprecedented pandemic. Many of our business clients, friends, and family members have been substantially impacted by this shutdown and the virus–whether it be financial health, physical health, and mental health. However, it is equally important for business owners to understand and adhere to guidance from the CDC and state agencies to not only prevent further spread of the disease, but also to minimize the risk of liability in operating their business. Guidance is changing and updating as the health community gets more information on the spread of the virus, and the situation continues to be fluid. Keeping apprised of the changes and adapting to them is also incredibly important.

We are hopeful that if we all, collectively, work together by listening to health experts’ recommendations on best practices for fighting COVID-19, that business can get back to normal soon. Failing to do so, in addition to the legal implications identified in this post, may result in a second wave of the virus and even further catastrophic effects on the business community, the economy, and the health of our citizens.

We at Schober Schober & Mitchell, S.C., are keeping apprised of ongoing developments related to the COVID-19’s impact on Wisconsin. We are available to assist with your legal needs and questions related to COVID-19 as well as all other business matters that you and your business may have. Please contact us at 262-785-1820 or email me, Attorney Jeremy M. Klang at jmk@schoberlaw.com. Stay healthy and safe!

 

[1] Megal v. Green Bay Visitor & Convention Bureau, Inc., 2004 WI 98, ¶ 25.

[2] Wis. Stat. § 101.11(1).

[3] Id.

[4] Gennrich v. Zurich American Ins. Co., 2010 WI App 117, ¶ 16.

[5] Szalacinski v. Campbell¸ 2008 WI App 150, ¶ 25

[6] Hofflander v. St. Catherine’s Hosp., Inc., 2003 WI 77, ¶ 89.

[7] Megal, 2004 WI 98, ¶ 10.

This article is the marvelous work of our current law clerk Kieran O’Day, who will be finishing his stint with us shortly and heading on to clerk with the Supreme Court for the State of Wisconsin!


Wisconsin Statutes Permitting Proxies Generally

Wisconsin corporations are governed by Wisconsin Statutes Chapter 180. Specifically, Wisconsin Statute Section 180.0722, titled “Proxies,” sets forth the process for and requirements of proxy voting for Wisconsin corporations. Wisconsin Statute Section 180.0722(1) states in its entirety, “A shareholder may vote his or her shares in person or by proxy.” This statute section provides shareholders a statutory right to vote by proxy, and it is the default rule that cannot be revoked by the articles of incorporation or the corporate bylaws. Note that several sections throughout chapter 180 use the phrase “unless otherwise provided in the articles of incorporation” to allow for variance. See e.g. Wis. Stat. §§ 181.0622(2), 181.0728(1), and 181.0725(1). Section 181.0722 does not contain any such language allowing the alteration of the default rule permitting the shareholders to vote by proxy.

Some confusion may arise when one researches the laws relating to Wisconsin voting by proxy because Chapter 181, which governs non-stock corporations, permits voting by proxy “unless the articles of incorporation or bylaws provide otherwise.” Wis. Stat. § 181.0724(1). Non-stock corporations are those without capital stock and rather than shareholders, those with a voting interest in the corporation are called “members.” Wis. Stat. § 181.0103(15), (17). If a corporation is incorporated under chapter 180 and not 181, this permissive language is not applicable.

Requirements for Voting by Proxy

Section 180.0722 also lays out the process by which shareholders vote by proxy and the requirements of submitting such a vote. The statutes authorize both physical and electronic proxy appointments and appointments of proxies are “effective when a signed appointment form or an electronic transmission of the appointment is received by the inspector of the election or the officer or agent of the corporation authorized to tabulate votes.” Wis. Stat. §§ 180.0722(2)(b)(1),(2); 180.0722(3). Under Section 180.0722(4)(a), appointments of proxy are revocable “unless the appointment form or electronic transmission states that it is irrevocable and the appointment is coupled with an interest.” The statute then outlines some appointments that may be coupled with interests, including among others, pledgees, persons who purchased or agreed to purchase the shares, or parties to a voting agreement created under s. 180.0731. Wis. Stat. §§ 180.0722(4)(a)(1), (2), (5).

