Monday, March 23rd, 2020
In the short time since the World Health Organization’s naming of the COVID-19 virus and its declaration of the spread of the virus as a pandemic, the social and economic systems that Americans have come to know have experienced seismic changes. For the foreseeable future, those swift changes are and will continue to affect how financial institutions and other business entities that extend credit to their customers conduct their business. It is important that those changes are met with equally swift recognition by each financial institution and business entity of how the changes are affecting their business and with the development and implementation of the appropriate business responses to those changes.
Financial Institutions
On March 13, 2020, the Federal Deposit Insurance Corporation (“FDIC”) issued a statement entitled Frequently Asked Questions for Financial Institutions Affected by the Coronavirus Disease 2019 (Referred to as COVID-19) (the “FAQ”). This statement provides significant guidance what the FDIC views as appropriate responses to both credit and operating issues arising as a result of the pandemic. The FAQ may be viewed at https://www.fdic.gov/coronavirus/index.html.
It is recommended that financial institutions review the FAQ and use it as a guideline for considering the following recommended actions: (a) the development of a plan of action to identify and address the instances in which a credit becomes non-performing as the result of the effect of COVID-19 on the borrower’s business operations and ability to service its obligations to the financial institution, (b) the review and the approval of the plan of action by the financial institution’s governing board, and (c) the implementation of the approved plan of action in a timely manner.
In this evolving landscape, an essential element of any plan of action must be the requirement of obtaining documentation on an ongoing basis that is sufficient to identify and distinguish a non-performing loan that is or would become non-performing regardless of the effects of the COVID-19 pandemic on the borrower’s ability to perform from those loans that have or will become non-performing as a direct result of the effects of the COVID-19 pandemic on the borrower’s ability to perform. This documentation should include both past and current financial information on an on-going basis and when applicable, appraisals of the current value of any assets that serve as collateral for the borrower’s obligations.
A second essential element is the preparation of and execution by each affected borrower of an agreement that sets forth the terms of any suspension of performance by the borrower and/or any forbearance by the financial institution of its rights under the loan documents. Such agreements serve at least three purposes: (i) documentation for future regulatory review of the non-performing loan, (ii) the specification of the period and terms of any suspension of the borrower’s obligations and the financial institution’s forbearance, and (iii) the acknowledgement by the borrower of the amount of indebtedness, the enforceability of loan documents, and the waiver of claims against the financial institution and defenses against the financial institution’s claims related to the loan.
Other businesses extending credit
Manufacturers, suppliers, and other businesses who sell or provide services on credit face similar issues and risks as financial institutions and a similar approach to both existing and future credit is productive in the reduction of risks. For example, the business that extends credit or sells product or services other than prepayment or C.O.D. should develop a plan of action to identify and address the customer credit that has or will become non-performing as the result of the effect of COVID-19 on the customer’s business operations and its ability to service its obligations to the business, (b) the review and the approval of the plan of action by the company’s governing board or executive committee and (c) the implementation of the approved plan of action in a timely manner.
As with financial institutions, the business extending credit should obtain current and ongoing financial information from its customers sufficient to allow the business to evaluate the credit risk of the customer and to determine whether the existing credit should be continued, modified or curtailed.
Businesses extending credit for the sale of goods should also evaluate and consider modification of the terms of any credit agreement, invoices, bills of lading and other transactional documents. Possible changes could include (i) specifying the laws of a particular jurisdiction govern the sales transaction and (ii) specifying when title to the goods transfer from seller to buyer, in order to obtain the maximum protection under the Uniform Commercial Code.
Conclusion
Both financial institutions and businesses extending credit should take into account the potential for one or more of their customers commencing a case under the United States Bankruptcy Code. The bankruptcy laws provide both some risks and protections to creditors. For example, section 546(c) of the Bankruptcy Code, in some circumstances, provides the right for a seller of goods to reclaim goods sold in the ordinary course of business in the 45 days before the filing of a bankruptcy petition. On the other hand, payments made within 90 days of the date of the filing of a petition may be recoverable by the debtor in a bankruptcy case, but that recovery is subject to several defenses, including providing “new value” after a payment and payments made in the ordinary course of business. Depending on the potential risk of a customer filing a bankruptcy petition, financial institutions and businesses extending credit should tailor their responses to the effects of the current crisis with those risks in mind.
