Wednesday, April 8th, 2020
While Virginians are living under Governor Northam’s executive orders, staying home and limiting unnecessary contact with others, Virginia construction projects are proceeding. With the progress on these projects, deadlines for perfecting and enforcing mechanic’s liens remain. The question then arises whether the recent orders by the Supreme Court of Virginia affect the deadlines for perfecting and/or enforcing mechanic’s liens. Having reviewed these orders, we recommend that contractors, subcontractors, and material suppliers proceed to record and enforce their mechanic’s liens as normal. Better to be safe than to risk losing the benefit of a lien.
As a bit of background, on March 17, the Supreme Court of Virginia issued an Order in response to the COVID-19 virus, declaring a judicial emergency for all state courts in the Commonwealth, in order to protect the health and safety of court employees, litigants, judges, and the general public.[1] The order suspended all non-essential, non-emergency court proceedings in all circuit and district courts, and tolled and extended “all deadlines” for a period of twenty-one days. Then, on March 27, the Supreme Court issued a further Order extending the declaration of judicial emergency through April 26, 2020.[2] The second Order tolled and extended “all applicable deadlines, time schedules and filing requirements,” during the period the order is in effect (until April 26, 2020). This Order also stated that “the courts and clerks’ offices shall remain operational and provide services required by law,” while maintaining health and safety precautions.
From the language of the second Order, it is unclear whether or not the Supreme Court’s extension and tolling of deadlines applies to the statutory deadlines for filing and perfecting mechanics liens. It is possible that the tolling and extension language in these Orders do not apply to mechanic’s lien deadlines, so contractors, subcontractors, and suppliers are advised not to rely on them, and to continue to perfect and enforce their mechanic’s liens by adhering to the deadlines in Title 43 of the VA Code as before. In short…don’t wait to record or file suit if you can. You do so at great risk.
One exception to this is that some courts may be completely closed in the virus “hot spots.” In this case, we recommend that contractors send a notice to the owner and general contractor, etc. within the 90 day recording period, just to be on the safe side, and record the lien as soon as the Circuit Court Clerk’s office re-opens. Recording and filing should be possible if the Circuit Court Clerk’s office is open.
Today the Roanoke City Circuit Court Clerk announced that she is closing the clerk’s office to walk-in traffic. York County recently closed its courts building for disinfecting after multiple staff members tested positive for the virus. As of this week it is more than limited “hot spots” where clerk’s offices are closing or limiting access. We recommend that before you attempt to record a mechanic’s lien you contact the Circuit Court Clerk in that jurisdiction to make arrangements to timely record the lien, complying with any procedures or processes the Clerk has established.
Mechanic’s liens are a powerful tool. Don’t risk losing your lien rights; record and enforce those mechanic’s liens. Please give us a call if we can answer any questions or help in any way.
[1] The March 17 Supreme Court Order is available at: https://www.courts.state.va.us/news/items/covid/2020_0317_supreme_court_of_virginia.pdf.
[2] The March 27 Supreme Court Order is available at: https://www.courts.state.va.us/news/items/2020_0327_scv_order_extending_declaration_of_judicial_emergency.pdf.
Wednesday, April 8th, 2020
Initial Guidance and Form Application published by Department of Treasury and the Small Business Administration
Late on Tuesday, March 31, 2020, the Department of Treasury and the Small Business Administration issued initial guidance related to the Paycheck Protection Program. Included in this guidance is the form application for borrowers to use when applying for a covered loan under the Paycheck Protection Program.
When can borrowers begin to apply for Paycheck Protection Program covered loans?
The guidance from the Department of Treasury states that lenders participating in the Paycheck Protection Program will begin processing loan applications as soon as this Friday, April 3, 2020 (for small businesses and sole proprietorships), so time is of the essence for borrowers in preparing the application to submit for your lender’s review.
The Department of Treasury provides the following dates for application processing and lending, with the category of borrower affecting the start date:
- Small businesses and sole proprietorships can apply for and receive loans starting April 3, 2020.
- Independent contractors and self-employed individuals can apply for and receive loans starting April 10, 2020.
If you are an independent contractor or a self-employed individual, we recommend that you still reach out to your bank as soon as possible to provide the application and requested materials. We anticipate that the demand for covered loans under the Paycheck Protection Program will exceed the supply of funds allocated to these covered loan under the CARES Act.
Which lenders are participating in the Paycheck Protection Program?
Existing lenders who participate in the SBA 7(a) loan program are approved to lend under the Paycheck Protection Program. We anticipate additional lenders will be approved for participation in the program, however, the timing of this approval and enrollment process for additional lenders remains unclear.
