We have been tracking local, state and federal actions regarding COVID-19, including Governor Walz’s “stay at home” executive order, COVID-19 related paid-leave and small business loan assistance.
UPDATES ON THE “STAY AT HOME” EXECUTIVE ORDER
The “Stay At Home” Minnesota Executive Order 20-20 issued on March 25th requires Minnesotans to stay home except to engage in certain exempted activities and critical sector work listed in the order.
- Critical Sector Work: The Order identifies 35 Critical sectors with essential business workforces that are exempt from the order to the extent the work cannot be performed from an employee’s home.
- Individual Activities: In accordance with Minnesota Department of Health Guidelines, individuals may leave their home for: outdoor activities, necessary supplies and services, health and safety activities, care for others, or essential travel.
- The order is effective for two weeks beginning Friday, March 27, 2020 at 11:59 pm and ending on Friday, April 10, 2020 at 5:00 pm.
Please contact us if you have questions about determining if your business is “essential” under the Executive Order or if you need a letter communicating this designation to employees or others.
UPDATES ON COVID-19 PAID LEAVE
- The U.S. Department of Labor (“USDOL”) moved up the effective date of the Families First Coronavirus Response Act, which provides for paid sick leave and COVID-19 FMLA leave, to Wednesday, April 1, 2020. This is a change from the previous effective date of April 2.
- The Minnesota “Stay at Home” Executive Order is an “isolation order” that triggers paid sick leave under the federal legislation for eligible employees on and after April 1, 2020. Please contact us if you have questions about implementing the federal COVID-19 paid sick leave.
- We have developed forms for you to provide to employees when they request COVID-19 paid sick leave or FMLA. To access the forms, click here.
- USDOL issued brief guidance on COVID-19 paid sick leave and FMLA for employers, as well as answers to FAQs.
- So far, USDOL has not issued specific guidance about the COVID-19 FMLA hardship exemption for businesses with fewer than 50 employees. We will provide that guidance as soon as it is released.
- This week we expect the U.S. Department of the Treasury will release detailed guidance about the tax credits to employers for paid leave. In the meantime, here is the interim guidance from the Treasury Department:
Prompt Payment for the Cost of Providing Leave
When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees' share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.
Under guidance that will be released this week, eligible employers who pay qualifying sick or child-care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child-care leave that they paid, rather than deposit them with the IRS.
The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes and the employer share of Social Security and Medicare taxes with respect to all employees.
If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.
UPDATES ON STATE AND FEDERAL SMALL BUSINESS LOAN ASSISTANCE
Beginning this week, two government-sponsored loan programs were made available to small businesses suffering from temporary closures and working capital shortages related to COVID-19.
Minnesota DEED Small Business Emergency Loan Program
The Minnesota Department of Employment and Economic Development (“DEED”) is offering a loan program to help small businesses facing temporary closure under Executive Orders related to COVID-19.
Loan Terms
- Loans of $2,500 to $35,000 at a 0% interest rate.
- Monthly payments over 5 years with the first payment deferred for 6 months.
- Up to 50% of the loan may be forgiven with DEED Commissioner approval if the business remains operating at substantially the same level for two years following loan disbursement.
- The government will guarantee up to 80% of the loan.
Eligible Businesses
- Businesses “directly and adversely affected” by Executive Orders 20-04 and 20-08 requiring the closure of certain businesses (e.g., restaurants, bars, theaters, museums, salons, fitness centers, recreational facilities, country clubs, etc.). A complete list of impacted businesses can be found at: https://mn.gov/deed/business/financing-business/deed-programs/peacetime/.
- All small businesses are eligible, regardless of form, including independent contractors and sole proprietorships.
Limitations
- Applicant has been operating in Minnesota for at least one year before March 23, 2020.
- Applicant is current on financial obligations as of March 1, 2020.
- Applicant is willing to provide collateral or personal guarantee for at least 20% of loan.
- Applicant has been denied credit by a lender and has sought or is in the process of seeking an SBA Economic Injury Disaster Loan. See below for more information on the SBA program.
- Applicant must have claimed all applicable private insurance and utilized all other sources of applicable assistance available from other private and public sources.
- Loan funds may not be used to refinance existing debt.
- Loan funds cannot be provided to businesses that:
- Derive income from passive investments without ties to operating businesses;
- Generate any part of their income from gambling or adult-oriented activities; or
- Have no current or historical financial statements.
Application and Administration
Federal SBA Economic Injury Disaster Loan Program
The federal Small Business Administration (“SBA”) is offering a loan program to private nonprofits and small businesses that have suffered substantial economic injury as a result of a declared disaster and cannot meet their obligations or pay ordinary and necessary operating expenses.
Loan Terms
- Loans of up to $2 million at a 3.75% interest rate for small businesses and a 2.75% interest rate for nonprofit organizations.
- Loan term not to exceed 30 years.
- No collateral is required for loans of $25,000 less; SBA will be flexible regarding collateral for loans in excess of $25,000, provided it is reasonably sure the business can repay the loan.
Eligible Businesses
- Businesses in all U.S. states and territories meeting the SBA definition of a “Small Business” based on either annual receipts or number of employees for the NAICS size standard of their primary industry. Industry standards can be found here: https://www.sba.gov/size-standards/.
Eligible Nonprofits
- Any non-governmental agency or entity that is currently tax-exempt under IRC sections 501(c), (d), or (e), or can provide satisfactory evidence from their state that the organization or entity is a nonprofit under state law, is eligible, regardless of size.
Application and Loan Administration
NOTE: Use of an SBA Economic Injury Disaster Loan may negatively affect eligibility for federal grants or assistance programs which may become available under pending federal legislation.
Updates on Loan Assistance from the Federal Government
We are closely watching as Congress finalizes this legislation authorizing an estimated $2 trillion in stimulus funds. Because access to federal loan assistance is a critical part of your decision-making in the days and weeks ahead, we will send another update as soon as the bill is in final form.