Under Section 180.0724, corporations may, acting in good faith, accept proxy appointments whether the appointment corresponds with the name of a shareholder or not. If an appointment does not correspond with the name of a shareholder, Sections 180.0724(2)(a)-(e) provide when the proxy may still be accepted. Corporations may reject a proxy appointment “if the secretary or other officer or agent of the corporation who is authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory’s authority to sign for the shareholder.” Wis. Stat. § 180.0724(3). Corporations are deemed to have acted in good faith in either accepting or rejecting a proxy appointment “unless a court of competent jurisdiction determines otherwise.” Wis. Stat. § 180.0724(5).

Beyond what is required to submit a vote by proxy, there are no additional statutory requirements for proxies, whether on behalf of the shareholder or the corporation. There need not be a statement regarding proxy voting in the articles of incorporation or the bylaws, though it is best practice to include a statement that matches the statutory language if a corporation believes voting by proxy will occur.[1]

 

[1] For the statutory requirements and optional provisions of articles of incorporation see Wis. Stat. § 180.0202.  For the law regarding corporate bylaws see Wis. Stat. § 180.0206.

Due to the COVID-19 crisis and the impact of the Wisconsin Safer at Home Order , we have been faced with the challenge of how to legally accomplish real estate transactions while adhering to social distancing requirements.

Before we even had heard of the concept of “social distancing”, a real estate transaction would culminate in an in person “closing”.  At the closing, all of the involved parties physically get together in one location and execute all documents to finalize the transaction. The closing occurs when, simultaneously, the title and ownership of the real estate transfers from the Seller to the Buyer (via a deed) and the transfer of money from the Buyer to the Seller occurs. These closings occur in person for several reasons (amongst them convenience and historical tradition), but another important reason is that there are legally required “formalities” that must be met for the conveyance of real estate to legally occur. One such formality is that the parties signing the conveyance documents must have a third party certify their signature before it is delivered to the Buyer. This is required by law in order for the Register of Deeds to accept the document and to record it–the final step in making the real estate conveyance legally effective. The purpose of this third party certification requirement is to provide assurance to the other involved parties and the public that the person who signed the conveyance document is actually the person they say they are. This provides assurance that the document isn’t being executed fraudulently.

Wisconsin law proscribes only two ways for this third party certification to be accomplished. The most common type of this third party certification is to have the signature witnessed by a notary public, or, as described under the statute, “acknowledgment”. Acknowledgement, however, to be legally effective, requires the notary to be physically present in the same room to witness the person signing the document before the notary can place their seal or stamp on the document. (We recognize that there is a new law going into effect May 1, 2020, Wisconsin Statutes Chapter 140, that allows for remote notarization of real estate documents via commercial remote notarization software. However, our research has found, at least as of the date of this post, that the cost associated with the third party remote notarization services are cost prohibitive).

That all being said, those wishing to buy or sell, or otherwise convey real estate (including refinancing of mortgages) during this time of social distancing can still accomplish the legally required formalities without having to meet with a notary.

In addition to the option for acknowledgement by a notary, Wisconsin law provides an alternative for Wisconsin Attorneys to certify real estate documents without being physically present to witness a signature. This option is referred to as “authentication”.

  • Deeds, Mortgages, and Other Conveyance Documents. For conveyances of Wisconsin real property, (with certain exceptions that are discussed below), Wisconsin licensed attorneys, per Wis. Stats. § 706.06(2) have the unique ability to authenticate the conveyance document (such as a deed or mortgage) and still allow the document to meet legally required formalities necessary for the document to qualify to be recorded.Where notarization (a/k/a acknowledgement) requires the notary’s physical presence in the same room as the signing person, for a Wisconsin attorney to authenticate the same document, the attorney does not have to be physically present in the same room to witness the signature. However, the attorney must be “familiar” with the person’s signature. If the attorney is familiar with the signature, the attorney can sign the authentication portion of the conveyance document.

    For many Wisconsin State Bar approved real estate forms such as deeds or mortgages that are commonly used in Wisconsin real estate transactions, there is pre-printed language on the bottom left side of the document for the attorney to authenticate the document. For other non-standard conveyance documents that need to be recorded, the attorney can draft the exact authentication language that is on the pre-printed State Bar forms, and then execute the document just as they would on the State Bar approved form. The attorney SHOULD NOT place a notary stamp or seal on the conveyance document if they are authenticating the document. The stamp or seal would be an indication that the attorney signed the document in an act of acknowledgement, not authentication.

