In the United States, temperature and other symptom checks would normally constitute an overly broad medical exam under the Americans with Disabilities Act, as well as various state non-discrimination laws. However, in light of the COVID-19 pandemic, with CDC and other guidance, the EEOC has provided guidance permitting employers to measure employees’ body temperature and to ask about other COVID-19 symptoms. Employers that choose to measure employee body temperatures and monitor for other symptoms should:
Establish a consistent process for conducting such screening and excluding symptomatic individuals to promote workplace safety;
Adopt measures to mitigate the risk of claims under laws related to discrimination, wage payment, leaves of absence or medical privacy; and
New Safe Harbor from the FTE Reduction Rule: In the latest IFR, the SBA discussed the new safe harbors to the FTE reduction rule in a manner that appears to be very borrower friendly. As you know, PPP loan forgiveness is reduced if you reduce your FTE count during your covered period (when compared to your reference period). The second of the two new safe harbors allows companies to ignore any FTE reductions after February 15, 2020 if they relate to an “inability to return to the same level of business activity” before February 15, 2020 as a result of guidance issued by a variety of agencies (including state and local government) that inhibits such business activity. Examples are closing non-essential businesses and reductions in businesses volume due to social distancing or sanitation guidelines, but the safe harbor can apply to a much broader set of circumstances.
Withum has included below both an excerpt from the IFR as well as an example provided in the IFR. This safe harbor does not require the business interruption to cover the entire covered period, meaning that borrowers just need to establish that a disruption occurred for some meaningful period of time during the covered period. It also does not narrowly define a disruption, allowing borrowers to potentially rely on a broad variety of different “disruptions” caused by the requirements established by these agencies. Therefore Withum believes this new safe harbor has broad applicability, including in the auto, restaurant and hospitality industries, for example, as well as in a variety of professional service industries like law and medicine.
Withum believes the safe harbor is extremely broad, and unless it is pared back by the SBA, a large number of borrowers should be able to avail themselves of it. If you have an FTE reduction during your covered period, Withum recommends that you closely review this safe harbor from the PPP Flexibility Act, as interpreted by the new IFR, to see if you can fall within it. The forgiveness application requires that you maintain documentation of the business disruption that took place and what requirement or guidance created it.
Excerpt from IFR:
Borrowers are also exempted from the loan forgiveness reduction arising from a reduction in the number of FTE employees during the covered period if the borrower is able to document in good faith an inability to return to the same level of business activity as the borrower was operating at before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention (CDC), or the Occupational Safety and Health Administration related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19 (COVID Requirements or Guidance).
The Administrator, in consultation with the Secretary, is interpreting the above statutory exemption to include both direct and indirect compliance with COVID Requirements or Guidance, because a significant amount of the reduction in business activity stemming from COVID Requirements or Guidance is the result of state and local government shutdown orders that are based in part on guidance from the three federal agencies.
Example provided in the IFR:
A PPP borrower is in the business of selling beauty products both online and at its physical store. During the covered period, the local government where the borrower’s store is located orders all non-essential businesses, including the borrower’s business, to shut down their stores, based in part on COVID-19 guidance issued by the CDC in March 2020. Because the borrower’s business activity during the covered period was reduced compared to its activity before February 15, 2020 due to compliance with COVID Requirements or Guidance, the borrower satisfies the Flexibility Act’s exemption and will not have its forgiveness amount reduced because of a reduction in FTEs during the covered period, if the borrower in good faith maintains records regarding the reduction in business activity and the local government’s shutdown orders that reference a COVID Requirement or Guidance as described above.
Reminder Section: (what should I be doing):
Call your payroll company about claiming the payroll tax deferrals and employee retention credits that were made available in the CARES Act.
Talk to your payroll company about the qualified sick/family leave legislation (FFCRA, passed prior to the CAREs Act).
Consider speaking with your lender to discuss changes to terms of existing debt facilities. The banking system remains strong.
If you have already applied for the PPP, start forecasting how you intend to spend the funds and how to qualify for the highest amount of forgiveness possible.
Alston & Bird have released their June 25 COVID-19 update, including the latest news on emergency funding, administrative and regulatory actions, workplace and home issues, and many other topics, as well as to links to all their past updates.
MCAA members are using new solutions, teamwork and creative problem-solving to approach fast-track COVID-19 projects in their communities. W.L. Gary Company, Inc., is just one example. The MCA of Metropolitan Washington, Inc. member played a role in expanding patient care facilities in Maryland.
Transforming a Parking Lot Into Critical Care Facility
W.L. Gary Company assisted in the installation of a STAAT ModTM Critical Care Unit in the parking lot of the Adventist Healthcare – Fort Washington Facility in Fort Washington, MD.
To activate the modular solution, sewer and water lines from the existing utilities had to be connected to the STAAT ModTM unit. The scope of work included excavating two lines that were connected to the utilities, running new four-inch lines to a point underneath the STAAT ModTM unit, and then testing, inspecting, and backfilling the lines.