Monday, March 23rd, 2020
Virginia Governor Ralph Northam has continued to provide near daily updates on Virginia’s response to the coronavirus, with the latest action coming in a sweeping Executive Order on March 23 strictly curtailing retail activity.
Executive Order #53, in addition to closing all K-12 public schools for the remainder of the year, bans all gatherings of more than 10 people, strictly limits restaurants and bars to carry-out or delivery only, closes a number of “non-essential” businesses, and places further restrictions on other retail establishments.
The order is effective for the next 30 days, until April 23, 2020.
But perhaps more importantly is what the order does not cover. The order only applies to “retail” and other businesses that are public-facing. The Executive Order explicitly says it does not apply to professional services. Similarly, the construction industry is not included and may continue to work. A number of other industries are also not impacted.
Background
As we shared last week, the state government has broad authority under the state Constitution and state statute during times of natural disasters and other emergencies. Our previous post covers in detail the Governor’s authority under Article V of the Constitution and Title 44 of the Code of Virginia.
Prior to this order, the Governor and other state bodies – including the Supreme Court of Virginia and the State Corporation Commission – had taken several steps to “slow the spread” of the coronavirus. This included temporarily closing schools, closing state offices and services like the DMV, and limiting the amount of people in a retail establishment at one time.
Executive Order 53
The full text of Executive Order 53 is available here, and the Governor’s office has provided a detailed Frequently Asked Questions document that provides more information.
In summary, the Governor’s actions include:
- Closing K-12 schools for the remainder of the school year
- Banning all gatherings of more than 10 people statewide
- Closing all “recreation and entertainment” businesses
- Limiting all restaurants, bars, and food establishments to offering carry-out or delivery only
- Requiring all “non-essential” retail businesses to limit the number of patrons to no more than 10, and require they always practice social distancing
The Executive Order allows all “essential” businesses to remain open but requires them to enforce social distancing when possible and to enhance sanitization practices. Essential businesses include:
- Grocery stores, pharmacies, and other retailers that sell food and beverage products or pharmacy products, including dollar stores, and department stores with grocery or pharmacy operations;
- Medical, laboratory, and vision supply retailers;
- Electronic retailers that sell or service cell phones, computers, tablets, and other communications technology;
- Automotive parts, accessories, and tire retailers as well as automotive repair facilities;
- Home improvement, hardware, building material, and building supply retailers;
- Lawn and garden equipment retailers;
- Beer, wine, and liquor stores;
- Retail functions of gas stations and convenience stores;
- Retail located within healthcare facilities;
- Banks and other financial institutions with retail functions;
- Pet stores and feed stores;
- Printing and office supply stores; and
- Laundromats and dry cleaners.
Industries Not Impacted
Notably, a number of businesses and industries are not affected by the Governor’s order. The order only applies to retail and other public-facing businesses.
During the Governor’s press conference, a member of the media specifically asked if the construction industry will be affected by this order, and a member of the administration confirmed that the construction industry is not affected by this order.
The order expressly states that “home improvement, hardware, building material, and building supply retailers” are essential retailers that may remain open during normal business hours, although these business “must, to the extent possible, adhere to social distancing recommendations, enhanced sanitizing practices on common surfaces, and other appropriate workplace guidance from state and federal authorities.”
The order also allows professional services to remain open, but does say that “professional businesses not listed above must utilize telework as much as possible. Where telework is not feasible, such businesses must adhere to social distancing recommendations, enhanced sanitizing procedures, and apply relevant workplace guidance from state and federal authorities.”
Manufacturing, energy, transportation, warehousing and distribution companies are also not affected.
If you have questions about whether or not this order impacts your business, please call Gentry Locke immediately at 866.983.0866.
Future Guidance
The Governor’s office said it would update this order as necessary, and that may include changing what is considered essential and non-essential. Virginia is also expected to provide additional guidance on the closure of K-12 public schools.
Virginia’s actions-to-date are not as strict as some other states, including New York, California, and New Jersey, which have all issued stronger orders, often referred to as “shelter in place” or “stay at home” orders.