    Where the attorney has documentation of the signing person’s signatures from other documents (for instance if the signer is a past client), this evidence can create familiarity of the signature for the attorney. For a new client, our practice is to get a sample of the signature (such as a copy of their ID with a signature on it) and to do a Facetime/Zoom/Skype call with the person signing the document to be authenticated by the attorney. During the call, the signing person will have signed the document, gotten the signed document to the attorney, and then the attorney would then hold up the signed document by the signing person and have them verbally verify over the video call that the signature is theirs.

    This practice can be useful to remotely authenticate documents without the necessity of a “drive-by notarization” as that practice still requires personal interaction. The client could pre-sign all documentation and mail and/or drop off at the attorney’s office, or even scan and forward the signed document via email or fax. The document can then authenticated by the attorney familiar with the signature after they’ve become familiar with the signature. Once authenticated, the document would then be ready and legally qualified to be recorded to effectuate the real estate conveyance at a remote closing. This option is also available for Wisconsin real estate for signing persons who are located out of state. This option may not only be beneficial for these times of social distancing, but in the future, for those wishing to conveniently transaction real estate related business remotely from their home.

  • Affidavits. Real estate transactions also require involved parties to sign affidavits under oath as a part of the the closing (Owner’s Affidavits, Gap Affidavits, etc.). These affidavits are typically related to the Title Insurance Policy to be issued after closing to the Buyer and lender. These affidavits are usually notarized at closing too! We’ve concluded that per Wis. Stats. § 706.06(3), affidavits related to Wisconsin real estate can also be authenticated by Attorneys in good standing with the State Bar of Wisconsin, but, that the Attorney authenticating must also be a registered as notary public (or otherwise authorized to administer oaths per Wis. Stats. § 887.01(1))  in order to do so. When signing the affidavit, the attorney should list his or her title as “Member of the State Bar of Wisconsin AND Notary Public”. Again, the Attorney should NOT place their stamp or seal on the document if they are authenticating the affidavit.
  • Termination of Decedent’s Interest in Property. As mentioned above, there is one exception we have found for certain types of real estate conveyances that cannot be accomplished by authentication and that must be accomplished by acknowledgement by a notary. This exception relates to execution of the Termination of a Decedent’s Interest in Real Estate (a/k/a TOD-110s/HT-110s). A conveyance of real estate pursuant to a TOD-110 would be done either under Wis. Stats. §§ 867.045 and 867.046. For these terminations to be legally effective, the statutes require that the person certifying the document declare that the applicant “appeared before him or her”. We interpret this to mean that the termination of the decedent’s interest under either of those sections cannot be effectuated without the person being within the physical presence when signing. You’ll note also that the standard TOD-110 form does not have a spot for an authentication and only have a spot for acknowledgment.

In sum, with the exception of the TOD-110/HT-110, we conclude that all real estate transactions with documents requiring a third party confirming a signature can be done via authentication and therefore do not require personal contact or notarization.

During this time, the attorneys of Schober Schober & Mitchell, S.C. are available (even remotely) to assist with your legal matters, including assisting with both residential and commercial real estate transactions, not only with closings, but also with negotiating offers and dealing with legal issues between signing the contract and closing. If you have concern about being able to accomplish a real estate transaction due to COVID-19, know that we can still assist you with the transaction and that it can be accomplished with limited to no physical interaction with others due to the unique ability of Wisconsin attorneys to authenticate real estate documents.

Call me, or one of our other real estate attorneys at 262-785-1820, visit our website at www.schoberlaw.com or email me, Attorney Jeremy M. Klang at jmk@schoberlaw.com. Stay healthy and safe!