Working through challenging weather and safety conditions, the W.L. Gary Company, Inc. team, led by Foreman Daniel Valdez, completed the work in less than a week.
Converting Office Space Into Patient Rooms
W.L. Gary Company, Inc. also collaborated to transform four floors of hospital office space into additional patient rooms. The team spent and a half week on construction per floor, facing several challenges along the way.
One floor’s entire medical gas system was compromised and needed to be replaced. The team prepared new medical gas lines and replaced all of the outlets in one week, resulting in over 30 patient beds.
The building’s plumbing included galvanized pipe and cast-iron drain lines that needed to be cleared and repaired to avoid future issues with the building’s restrooms.
Service elevators were shared with hospital staff and patients. To mitigate the possibility of contracting COVID-19, W.L. Gary Company, Inc. followed appropriate Personal Protective Equipment (PPE) and safety precautions. Team members avoided areas with coronavirus-positive patients, and an air-scrubber was installed to avoid any cross-contamination.
Steamfitters Local Union 602 member Travis Jackson, a foreman and service technician for W. L. Gary Company, Inc., juggled manpower, supplies, client expectations, and an accelerated schedule to make the project a success. Challenges were addressed as they arose, with all parties collaborating to create effective solutions for each.
Efforts like this one and those of many other MCAA members showcase the importance of teamwork in helping our communities cope with the impact of the COVID-19 pandemic. We’re all in this together.
With the nation’s attention towards occupational safety and health on COVID-19, it’s important to remember and address the other potential hazards. One of those potential hazards is excavation cave-ins, which frequently result in fatalities without the appropriate protective systems in place.
MCAA and safety partner CNA have several excavation safety resources that are readily available to you.
MCAA’s excavation safety resources include a worker safety training video, pocket guide, training documentation sheet, 20-question multiple choice test with answer key, and an easily tailorable model excavation safety program. CNA’s excavation safety resources include damage prevention guidelines for underground utilities and a trench inspection checklist.
The Critical Path Method (CPM) schedule is an essential management tool for all construction team members when it comes to completing an on-time and financially successful project. In this webinar, John Koontz discusses how, even in the absence of receiving access to the master schedule, a contractor can provide notice and quantify delay impacts, so as not to waive important contractual rights. Providing notice and quantifying delay are just some of the issues that make obtaining the prime contractor’s native CPM scheduling files so important. Is it always easy? Or even possible? Maybe not… but John Koontz discusses best practices for how to get the GC’s CPM schedule, and even what to do if you can’t. As an added bonus, John is joined by the author of MCAA’s 2020 Change Order Productivity Primer, Paul Stynchcomb, to discuss the relationship between the Prime’s CPM Schedule and impact quantification on your end, along with important concepts relating to CPM schedule review.
MCAA’s Virtual Trade Show connects our contractor members with the members of MCAA’s Manufacturer/Supplier Council.
Participating companies highlight and link to new products, product lines, services, solutions or web pages of particular interest. Here are just a few of the recent additions:
Tyler Pipe & Coupling Tyler Pipe & Coupling produces quality cast iron soil pipe and fittings and no-hub couplings in the heartland of America. Visit our website to see how quality cast iron is made right here in the USA.
AB&I Foundry AB&I Foundry manufactures cast iron soil pipe & fittings for DWV Plumbing Systems. Visit the website to see how cast iron is made right here in America.
Visit the Smart Solutions Case Studies area of our website to learn how other mechanical contractors found their win-win with cost-saving and productivity-enhancing applications from members of MCAA’s Manufacturer/Supplier Council.
This section of our website also includes tips and ideas to help your company save money and enhance your productivity. Don’t miss it!
Change to Forgiveness Process: As we all know, the Covered Period was recently changed to be either 8 weeks or 24 weeks, at the borrower’s election if the loan was issued before June 5th. This has opened the door to many companies obtaining full forgiveness of their loan. An issue that has often come up is that many borrowers are able to incur enough expenses to obtain full forgiveness within a period that is longer than 8 weeks but perhaps far shorter than 24 weeks. This has led to the question: Do I need to wait the full 24 weeks before we apply for forgiveness?
Up until now the answer was yes, however the IFR release has clarified that a borrower can apply for forgiveness at any time after or DURING their covered period. This will allow borrowers to get the process rolling and perhaps allow them to wrap up the forgiveness process prior to the end of the year.
Update on Salary and Wage Reduction Rule: The IFR also indicates “If the borrower applies for forgiveness before the end of the covered period and has reduced any employee’s salaries or wages in excess of 25 percent, the borrower must account for the excess salary reduction for the full 8-week or 24-week covered period.”
This is meaningful because it indicates that you will need to account for salary reductions through your full covered period even if you apply for forgiveness early. As an example, if you reduced an employee’s salary in excess of 25% for the first 12 weeks of your covered period, when applying for forgiveness you need to assume that reduction will have been in place for all 24 weeks for purposes of the forgiveness calculation. No guidance was issued about what to do if there are FTE reductions during the covered period.