Gentry Locke’s Government and Regulatory Affairs team is closely monitoring the developments related to state government as part of Gentry Locke’s coronavirus response team. If you have questions about how your business or organization may be affected by state action, please call us directly at 866.983.0866.
Friday, March 20th, 2020
U.S. SBA Economic Injury Disaster Loan (EIDL) Summary for Small Businesses and Nonprofits
The public health emergency resulting from the Coronavirus/COVID-19 pandemic is causing unprecedented challenges to small businesses in many industries. To assist small businesses suffering substantial economic injury as a result of the Coronavirus pandemic, the U.S. SBA is offering small businesses operating in certain designated states, including Virginia, low-interest federal disaster loans for working capital, under the Coronavirus Preparedness and Response Supplemental Appropriations Act recently passed by the U.S. Congress and signed into law by the President.
In response to a request from Virginia Governor Ralph Northam, the U.S. SBA issued an Economic Injury Disaster Loan assistance declaration as to all counties and cities in Virginia, on March 19, 2020. This EIDL assistance declaration makes loans available statewide to small businesses and private, non-profit organizations to help address economic injury to such small businesses resulting from the Coronavirus/COVID-19 pandemic; provided that such businesses and non-profit organizations have suffered a substantial economic injury as a result of a temporary reduction in revenue caused by the Coronavirus/COVID-19 pandemic.
Although the traditional essential elements of eligibility for the EIDL program are a small business’s inability to obtain credit through the private market and the small business’s suffering actual “substantial economic injury” that would qualify it for an EIDL loan, at present, those eligibility requirements have been relaxed by the federal government. Thus, small businesses and non-profits negatively affected by the Coronavirus/COVID-19 pandemic disaster are not required pursue alternate sources of credit through contacts with traditional private lenders, or exhaust available credit before applying for an EIDL. Instead, for the foreseeable future Small Businesses adversely affected by the Coronavirus/COVID-19 pandemic are encouraged to apply for private loans from traditional lending sources, like banks and credit unions, and EIDL loans from the U.S. SBA at the same time.
Friday, March 20th, 2020
The Virginia Employment Commission (VEC) recently issued new guidance regarding the availability of unemployment benefits during the COVID-19 pandemic. As businesses continue to face the possibility of limiting hours and staff, employers may be able to structure furloughs and reduced hours to maximize unemployment benefits to employees.
Employees can file for unemployment compensation benefits due to reduction in hours or loss of employment. For claims related to a reduction of hours, the claimant’s gross earnings for the week must be less than the weekly VEC benefit amount. The maximum weekly VEC benefit is $378. Depending on an employee’s earnings, the unemployment benefit amount may range from a minimum of $60 per week for 12 weeks to a maximum of $378 a week for 26 weeks. It is unclear at this time whether federal legislation will pass that increase the amount or duration of these benefits.
In response to the COVID-19 pandemic, Governor Northam suspended the need to comply with a one week waiting period as well as the requirement for the claimant to submit evidence of a weekly job search for all claims filed on or after March 15, 2020. These changes will help ensure that laid off employees will be eligible to receive unemployment benefits sooner after filing a claim and will not have to worry about attempting a job search during the COVID-19 pandemic.
The VEC has also expanded the way that claims for benefits can be filed to minimize the need for in-person filing.
Employers and effected employees should regularly check the VEC’s website for updates on any changes that may occur on how claims are being processed (https://www.vec.virginia.gov/qa-coronavirus).
Please contact our Employment Team if you have any questions. Current as of March 20, 2020
Friday, March 20th, 2020
The Treasury Department and Internal Revenue Service recently announced that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020.
All the major news outlets are reporting about this COVID-19 emergency extension.
However, Virginians should not be lulled into complacency. Although Virginia has granted a one-month extension for payment of individual and corporate state income taxes, these tax returns are still due May 1. Because the calculation of Virginia income tax is based largely on the computations of federal tax items, it would be impractical to file Virginia tax returns by the May 1st deadline without also filing your federal tax returns by that date. For Virginians, this effectively reduces the 90-day federal extension to a 15-day extension.
