- March 24, 2020
Since the COVID-19 pandemic began having a widespread affect on American society, federal, state and local governments have enacted emergency regulations and programs to protect public health and the economy. On a daily basis, new, complex regulations and programs are being implemented (and will continue to be implemented) as government attempts to curtail this unprecedented crisis. Keeping up with all of the new requirements and opportunities can be dizzying, so consider the following suggestions.
- Control What You Can Control. Focus on the essential functions of your business: (1) providing a good service or product (if permitted); (2) collecting outstanding accounts receivable; (3) limiting payment to only essential bills in order to conserve cash; (4) proactively speaking with your landlord, lender and/or other creditors to abate rent/mortgage payments, extend lines of credits, and/or work out other arrangements; and (5) providing clear instructions to your employees regarding the terms and expectations of their employment. We have compiled a list of questions frequently asked by employers here: COVID-19 Employer Frequently Asked Questions
- Take Advantage of Opportunities, but Don't Plan for a Bailout. While local, state and federal governments have enacted and have proposed further programs to support the business community, these programs often have limited reach and strings attached. For example, the City of Chicago Small Business Resiliency Fund is only available to provide loans up to $50,000 for companies and non-profits with: (1) less than 50 employees; and (2) less than $3 Million in gross revenue in 2019. The U.S. Small Business Administration's Economic Injury Disaster Loans offer up to $2 Million in assistance at a 3.75% interest rate, but may require a personal guarantee and small businesses may not be eligible if credit is available elsewhere. We have written about these government programs enacted to date here: Governmental and Other Organizations Provide Support to Small Businesses Impacted by COVID-19. As with entering into any loan agreement, whether with a bank, government entity or other lender, it is crucial to discuss the terms with legal counsel to fully understand the long-term implications of obtaining any loan.
- Follow the Laws Effective Today. When the President, Governor, and/or Mayor announce a new initiative, prepare to act but wait for the ink to dry before acting. For example, the Families First Coronavirus Response Act (FFCRA) that passed the U.S. House of Representatives on Friday, March 13, 2020 had several different provisions than the final bill signed by President Trump five days later (which is the law employers will be required to follow effective April 1). See our summary of the FFCRA here: UPDATED WITH EASY TO FOLLOW FLOW CHARTS: Congress Passes Emergency Paid Sick Leave & FMLA Changes Applicable to Many Employers
In another example, Illinois Governor J.B. Pritzker issued seven (7) Executive Orders in seven (7) days between March 13 and March 20, 2020, including closing schools, restaurants, and bars, and then ordering all Illinois residents to stay-at-home with broad exceptions. Despite the general instruction to "Stay-at-home", many businesses are considered "essential" and permitted to continue to operate. Read more about Illinois' Stay-At-Home Order Here: Illinois Issues Shelter-In-Place Order. Finally, U.S. Treasury Secretary Mnuchin postponed the deadline to pay federal income taxes, and then, two days later, postponed the deadline to file federal income taxes as well. Update: Deadline to Pay and File Federal Taxes Extended 90 Days. Most states have yet to extend their deadlines, so make sure state income taxes are filed timely if states don't act.
- Understand Your Contracts and Insurance Policies. It is crucial to understand your contractual obligations to customers, vendors, suppliers, partners and employees. It is important to determine whether you'll be held to certain obligations which may be impossible and/or financially harmful given the circumstances, or whether a force majeure contractual provision or common law defense may excuse your performance, as we have discussed here: Force Majeure" Clause or Other Legal Defenses May Excuse Contractual Obligations Due to COVID-19
Additionally, a prompt review of your insurance policies is important to determine whether any business interruption coverage is available, as discussed here: Business Interruption Insurance Coverage For COVID-19 Losses
These are four general suggestions to help focus on the issues at hand. Contact the attorneys are Burke, Warren, MacKay & Serritella, P.C. for guidance on how to address any of these issues.