What are “Full Time Equivalents” (or “FTE”) under the CARES Act, as they relate to PPP loan forgiveness? We did some digging and found several helpful links. First, is the healthcare.gov website that has an FTE calculator. According to healthcare.gov, “full time” is an average of at least 30 hours a week for more than 120 days/year. The calculator on the above link also has a “Learn how FTEs are calculated” link that gives a basic description. We played with the numbers. Say an employer had 10 full time employees and 158 hours of part time work, the calculator converted the part time work into 5 more full time employees. The basic calculation is: full time employees (those working 30 plus hours per week), plus the number you get when you divide total part time hours per week by 30. Here is an article from AccountingTools.com that further explains the calculation. Additionally, Section 16 of this CLA article describes how FTEs may be calculated under the PPP.

Regardless of which method you may prefer above, we caution you that until SBA issues regulations under the CARES Act, any such calculation is merely an “educated guess.” Please see and review your information with both your attorneys and your accountants as you prepare your case for forgiveness to be presented to your banker. This can be a real challenge for those whose 8 week period for determining PPP fund use has already begun!

If you need help, don’t hesitate contacting our business attorneys at Schober Schober & Mitchell, S.C. at (262)785-1820.

Here is a summary of the changes in Wisconsin Governor Evers’ extended Safer at Home Order. An important point to begin with is that it does not add any or remove categories of essential businesses. This Order in in effect until May 26, 2020 or until a superseding order comes from DHS.

Safe Business Practices

Section 2(b) of the Order outlines several practices that the Department of Health Services either encourages or requires essential business that remain open to implement. Some practices include complying with social distancing requirements, restricting the number of workers present, and adopting more rigid sanitation and cleaning procedures. Retail essential businesses have more restrictive practices mandated by the order, for example: limiting the number of customers in the establishment at any time based on square footage (either above or below 50,000 square feet). Businesses above 50,000 square feet are also required to, for at least 2 hours a day, only open for vulnerable populations.

Closures

Under the order, the remainder of the 2019­-20 school year is now cancelled. The Order also added public libraries to the closure list, except they may offer online services, curbside pickup, essential government functions, and food distribution. The DHS amended the Order to exempt golf courses from the “places of public amusement” closures. Golf courses may remain open, but have a rather strict list of guidelines that have to be followed, including prohibiting the use of golf carts and keeping the clubhouses and pro shops closed. People who live outside of the same house can play together, but must, to the extent practicable, observe social distancing.

Minimum Basic Operations

The Order significantly expanded the definition of minimum basic operations. In the previous order, minimum basic operations included only the most basic functions: security, inventory, payroll, and maintaining telework. Now, minimum basic operations also include: mailing and delivery, curbs-side pickup, and landscaping (if it can be done by one person). Arts and crafts stores may also have the number employees necessary to manufacture PPE.

If you find that you have questions as to how this may affect your business or operations, please call our knowledgeable attorneys at Schober Schober & Mitchell, S.C. at (262)785-1820.

This article is the marvelous work of our current law clerk Kieran O’Day, who will be finishing his stint with us shortly and heading on to clerk with the Supreme Court for the State of Wisconsin!


In a recent post, Attorney Jeremy Klang discussed the Paycheck Protection Program (PPP) loans under the CARES Act. This post will serve as an update regarding how the PPP and the Emergency Injury and Disaster Loans (EIDLs) interact. Head to the Business Law Blog for our other posts regarding COVID-19’s effects on the legal and business worlds particularly as those effects relate to Wisconsin businesses.

Who can apply?

Applicants for both loans must be adversely affected by COVID-19.

EIDL

·         Businesses with fewer than 500 employees;

·         most non-government, not for profit businesses; and

·         sole proprietors and independent contractors.

 

PPP

·         Businesses with fewer than 500 employees;

·          non-government, not for profit businesses; and

·         sole proprietors, self-employed individuals, and independent contractors

How much are businesses eligible for? 

EIDL

·         Up to $2,000,000 with up to a $10,000 advance grant.

·         Businesses should receive this grant regardless of the status of their overall application.

 

PPP

·         Up to $10 million, but

·         it is limited to 2.5 times the business’ average total monthly payments for payroll costs during the 1-year period before the date of the loan.

 

There has been a bit of confusion regarding the amount of the $10,000 businesses will be eligible for. The SBA has not provided official guidance on how it will determine the amount businesses are eligible for.