In the event that the COVID-19 crisis (or other circumstances) significantly delays your ability to file your federal tax return, the prudent course of action is to file for an automatic extension of your federal and Virginia tax returns.
Thursday, March 19th, 2020
Among the issues employers need to be considering is what steps need to be taken in advance of learning that an infected employee has been in the workplace, and also what its protocols will be if an infected employee has been in the workplace for a period of time prior to discovery.
The most current guidance on how to clean and disinfect the workplace issued by the Center for Disease Control and Prevention (CDC) was issued April 1, 2020. All employers are strongly encouraged to check this website periodically to make sure that you are following the most current guidance. The CDC has also posted a quick reference document: Cleaning And Disinfecting Your Facility.
As has been widely noted, there is still much to be learned about the causes for and how the coronavirus disease 2019 (COVID-19) spreads. Transmission of the virus may well occur from surfaces contaminated with the virus. It is unclear how long the virus may remain viable on various surfaces.
The CDC Guidance lays out in detail the steps that should be taken to properly clean and then disinfect potentially contaminated surfaces. There are, however, other considerations for employers as noted:
- Employers need to make sure that they are complying with all federal, state and local health protocols and guidelines, including those involving the identification of new potential cases of COVID-19.
- Employers should educate those employees whose duties include cleaning, laundry and trash pickup to recognize the symptoms of COVID-19 and to provide instructions on what to do if they develop symptoms. At a minimum, staff should notify their supervisor and ensure that the local health department is notified if they develop symptoms of COVID-19. The Health Department will then provide guidance on what actions need to be taken.
- Employers should also develop policies and guidelines for worker protection and provide on-site training to all cleaning crews prior to providing cleaning tasks. Training should include when to use Personal Protective Equipment (PPE), what PPE is necessary, how to properly put on, use and take off PPE, and how to properly dispose of the PPE.
- The CDC has said that the PPE required for cleaning staff in this context are disposable gloves and gowns, which should be worn for all tasks in the cleaning process, including handling trash.
- Gloves and gowns should be compatible with the disinfecting products being used.
- Additional PPE may be required based on the cleaning/disinfecting products being used whether there is a risk of splash.
- Gloves and gowns should be removed carefully to avoid contamination of the wearer and surrounding area.
- Upon removal of the gloves the cleaning crew should be sure to thoroughly wash and clean their hands carefully.
- Employers must ensure that employees are trained on the hazards of the cleaning chemicals used in accordance with OSHA’s Hazardous Communication standards (29 CFR 1910.1200).
- Additionally, certain employers will need to ensure compliance with OSHA standards for handling Bloodborne Pathogens (29 CFR 1910.1030, including the proper disposal of regulated waste and PPE) (29 CFR 1910.132).
For further questions regarding steps to be taken, be sure to consult the most current guidance from the CDC, and state and local health departments.
Wednesday, March 18th, 2020
Many people who are accustomed to a traditional office environment are finding themselves transitioning to work from home during the COVID-19 pandemic. Hackers and scammers are taking full advantage of this and are targeting their phishing attacks to exploit current events. An email from your supervisor or executive two weeks ago asking: “Are you in the office? Can you do me a quick favor?” may have been easily dismissed and deleted, especially if the alleged sender works two doors down and you just saw him or her walk by with a cup of coffee.
Now imagine you are working from home or you are part of a small number of employees who are continuing operations in the office, all the while being encouraged to keep a distance from others. You receive an email: “Hi, I am stuck and can’t access our system. I am working with IT, but it could take a while, can you do me a quick favor?” You want to immediately and automatically say yes, but take a minute to evaluate the email.
- Treat every email like it could be from someone other than the alleged sender.
- Check the sender’s email address and hover over any hyperlinks checking for typos and if the link is to a different website than the link shown in the actual email.
- What about context and tone? Does this communication have the “voice” of the sender, and would you be the most likely person he or she would contact with this request?
- Do not click on links, send information, or take action without doing your due diligence. This may require that you reach out to the sender by phone to confirm.
Wednesday, March 18th, 2020
As the number of confirmed coronavirus cases continues to grow in Virginia, state leaders are taking several steps to slow the spread of the virus and protect the population at large. Here is what businesses and individuals need to know about the state government’s response to the emerging and evolving threat that is COVID-19.