If you are interested in applying for a covered loan, we recommend that you reach out to lenders you have relationships with as soon as possible to determine if they are currently enrolled as a lender in the SBA 7(a) loan program and if they are receiving applications for covered loans under the Paycheck Protection Program.
Did the initial guidance from the Department of Treasury and Small Business Administration clarify the terms outlined in the text of the CARES Act?
The initial guidance did provide some points of clarification:
- Average Monthly Payroll Measurement Period:
- Instead of the rolling 12 month time frame outlined in the CARES Act, the application and related guidance indicates employers will use your average monthly payroll for 2019 (with some variation for seasonal employers and new businesses).
- Employees with associated payroll costs of over $100,000 on an annualized basis:
- The application indicates that “costs” related to payroll are capped at $100,000 on an annualized basis for each employee. This is a variance from the text of the CARES Act, which indicated salary and wages were capped at $100,000 per employee, but did not indicate an overall employee payroll cost cap when considering benefits and other related expenses included in the definition of “payroll costs” under the program.
- What are the terms of a covered loan under the Paycheck Protection Program?
- The Department of Treasury states that all loan terms will be the same for every borrower who receives a covered loan.
- Interest Rate: 0.50% fixed rate
- Maturity Date: 2 years for any portion that is not forgiven. There is no prepayment penalty.
- Deferment: All payments are deferred for 6 months, however interest (at the rate of 0.50% will continue to accrue during this deferment period).
- Unsecured Loan: There are no guarantees required in connection with a covered loan and there is no collateral required for these loans. The business and certain other owners will be required to provide certain certifications in good faith when submitting the application.
- Terms of loan forgiveness:
- The initial guidance does indicate that “due to the likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.” This means that of the funds borrowed (2.5 x average monthly payroll costs = maximum loan amount), the government is anticipating that in order to receive full forgiveness of the principal amount, borrowers will have to demonstrate the use of at least 75% of the borrowed funds toward payroll costs, with up to 25% of the borrowed funds used for other covered overhead expenses (e.g. rent, mortgage interest, utilities)
Do we anticipate additional guidance?
As we are updating this news alert, the SBA has not issued regulation related to the Paycheck Protection Program and the associated loan forgiveness. Regulation may not be published prior to loans being made under this program. This is an unusual path for enacting a piece of legislation, but these are unusual times.
We will continue to monitor guidance and regulation from the Department of Treasury and the Small Business Administration, and will continue to update this landing page as additional guidance is received.
Thursday, April 2nd, 2020
Late in the day on April 2, 2020, the Department of Treasury published the Interim Final Rule for the Paycheck Protection Program on its website as well as an updated application.
The Department of Treasury has previously stated that covered loan applications under the Paycheck Protection Program would begin to be processed by participating lenders as early as today, Friday, April 3, 2020.
Many lenders have expressed concern over potential liability exposure for lenders participating in the Paycheck Protection Program as well as with the lack of specificity and guidance included in the text of either the CARES Act or the initial guidance provided by the Department of Treasury and the Small Business Administration. It is unclear whether this interim final rule, including the lender protections outlined and the questions and answers contained therein, will provide lenders with the comfort and all of the information needed to allow them to begin processing loan requests.
Some questions and concerns both borrowers and lenders have expressed were addressed in the interim final rule, while a number of questions remain.
Interest Rate: In response to lender concerns, the interim final rule increases the interest rate on covered loans under the Paycheck Protection Program to 1% (up from 0.5% provided in the initial guidance). Additionally, while interest will begin to accrue when the loan is made, the interim final rule states “the amount of loan forgiveness can be up to the full principal amount of the loan and any accrued interest…” (emphasis added). If a borrower expends all borrowed funds for forgivable purposes, including following the requirements to spend at least 75% of such funds on payroll costs and maintaining employee and payroll levels as outlined under the program, upon requesting and receiving loan forgiveness it is possible that no payment of either principal or interest by the borrower will be due.
Independent Contractors: The interim final rule does make it clear that independent contractors do not count for purposes of a borrower’s covered loan calculation. An independent contractor will have the ability to apply for a covered loan under the Paycheck Protection Program on its own behalf.