A since-removed bulletin from the Massachusetts SBA field office stated that the advance will be capped at $1,000 per employee. For example, if this ends up becoming the cap employers with five employees will only get a $5,000 advance. However, there has not been an official announcement from the SBA. We will keep this section up to date as more information becomes available.

What we do know about the advance is that while it does not need to be repaid, it will be subtracted from the forgiveness amount of the PPP if a business receives a PPP loan.   

What are the terms?

An underlying term that affects both of these loans is that the CARES Act prohibits borrowers who obtain both loans from using the loans for the same purposes.

EIDL

·         Interest rates are 3.75% for for-profit businesses and 2.75% for nonprofits.

·         Loans can be set at a maximum of 30-year terms and payments are deferred for one year.

PPP

·         Can be forgiven up to the amount a business spends in the 8-week period following the origination of the loan provided the funds are used for payroll costs, interest on mortgage obligation, rent and utility payments, interest on other debt obligations incurred before February 15, 2020.

·         To have amounts forgiven, the amount spent on non-payroll costs cannot be greater than 25%.

·         The interest rate on any non-forgiven amount is 1%.

·         The remaining loan amount after forgiveness is set at a 2-year term and payments are deferred for six months.

What can the loans be used for?

EIDL

·         Pay fixed debts

·         Payroll

o   This includes sick leave. It is currently unclear whether the same restriction under the PPP applies regarding FFCRA leave.

·         Accounts payable

·         Other operating expenses that could have been paid but for the pandemic

PPP

·         Payroll costs

o   This includes sick leave except for leave for which a credit is allowed under section 7001 of the FFCRA or qualified leave under section 7003 of the FFCRA.

·         Interests on mortgage obligations incurred before February 15, 2020

·         Rent, under lease agreements in force before February 15, 2020

·         Utilities, for which services began before February 15, 2020

 

Note that the approved uses for each loan generally overlap. Again, the loans cannot be used for the same purposes, so if a business receives both loans it will have to carefully analyze which loan is used for specific purposes.

Required documentation and other information

EIDL

·         Required Documents

o   Loan Application

o   Tax Information Authorization (IRS Form 4506T)

o   Personal Financial Statement

o   Schedule of Liabilities

·         Personal guarantees may not be required for loans less than $200,000.

·         Collateral is not required for loans less than $25,000.

·         Loan is administered by the SBA.

·         SBA will not require first-year tax returns, will not require other credit could have been obtained elsewhere, and approval can be based on credit score.

·         If funds are available, these loans can be applied for up until December 31, 2020.

 

PPP

·         Required Documentation

o   Certification that the business was in operation on or before February 15, 2020

o   Certification that the business had employees

o   Verification of average monthly payroll costs

·         PPP loans are administered by individual lenders. See this link for a list of Wisconsin lenders.

·         Collateral is not required.

·         Personal guaranty is not required.

·         No requirement for seeking credit elsewhere.

·         If funds are available, these loans can be applied for up until June 30, 2020.

 The SBA is providing much needed financial support for small businesses across the country through the EIDL and PPP. We will continue watching for guidance as it comes down from the federal government. Follow our COVID-19 blog posts on www.wisconsinbusinesslawblog.com/. Please contact our offices at 262-785-1800 or visit our website www.schoberlaw.com to talk to the business law attorneys regarding the EIDL or PPP or any other business law questions related to COVID-19.

We just received word that late yesterday, the IRS extended the 45 and 180 day deadlines for Section 1031 transactions. It appears that such deadlines which fall between April 1st and July 14th will be extended to July 15, 2020. We have also been alerted that our colleagues at IPX 1031 are working diligently with the IRS requesting that the start date be moved back to January 20th. We will keep you informed!

For now, if you have a Section 1031 in progress, be sure to contact us if you are concerned about making your deadlines, and hopefully we can provide the most current information! Call us at (262)785-1820.

This article is the marvelous work of our current law clerk Kieran O’Day, who will be finishing his stint with us shortly and heading on to clerk with the Supreme Court for the State of Wisconsin!