State Emergency Authority
While the federal government’s police powers are prohibited by the construction of the Constitution, which grants the federal government enumerated powers, the police powers of the states are more implied. Like most states, Virginia’s constitution and statutes grant the governor broad discretionary authority during times of disaster and emergency.
Article V of the Virginia Constitution vests all executive power in the governor and establishes his authority as “Commander-in-Chief” of the armed forces, with power to “repel invasion, suppress insurrection, and enforce the execution of the laws.”
The Code of Virginia specifically sets out the Commonwealth’s Military & Emergency laws in Title 44, a wide-ranging section of code that touches on everything from the physical defense of the Commonwealth to natural disasters and emergency services.
Title 44 specifically declares that the governor’s Executive Orders have the force of law and are punishable as a Class 1 misdemeanor.
Emergency authority is also littered throughout other places in the Commonwealth’s laws, granting emergency authority to regulatory bodies, state agency directors, and other state boards and commissions. This includes, specifically, authority to issue public health orders.
Finally, the state also has a detailed document entitled the “Commonwealth of Virginia Emergency Operations Plan” that sets out the delegation of authority and the state’s response to specific disaster scenarios.
Actions to Date
Virginia leaders have exercised their broad authority on a slower pace than other states thus far, but the actions ramped up in recent days.
Governor Northam issued an Executive Order declaring a state of emergency on March 12. EO-51 reads in part:
Therefore, on this date, March 12, 2020, I declare that a state of emergency exists in the Commonwealth of Virginia to continue to prepare and coordinate our response to the potential spread of COVID-19, a communicable disease of public health threat. The anticipated effects of COVID-19 constitute a disaster as described in § 44-146.16 of the Code of Virginia (Code). By virtue of the authority vested in me by Article V, Section 7 of the Constitution of Virginia, by §§ 44-146.17 and 44-75.1 of the Code, as Governor and Director of Emergency Management and Commander-in-Chief of the Commonwealth’s armed forces, I proclaim a state of emergency. Accordingly, I direct state and local governments to render appropriate assistance to prepare for this event, to alleviate any conditions resulting from the situation, and to implement recovery and mitigation operations and activities so as to return impacted areas to pre-event conditions as much as possible. Emergency services shall be conducted in accordance with § 44-146.13 et seq. of the Code.
On March 13, the governor ordered all public schools to close for two weeks, saying “I recognize this will pose a hardship on many families, but closing our schools for two weeks will not only give our staff time to clean and disinfect school facilities, it will help slow the spread of this virus. This is a fluid and fast-changing situation.”
On March 17, Governor Northam issued an executive directive closing all offices of the Department of Motor Vehicles for 14 days. The governor also ordered the extension of all driver’s license expiration dates and vehicle registration deadlines.
Perhaps the most far reaching order also came on March 17, as Governor Northam issued an “Public Health Emergency Order” to enforce a limitation on the number of people who could gather at restaurants, bars, and theaters.
Previously, the governor had “encouraged” people to limit gatherings to no more than 50 people, but in this order, the governor lowered the number to 10 and gave the public health commissioner and law enforcement authority to enforce the limitation. Under this order, the state health commissioner may suspend operations at any establishment violating the order. Violation of the order is also punishable as anything from a Class 1 to Class 3 misdemeanor.
Other State Government Actions
The action of state government in response to the coronavirus has not been limited to just the governor.
The State Corporation Commission also acted this week, issuing an order in response to a motion from Attorney General Mark Herring that prohibits public utilities from disconnecting electric, natural gas, or water services for 60 days.
The Supreme Court of Virginia issued a “judicial emergency” order on March 16 suspending all “non-essential” and “non-emergency” court proceedings in the Commonwealth. The order, signed by Chief Justice Don Lemons, directed the court to continue all proceedings, except for “emergency matters, including but not limited to, quarantine or isolation matters, arraignments, bail reviews, protective order cases, emergency child custody or protection cases, and civil commitment hearings.”
The Days Ahead
Undoubtedly the response and actions of state government officials will continue to evolve in the days ahead. As the number of cases continues to grow and the spread of the virus multiplies, state action may become more drastic.