SBA Affiliation Rules: The CARES Act contains waivers of the SBA Affiliation Rules for certain business concerns (e.g., certain businesses in the hospitality industry, a franchise assigned a franchise identifier code by the SBA, and a business that receives financial assistance from certain small business investment companies). A number of questions remain regarding the applicability and interpretation of the SBA Affiliation Rules in connection with the Paycheck Protection Program. The interim final rule includes a statement the “SBA intends to promptly issue additional guidance with regard to the applicability of the affiliation rules at 13 CFR 121.103 and 121.301 to the Paycheck Protection Program.”
Average Monthly Payroll Costs: The measurement period for purposes of calculating the average monthly payroll still contains ambiguity, with the guidance stating that borrowers should use the “aggregate payroll costs from the last twelve months” while lenders are instructed to “confirm the dollar amount of average monthly payroll costs for the preceding calendar year”.
We recommend that if you are interested in a covered loan under the Paycheck Protection Program, you reach out to your lender to determine what information and documentation the lender will require in order to review and process your loan application.
Additional information may be found at www.sba.gov (including a tool to find lenders near you who are participating in the Paycheck Protection Program) and www.treasury.gov
Monday, March 30th, 2020
Written by Todd A. Leeson and Kelsey M. Martin, Gentry Locke Attorneys
March 27, 2020
Last night, the Department of Labor Wage and Hour Division (WHD) released its second round of FAQs [#15–37] addressing the Families First Coronavirus Response Act. The FAQs can be found here.
A few important takeaways:
- Employers are advised to require employees to submit documentation to verify their need for emergency paid sick leave or extended FMLA leave [FAQ #16].
- Leave can only be used intermittently for child care reasons and when the employer consents to such intermittent leave [FAQs #20–22].
- Employees who are furloughed or temporary laid off are not eligible for leave under the FFCRA [FAQs #23–28].
- Employers must continue the employee’s health coverage when the employee takes leave under the FFCRA [FAQ #30].
Please let us know if you have questions or if we can assist you with compliance. Please also consult gentrylocke.com/coronavirus for additional information on the various laws and legal issues related to the COVID-19 pandemic.
Wednesday, March 25th, 2020
Written by Todd A. Leeson and Kelsey Martin, Gentry Locke Attorneys
March 25, 2020
On March 24, 2020, the U.S. Department of Labor Wage-Hour Division (WHD) published its “first round” of guidance regarding the new Families First Coronavirus Response Act (“FFCRA” or the “Act”). The Act was signed into law on March 18, 2020. As you likely know by now, the Act basically provides that private sector employers with 499 or fewer employees must give eligible employees up to 80 hours of emergency paid sick leave (EPSL), and up to 12 weeks of emergency paid FMLA leave (EFLMA) for defined COVID-19 reasons.
You can find the WHD’s March 24 news release here: https://www.dol.gov/newsroom/releases/whd/whd20200324
As you will see, there are 3 primary “guidance” documents set forth in this WHD news release: a Fact Sheet for Employees, a Fact Sheet for Employers, and a Questions and Answers document.
The WHD set the effective date for the new paid leave provisions as April 1, 2020. (This is 1 day earlier than anticipated.)
In addition, the WHD will be publishing a Notice today (March 25, 2020) that employers will be required to post and publicize to its employees regarding the FFCRA. Stay tuned!
As noted, WHD will be providing additional guidance in the near term. It specifically stated that it “expected” to publish its formal regulations in “April 2020.”
Here are a few additional items of note from the WHD documents
Calculating Hours Worked by Full or Part Time Employees. [Questions 5 & 6] The WHD outlines several scenarios to help employers determine the number of hours a part or full time employee works for purposes of determining the amount of leave available to the employee.
Calculating Employee’s “Regular Rate of Pay” for Purposes of FFCRA. [Question 8] For employees who have worked for you for more than 6 months, the “regular rate” is the average of his/her regular rate over a period of up to 6 months. Alternatively, you can add all compensation that is part of the regular rate for the above period and divide that sum by all hours actually worked.
80 Hours is Max for EPSL. [Questions 6 & 9]. Total number of hours for which an employee may receive Emergency Paid Sick Leave (EPSL) is capped at 80 hours over a 2 week period. For example, if an employee is scheduled to work 50 hours a week, she may take 50 hours of EPSL in the first work, but only 30 hours of EPSL in the second week.
Small Business Exemption. [Question 4]. A business with fewer than 50 employees does not have to provide child care-related EPSL or EFMLA if it would “jeopardize the viability of the business as a going concern.” As stated in the answer to question 4, the WHD expects to issue regulations in April to provide “more detail” on the criteria that will support this exemption. In other words, we do not currently have substantive guidance on this question.