To help navigate the Families First Coronavirus Response Act (FFCRA), the Department of Labor (DOL) published guidance on April 6, 2020. In our last post, we discussed the ins and outs of the leave provisions of the FFCRA. In this post, we will highlight that guidance. For information regarding the FFCRA, the Paycheck Protection Program under the CARES Act, or Wisconsin’s Safer At Home Order, see our prior posts on the Business Law Blog.

Definitions

The DOL determined that certain definitions needed further explanation and guidance to fully effectuate the FFCRA. Some definitions, like those for “son or daughter” or “person,” come from other laws like the Family and Medical Leave Act (FMLA) or the Fair Labor Standards Act (FLSA). The DOL further explained the law’s definition of “telework.” The DOL explains that telework is defined broadly under the FFCRA in order to “effectuate the statute’s underlying purposes . . . [and to] encourage employers and employees to implement highly flexible telework arrangements that allow employees to perform work, potentially at unconventional times[.]” The explanation of telework also clarifies that, because of these potentially unconventional work times, employers are still required to compensate employees for recorded hours, including overtime.

Paid Leave Entitlements

The DOL further explains each of the six reasons that an employee may take leave under the Emergency Paid Sick Leave Act (EPSLA). Those explanations are highlighted below:

  • Reason 1: Employee is unable to work or telework because the employee is subject to a federal, state, or local quarantine or isolation order.
  • This applies to broad stay at home orders that affect some or all people (like the one Governor Evers issued in March).
  • The question is “whether the employee would be able to work ‘but for’ being required to comply with a quarantine or isolation order.”
  • Employees cannot use this leave if they do not have work from the employer. This is because regardless of the pandemic, the employee in this instance would not be working anyway.
  • Telework is available under three circumstances: (1) the employer has work for the employee; (2) the employer permits the employee to perform the work from where the employee is quarantined or isolated; and (3) there are no extenuating circumstances that prevent the employee from performing the work.
  • Reason 2: Employee is unable to work or telework because the employee has been advised by a healthcare provider to self-quarantine for a COVID-19 related reason.
  • The healthcare provider must believe that the employee has COVID-19, may have COVID-19, or is particularly vulnerable to contracting COVID-19.
  • The employee is able to telework based on the same three criteria above. Some extenuating circumstances could include serious symptoms that prevent the employee from working.
  • Reason 3: Employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
  • Symptoms include, but are not necessarily limited to, the typical COVID-19 symptoms like fever, dry cough, and shortness of breath.
  • Employee may take paid leave for time spent seeking such a diagnosis “for instance . . . making, waiting for, or attending an appointment for a test for COVID-19.”
  • Employees may not take paid leave for self-quarantine without seeking a diagnosis.
  • Employee may continue to take leave as long as experiencing symptoms, or after testing positive if instructed to self-quarantine.
  • Telework is based on the same criteria as (1) above.
  • Reason 4: Employee is caring for someone subject who is (a) subject to a Federal, State, or local quarantine or isolation order or (b) has been advised by a health care provider to self-quarantine due to COVID-19 concerns.
  • Employee must have “a genuine need to care for the individual.” The individual cannot be someone with whom the employee has no personal relationship. The individual “must be an immediate family member, roommate, or similar person with whom the employee has a relationship that creates an expectation that the employee would care for the person . . . .”
  • Reason 5: Employee needs to take care of employee’s son or daughter if (a) the child’s school or place of care has been closed or (b) the child care provider is unavailable due to COVID-19.
  • This only applies if the employee genuinely cannot work because they are the only person available to care for the employee’s son or daughter. If another co-parent, co-guardian, or the usual care giver is available and the employee can work, the employee may not take leave under this section.

Reason 6, a substantially similar condition specified by the Secretary of Health and Human Services, did not receive further guidance.

The common thread throughout the 5 reasons for taking emergency paid sick leave is that the employer must actually have work for the employee to do before the employee can take leave. The guidance provides a helpful example:

“[I]f a coffee shop closes temporarily or indefinitely due to a downturn in business related to COVID-19, it would no longer have any work for its employees. A cashier previously employed at the coffee shop who is subject to a stay-at-home order would not be able to work even if he were not required to stay at home. . . . [H]is inability to work is not due to his need to comply with the stay-at-home order, but rather due to the closure of his place of employment.”

