Many have been left with more questions than answers following the announcement that there will be at least a $1 trillion stimulus package to help companies deal with forced business shutdowns due to the coronavirus pandemic.
While the U.S. Small Business Administration has released its Coronavirus (COVID-19): Small Business Guidance & Loan Resources, much needs to be decided when it comes to stopped work orders and handling related employee situations.
On April 7, the Accredited Snow Contractors Association (ASCA) sponsored a free webinar, “COVID-19: Real World Impact of Business Restrictions and Stimulus Package for Service Contractors” to discuss issues relevant to contractors in many industries.
The webinar was hosted by Josh Ferguson, ASCA’s legal counsel and partner at Freeman Mathis & Gary Attorneys at Law; and from Henry Dunn Insurance, Craig J. Clark, vice president/risk architect and Michele Vandernoth, commercial lines professional.
Essential Workers
With shelter-in-place orders varying throughout the country, many businesses are left wondering, “Am I an essential business?” The rules are vague when it comes to specific jobs, such as landscape architects, snow and ice contractors or pavement maintenance.
Ferguson suggested contractors check with their industry association groups, state agricultural and horticultural departments for guidance on the issue.
“Our most common question is can we still operate? It’s been mostly a grey area for people,” he says. “The question is do they fit in with any of those definitions of an essential business.”
For companies not on states’ short lists of essential workers, there are steps to take to potentially stay operational. For example, Ferguson says, governors and state agencies my issue industry-specific bulletins that include your work. In some states, the governor can be petitioned to add certain businesses to the essential list. Also, a company can be considered essential if it provides a good or service for a business that has already been deemed essential.
CARES Act Stimulus Package
The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed on March 27, includes several programs including the Paycheck Protection Program, Economic Injury Disaster Loans and Emergency Grants, as well as Small Business Debt Relief.
For more information, the SBA and U.S. Department of Treasury have created a guide to understanding the CARES Act, based on a company’s needs. According to Ferguson, the package potentially includes:
- SBA loans
- Additional assistance to mid-sized businesses
- Unemployment benefit expansion
- Changes to retirement fund distributions
SBA loans through the CARES Act are available to businesses, nonprofits and veterans’ organizations with fewer than 500 employees. Although those loans may also be available for businesses with more than 500 employees, if those companies have multiple locations, Ferguson says.
Loans of up to 250% of the average monthly payroll costs over the past year, up to $10 million, for COVID-19-caused harm that takes place between February 15 to June 30, 2020, are available to small businesses. Loans can be for up to 10 years, at a maximum of 4% interest and six-month payment deferral. There are complex rules for each aspect of the loans, so it’s important to have a knowledgeable person to help with stimulus paperwork, Clark says.
“The government claims it only takes eight minutes to fill out the paperwork, but it can take eight to nine hours to put together all the paperwork needed to fill it out,” he says. “Contractors with small banks have had a hard time getting someone on the phone to get questions answered.”
Loan Forgiveness
It’s important to note that loans may be fully or partially forgiven if employers continue paying employees at normal levels during the eight weeks following the origination of the loan, Clark says. Forgiven amounts include payroll costs, mortgage interest, rent and utility payments.
The amount forgiven will be less if the number of full-time employees during the eight-week period is less than the same period in 2019.
Insurance Claims
Many contractors are asking whether they will be liable for unfinished work due to COVID-19. Clark suggested contractors review their contractors and speak with their insurance brokers to find out if the inability to finish work will result in a potential claim.
“There’s nothing in the policy that addresses pandemic, but there is language that addresses a virus,” Vandernoth says of some insurance policies.
They also suggest that contractors notify insurance companies of a potential claim for a loss of business. Whether that claim is filed later, does not have to be determined now. And make sure to document everything, Clark says.
“Go back and check your contracts and speak with counsel,” he says.
Vandernoth noted that contractors who intend on reducing their fleet to save on insurance costs still need to file for registration tags and to be careful when deciding to reduce insurance risk.
“Talk to your insurance brokers about whether to dial down your insurance risk in order to reduce future premiums,” Vandernoth says.
Upcoming Webinars
Several organizations are hosting webinars to help contractors navigate COVID-19 and the related stimulus packages. Freeman Mathis & Gary Attorneys at Law will be putting on several more, including:
- New CARES ACT in plain English, 3:30 p.m. EST, April 9
- A Guide to Understanding an Employer’s Obligations Under the Families First Coronavirus Response Act, 1 p.m. April 13
For more information about those webinars, visit the law firm’s Coronavirus Resource Center.