Calculating Number of Employees. [Question 2]. A business with fewer than 500 employees is covered under the FFCRA (unless it qualifies for an exemption for having fewer than 50 employees). In making this determination, you should include employees on leave, temporary employees who are jointly employed by you and another employer, and day laborers supplied by a temporary agency. If two entities are found to be joint or integrated employers, all of their common employees must be counted in determining whether paid sick leave must be provided under the FFCRA.
Refundable Tax Credit. On a related topic, businesses will receive a refundable tax credit for the entire cost of these payments to eligible employees. To this end, the IRS and DOL published helpful information on the tax credit on Friday March 20. See link below.
https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus
In sum, the WHD will be publishing additional guidance and regulations in the coming days and weeks. Please let us know if you have questions or if we can assist you with compliance. Please also consult gentrylocke.com/coronavirus for additional information on the various laws and legal issues related to the COVID-19 pandemic.
Wednesday, March 25th, 2020
With multiple states adopting lockdown orders to combat the COVID-19 pandemic, construction projects are being impacted. Although many states, including Virginia, have considered the construction industry, construction material suppliers/retailers to be essential businesses that are not affected by lockdown or shelter in place orders, construction projects are being impacted, and COVID-19 lockdown related delays are all but inevitable. Recent reports suggest that the supply chains for construction materials have been impacted by COVID-19 lockdowns in multiple countries. See: https://archpaper.com/2020/03/coronavirus-construction-supply-chain/. Corona virus related lockdowns are resulting in closed factories, shipping delays, and unavailability of workers in both the factory and in the field. A recent AGC of America survey revealed that 28% of respondents have halted or delayed project work due to the COVID-19 pandemic.
With substantial delay related costs on the line, now is the time to carefully read your contracts and subcontracts. You must determine the requirements for providing notice of delays, particularly those in any way related to the COVID-19 pandemic and state or federal orders that impact the availability of labor, materials, equipment, administrative staff, inspection staff, or even cash flow. When providing notice of anticipated or current delays, it is better to be proactive rather than reactive. Know the timing and content of delay notices required by your contracts. Trade organizations like the Associated General Contractors of Virginia are providing guidance and recommendations concerning the preparation of generic notice of potential COVID-19 related delays. We are counseling clients concerning the preparation of project and contract specific delay notices. Once you have provided the initial notice, make sure you provide updates and supporting information concerning the nature and duration of the delay, and the costs resulting from the delay.
Stay safe and healthy.
Wednesday, March 25th, 2020
We recently wrote about COVID-19 related delays, and providing notice of such delays, here. When reviewing the delay clauses in your contracts, you need to pay attention for the delaying events that are excusable, as well as those that are compensable. The Executive Director and Senior Counsel for ConsensusDocs (Brian Perlberg, Esq.) recently pointed out that Section 6.3.1(j) of the “ConsensusDocs 200 Owner/Constructor Agreement with General Conditions” specifically allows for delays that are “reasonably due to epidemics.” See: https://www.consensusdocs.org/consensusdocs-addresses-coronavirus-delay-risk-explicitly-other-standard-documents-do-not/?utm_source=informz&utm_medium=email&utm_campaign=informz_email&_zs=ICd0d1&_zl=n51d6
Mr. Perlberg also pointed out that although the AIA documents, and other standard construction contract forms, do not expressly mention epidemics or pandemics, the AIA A201 General Conditions has a catch all clause that allows for extension of time for “other causes that the Contractor asserts, and the Architect determines justify delay.”
Each of the standard construction contract forms, as well as forms prepared and provided by owners, prime contractors, and subcontractors, contains different language to address excusable or compensable project delays. We are counseling our clients concerning the project and contract specific delay issues arising out of the COVID-19 pandemic. Please let us know if we can help you with COVID-19 related project delays.
Stay safe and healthy out there.
Wednesday, March 25th, 2020
Written by Todd A. Leeson and Kelsey Martin, Gentry Locke Attorneys
March 25, 2020
Today (March 25, 2020) the Department of Labor Wage and Hour Division (WHD) released the Notice outlining employee rights under the Families First Coronavirus Response Act that covered employers are required to post. WHD also published a helpful “Frequently Asked Questions” (FAQ) document regarding the required posting. The Notice and FAQ can be found here (scroll down to Posters section).
https://www.dol.gov/agencies/whd/pandemic
The Notice must be posted on or before April 1, 2020, in a conspicuous place on the employer’s premises. With many employees teleworking during this pandemic, employers may satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website. (FAQ no. 1.)
The DOL states that employers that they are not required to provide this Notice to recently laid-off employees. The Notice must only be shared with current employees. (FAQ no. 3.)