Paid Leave Rate of Pay & Hours of Leave

The DOL further explains the rate of pay requirements under the FFCRA. Remember, if an employee is taking leave for reasons (1)-(3), the employee is entitled to that employee’s regular rate of pay. If an employee takes leave for reasons (4)-(6), the employee is entitled to not less than 2/3 of the employee’s regular rate of pay. However, as the DOL explains, if the employee’s regular rate of pay is less than the federal, state, or local minimum wage, the employee is entitled to the highest applicable minimum wage for the duration of the employee’s leave. In Wisconsin, there is no difference between the state and federal minimum wage requirements, so employees whose regular rate of pay is lower than $7.25 an hour are entitled to $7.25 an hour for the duration of their leave.

Employees are entitled to hours of leave equal to the average hours the employee works over a two-week period. The DOL  explains that if an employee does not have a regular schedule (for example 9:00 a.m. to 5:00 p.m. Monday through Friday), the employee’s average number of hours worked should be calculated over a six-month period. If the employee has not been employed by that employer for at least six months, the rate is calculated based on the entire time of the employee’s employment.

Employers with fewer than 50 employees

The FFCRA provides that employers that employ fewer than 50 employees may be exempt from providing leave in certain circumstances. The Department clarified that those employers with fewer than 50 employees are exempt when:

  • Such leave would cause the small employer’s expenses and financial obligations to exceed available business revenue and cause the small employer to cease operating at a minimal capacity;
  • The absence of the employee or employees requesting such leave would pose a substantial risk to the financial health or operational capacity of the small employer because of their specialized skills, knowledge of the businesses, or responsibilities; or
  • The small employer cannot find enough other workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services of the employee or employees requesting leave provide, and these labor or services are needed for the small employer to operate at a minimal capacity.

Employers that deny leave based on these criteria are advised by the DOL to retain records that document the reasons for denial. However, those records should merely be retained by the employer and should not be sent to the DOL.

Interaction between EPSLA & EFMLA

Reason for paid leave (5) under the EPSLA and the only eligible reason under the EFMLA overlap; thus those provisions interact and can be used successively. The DOL explains that if an employee is taking paid leave to care for a son or daughter whose school has closed may first take the 10-day leave under the EPSLA first and then take the remaining 10 paid weeks under the EFMLA. This makes sense because taking leave under the EFMLA entitles an employee to 12 total weeks, but only 10 paid. Because the reasons for taking leave overlap, an employee can justifiably get all 12 weeks paid if that employee is eligible for both types of leave.

Temporary Non-Enforcement Period

This portion of this post deviates from the guidance that the DOL issued on April 6, 2020, but it is still important information for employers. On March 24, 2020—roughly a week before the FFCRA leave provisions took effect—the DOL issued a “Field Assistance Bulletin” that updated employees in the Wage & Hour Division on the DOL’s temporary non-enforcement policy.

The bulletin explains that the DOL “will observe a temporary period of non-enforcement of the FFCRA for the period of March 18 through April 17, 2020.” In order to get the benefits of the non-enforcement policy, an employer must make “reasonable, good faith effort to comply with the [FFCRA].” The bulletin goes on to explain what reasonably and in good faith mean in this context. Those terms apply only when all of the following are present:

  • The employer remedies any violations;
  • The violations were not “willful,” which means that the employer knew or should have known that the conduct was prohibited; and
  • The employer certifies in a writing sent to the DOL that the employer will comply with the FFCRA in the future.

If an employer is in violation of the FFCRA and does not meet all of the above requirements, the DOL may take action against the employer. It is important to note that this temporary non-enforcement period only applies to DOL enforcement. Aggrieved employees still have a private right of action against the employer under the FFCRA.

This guidance from the DOL is likely only the beginning of what we can expect from the federal agencies involved in these acts. Follow our COVID-19 blog posts on www.wisconsinbusinesslawblog.com/ as we will continue to update as more guidance comes down from the federal and state governments. Please contact our offices at 262-785-1800 or visit our website www.schoberlaw.com to talk to the business law attorneys regarding the new leave requirements or any of the new laws centered around COVID-19.