Gentry Locke’s Government and Regulatory Affairs team is closely monitoring the developments related to state government as part of Gentry Locke’s coronavirus response team. If you have questions about how your business or organization may be affected by state action, please call us directly at 866.983.0866.
Wednesday, March 18th, 2020
On March 18, 2020, the Virginia Department of Health (“VDH”) updated its guidance for the suggested time period and circumstances for individuals to discontinue isolation after having confirmed or suspected COVID-19. Unlike the flu where the VDH suggested that individuals could discontinue isolation and return to work after a 24-hour period without a fever, the VDH recommends a longer fever-free period of time as well as additional symptom-free conditions.
The VDH provides the following guidance:
If you are sick and have confirmed or suspected COVID-19 and have been directed to isolate at home, you can stop home isolation under the following conditions:
- You have had no fever for at least 72 hours (that is three full days of no fever without the use of medicine that reduces fevers) AND
- Other symptoms have improved (for example, when your cough or shortness of breath have improved) AND
- At least 7 days have passed since your symptoms first appeared.
(see https://www.vdh.virginia.gov/coronavirus/coronavirus/what-to-do-if-you-have-confirmed-or-suspected-coronavirus-disease-covid-19/).
As more information is learned about COVID-19, this guidance is subject to change so it is important for employers to regularly check VDH’s website for updates.
Tuesday, March 17th, 2020
By Kirk Sosebee, Brett Marston, and Spencer Wiegard
In this difficult time for employers, OSHA has placed another new requirement on their plate. Not only are employers encouraged to take extra steps and precautions to help protect their employees’ health and safety, new guidance from OSHA requires employers to record, and in some cases report, instances of coronavirus that are contracted by their employees on the jobsite.
Employers have a general duty to record and report certain work-related injuries and illnesses to OSHA. Unlike the common cold or flu, which are excluded from OSHA’s recording and reporting requirements, OSHA is considering COVID-19 to be an “illness” that must be recorded by employees if it is “work-related,” just like other workplace injuries and illnesses. Work-related in this context means contracted as part of the employees’ work, while they were on the jobsite. If an employee contracts COVID-19 from someplace other than the workplace and exhibits symptoms while they are at work, it would not be considered work-related and would not have to be recorded. Also, only confirmed cases of COVID-19 need be recorded, not suspected cases. In addition to recording these cases, employers are also required to report them to OSHA if they result in in-patient hospitalization within 24 hours or in a fatality within 30 days of the work-related exposure to COVID-19.
Bottom line: an employer should record if an employee has a confirmed case of COVID-19 that he or she contracted in the workplace, and also report to OSHA if the COVID-19 illness results in death within 30 days or in-patient hospitalization within 24 hours.
New guidance from the Department of Labor:
1. A new OSHA chart outlines safety steps to take based on worker exposure risk by industry.
2. Workers have the right to report an unsafe workplace during the COVID-19 pandemic.
3. Three new animated videos provide quick tips on social distancing, disinfecting workplaces, and industry risk factors to keep workers safe from COVID-19.
4. Reminder: Employers must post their Summary of Work-Related Injuries and Illnesses.
Further reading:
Other OSHA standards that may apply to COVID-19:
- OSHA’s Personal Protective Equipment (PPE) standards (in general industry, 29 CFR 1910 Subpart I), which require using gloves, eye and face protection, and respiratory protection.
- When respirators are necessary to protect workers, employers must implement a comprehensive respiratory protection program in accordance with the Respiratory Protection standard (29 CFR 1910.134).
- OSHA has issued temporary guidance related to enforcement of respirator annual fit-testing requirements for healthcare.
- The General Duty Clause, Section 5(a)(1) of the Occupational Safety and Health (OSH) Act of 1970, 29 USC 654(a)(1), which requires employers to furnish to each worker “employment and a place of employment, which are free from recognized hazards that are causing or are likely to cause death or serious physical harm.
OSHA has also published a general “Guidance on Preparing Workplaces for COVID-19,” available at https://www.osha.gov/Publications/OSHA3990.pdf
OSHA’s dedicated COVID-19 webpage: https://www.osha.gov/SLTC/covid-19/standards.html