Please continue to monitor the DOL’s website for future guidance. We will also do our best to update you on important developments: www.gentrylocke.com/coronavirus
Wednesday, March 25th, 2020
The following summary of the Department of Treasury’s initial guidance related to the Paycheck Protection Program should be read in connection with the following:
4/13/2020 Update: The Treasury Department Clarifies Confusion Concerning PPP Eligibility for Small Businesses
4/3/2020 Update: Interim Final Rule Paycheck Protection Program
4/1/2020 Update: Paycheck Protection Program Update
Initial Guidance and Form Application published by Department of Treasury and the Small Business Administration
Late on Tuesday, March 31, 2020, the Department of Treasury and the Small Business Administration issued initial guidance related to the Paycheck Protection Program. Included in this guidance is the form application for borrowers to use when applying for a covered loan under the Paycheck Protection Program.
When can borrowers begin to apply for Paycheck Protection Program covered loans?
The guidance from the Department of Treasury states that lenders participating in the Paycheck Protection Program will begin processing loan applications as soon as this Friday, April 3, 2020 (for small businesses and sole proprietorships), so time is of the essence for borrowers in preparing the application to submit for your lender’s review.
The Department of Treasury provides the following dates for application processing and lending, with the category of borrower affecting the start date:
- Small businesses and sole proprietorships can apply for and receive loans starting April 3, 2020.
- Independent contractors and self-employed individuals can apply for and receive loans starting April 10, 2020.
If you are an independent contractor or a self-employed individual, we recommend that you still reach out to your bank as soon as possible to provide the application and requested materials. We anticipate that the demand for covered loans under the Paycheck Protection Program will exceed the supply of funds allocated to these covered loan under the CARES Act.
Which lenders are participating in the Paycheck Protection Program?
Existing lenders who participate in the SBA 7(a) loan program are approved to lend under the Paycheck Protection Program. We anticipate additional lenders will be approved for participation in the program, however, the timing of this approval and enrollment process for additional lenders remains unclear.
If you are interested in applying for a covered loan, we recommend that you reach out to lenders you have relationships with as soon as possible to determine if they are currently enrolled as a lender in the SBA 7(a) loan program and if they are receiving applications for covered loans under the Paycheck Protection Program.
Did the initial guidance from the Department of Treasury and Small Business Administration clarify the terms outlined in the text of the CARES Act?
The initial guidance did provide some points of clarification:
- Average Monthly Payroll Measurement Period:
- Instead of the rolling 12 month time frame outlined in the CARES Act, the application and related guidance indicates employers will use your average monthly payroll for 2019 (with some variation for seasonal employers and new businesses).
- Employees with associated payroll costs of over $100,000 on an annualized basis:
- The application indicates that “costs” related to payroll are capped at $100,000 on an annualized basis for each employee. This is a variance from the text of the CARES Act, which indicated salary and wages were capped at $100,000 per employee, but did not indicate an overall employee payroll cost cap when considering benefits and other related expenses included in the definition of “payroll costs” under the program.
- What are the terms of a covered loan under the Paycheck Protection Program?
- The Department of Treasury states that all loan terms will be the same for every borrower who receives a covered loan.
- Interest Rate: 0.50% fixed rate
- Maturity Date: 2 years for any portion that is not forgiven. There is no prepayment penalty.
- Deferment: All payments are deferred for 6 months, however interest (at the rate of 0.50% will continue to accrue during this deferment period).
- Unsecured Loan: There are no guarantees required in connection with a covered loan and there is no collateral required for these loans. The business and certain other owners will be required to provide certain certifications in good faith when submitting the application.
- Terms of loan forgiveness:
- The initial guidance does indicate that “due to the likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.” This means that of the funds borrowed (2.5 x average monthly payroll costs = maximum loan amount), the government is anticipating that in order to receive full forgiveness of the principal amount, borrowers will have to demonstrate the use of at least 75% of the borrowed funds toward payroll costs, with up to 25% of the borrowed funds used for other covered overhead expenses (e.g. rent, mortgage interest, utilities)
Do we anticipate additional guidance?
As we are updating this news alert, the SBA has not issued regulation related to the Paycheck Protection Program and the associated loan forgiveness. Regulation may not be published prior to loans being made under this program. This is an unusual path for enacting a piece of legislation, but these are unusual times.
We will continue to monitor guidance and regulation from the Department of Treasury and the Small Business Administration, and will continue to update this landing page as additional guidance is received.
Monday, March 23rd, 2020
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