This article is the marvelous work of our current law clerk Kieran O’Day, who will be finishing his stint with us shortly and heading on to clerk with the Supreme Court for the State of Wisconsin!


On March 25, 2020 Wisconsin’s Safer At Home Order (the Order) went into effect. The order is Wisconsin’s version of  a shelter-in-place or stay at home order that other states such as Illinois, California, Michigan, and New York, among others, have enacted in response to the COVID-19 pandemic. The order mandates that Wisconsinites only leave their homes for essential activities, and when they do leave their homes, they should practice social distancing as recommended by the Department of Health and Safety and the Centers for Disease Control. This Order is in effect until 8:00 a.m. Friday April 24, 2020. Notwithstanding the sunset date of this first order, it is possible (and altogether likely) that the State may issue a superseding order extending its duration.

The upshot of this order is that businesses that are not “Essential Businesses and Operations” as defined by the order must cease in person business and convert to telework (work from home) or cease business altogether. By way of this post we hope to inform businesses of their resources to determine whether they are “essential” or what is still available for those deemed non-essential.

Am I an Essential Business or Operation?

While at first glance the Order initial appears to shutter thousands of businesses across the state, a careful reading of the Order shows that many, many businesses may actually qualify as essential and continued operating. Although many businesses may be able to remain open, they will be subject to the modified business practices to slow the spread of COVID-19. Section 13 of the Order provides a list of Essential Businesses and Operations. The Essential Businesses and Operations list includes the other operations already allowed under the Order (Essential Governmental Functions, Healthcare and Public Health Operations, Human Services Operations and Essential Infrastructure) as well as 26 other broad types of businesses and operations.

Notable categories include (1) “Stores that sell groceries and medicine”; (2) “Food and Beverage production, transport, and agriculture,” which keeps the supply chain for (1) in tact; (3) “Restaurants”; (4) “Bars; (5) “Media”; (6) “Financial institutions and services”; (7) “Hardware and supplies stores”; (8) “Critical trades.”; and (9) “Professional services.” These nine categories alone allow businesses such as grocery stores, pharmacies, gas stations, construction companies, law firms, accounting firms, hardware stores, banks, and newspapers and radio stations to remain open beyond only minimal business operations.

Each category has its own restrictions and additional guidelines. For instance, bars and restaurants may only remain open for take-out or delivery services, grocery stores must (like bars and restaurants) close any seating areas for food consumption, and professional services should encourage telework to the extent practicable.

Governor Evers posted an FAQ on the Order, which encourages all business owners or employees to carefully read the Order in its entirety and make a decision based on the Order to determine whether the business is essential. In the event that a business believes it is essential but is not listed on the Order, the Wisconsin Economic Development Corporation (WEDC) provides an inquiry. The WEDC website also includes dropdown definitions of each listed essential business (use the “list” hyperlink above).

 What if I am not essential?

The Order requires any non-essential business (again, carefully check the Order for this determination) to cease in person operations. Despite the mandated cessation, businesses may remain open to perform “Minimum Basic Operations.” Minimum Basic Operations include processing payroll, security, and checking and maintaining inventory. These operations also include those necessary to facilitate work from home capabilities for employees.

What if I want to remain open?

Section 17 of the Order provides enforcement of the Order. It provides that law enforcement agencies, including county sheriff departments, may enforce the Order according to Wisconsin Statute Section 252.25. This statute allows those agencies to enforce the order by fining violators up to $350, imprisoning them up to 30 days, or taking both actions.

What if my county, city, or town has its own order?

To maintain consistency across the state, the Order includes Section 19 “Supremacy.” This section states that the Order supersedes any order inconsistent with it. So, if your locality created its own order that is less restrictive than the State’s, the State’s will apply regardless of a local order.

The business attorneys at Schober, Schober & Mitchell, S.C. are here to guide your business through these strange and confusing times. Stay informed by keeping up with our COVID-19 Response Posts that will be posted on our Business Blog page. If you would like to talk to us regarding the Safer At Home Order or any other business considerations, implications, or issues surrounding the COVID-19 pandemic, please reach out at 262-785-1820 or by visiting our website at www.schoberlaw.com.