The new IFR clarified many other points regarding the loan forgiveness process, and all of the salient ones are included in Withum’s 06/20/2020 webinar on loan forgiveness. It will be posted on Withum’s website afterwards.
Reminder Section: (what should I be doing):
Call your payroll company about claiming the payroll tax deferrals and employee retention credits that were made available in the CARES Act.
Talk to your payroll company about the qualified sick/family leave legislation (FFCRA, passed prior to the CAREs Act).
Consider speaking with your lender to discuss changes to terms of existing debt facilities. The banking system remains strong.
If you have already applied for the PPP, start forecasting how you intend to spend the funds and how to qualify for the highest amount of forgiveness possible.
People are not machines. Running an engine for 16 hours will result in twice the output achieved by running it for 8 hours… but the same math does not apply to our workforce. It is a well-known fact that working longer hours each day, and more days per week, results in reduced worker productivity. However, while it is easy to calculate the difference between overtime premiums and straight time labor costs on a spreadsheet, calculating the real costs of productivity impacts caused by extended periods of overtime work is less clear-cut. So how do we explain, estimate, and account for this lost productivity? In this webinar, John Koontz explains the three types of overtime typically found in construction and talks about the three universally accepted methods of calculating overtime impact costs. Most importantly, he covers the preferred and most effective method of OT impact calculation, which incorporates all three methods. We can’t always avoid overtime, and we certainly can’t avoid the productivity impacts that result from working extended hours – but we can learn to use the information contained in the 2020 Edition of the MCAA Change Orders-Productivity-Overtime Primer to make a solid case for recouping impact costs associated with working overtime.
The Food and Drug Administration (FDA) is concerned that hand sanitizers manufactured by Eskbiochem SA de CV in Mexico may contain methanol (wood alcohol), which can be toxic when absorbed through the skin or ingested. The FDA has identified the following products manufactured by Eskbiochem:
All-Clean Hand Sanitizer (NDC: 74589-002-01)
Esk Biochem Hand Sanitizer (NDC: 74589-007-01)
CleanCare NoGerm Advanced Hand Sanitizer 75% Alcohol (NDC: 74589-008-04)
Lavar 70 Gel Hand Sanitizer (NDC: 74589-006-01)
The Good Gel Antibacterial Gel Hand Sanitizer (NDC: 74589-010-10)
CleanCare NoGerm Advanced Hand Sanitizer 80% Alcohol (NDC: 74589-005-03)
CleanCare NoGerm Advanced Hand Sanitizer 75% Alcohol (NDC: 74589-009-01)
CleanCare NoGerm Advanced Hand Sanitizer 80% Alcohol (NDC: 74589-003-01)
Saniderm Advanced Hand Sanitizer (NDC: 74589-001-01)
Arden Engineering Constructors, LLC, internships prepare students for careers in the construction industry. That guidance has paid off for both the company and three recent graduates who accepted full-time positions within the Arden Building Companies family of businesses. Congratulations to Natalie Mansson, Andrew Basile and Alex Appolonia on finding their great futures with Arden.
About Natalie
Natalie Mansson was hired in May 2020 as Arden Engineering Constructors, LLC’s newest Project Engineer. She interned for the company last winter.
She has had an interest in construction from an early age. “I knew construction would be a great career path for me when my family bought an old Cape house that needed a major renovation,” she said. “I would always ask the contractor, plumber, and electrician questions about their work and the different systems used.”
A recent graduate of Roger Williams University, Natalie studied Construction Management (CM). She grew to love the construction industry more during her time in school, so she decided to take another year to receive her master’s degree in CM.
“My experience at Arden so far has been incredible. I have been working in the estimating department, learning the different software the estimators use and completing various takeoffs. I have also worked with project managers, attended an on-site meeting, and did a site walk-through to see the incredible work Arden is doing.”
About Andrew
Andrew Basile was hired this May as a Controls Engineer with Earthwise Energy Technologies. Andrew is a graduate of Western New England University where he studied Mechanical Engineering.
“I chose mechanical engineering as my field of study because of my love to learn about the inner workings of everyday objects and systems and to be able to use that information, along with some creativity, to create a useful end product,” he said. “For my future in this field, I hope to find a specific application that I am passionate about so I can be invested in my projects and produce results I am proud of.”
Andrew, who interned for Arden during the past two summers recalls his internship experience fondly:
“My experience at Arden has been very informative, with the possibilities for work with a mechanical engineering degree, and the amount of information I can still learn. Working with Paul Carter, General Manager of Earthwise Energy Technologies has shown me the more technical, controls side of HVAC, while working with Tim Elliott, Director of Design & Engineering at Arden Engineering Constructors gave me a more physical understanding of the systems. With the combination of both experiences, I have obtained a more complete understanding of HVAC systems and every step taken to create a functioning system.”
About Alex
Alex Appolonia was recently hired as a Project Engineer on the Unique Metal Works, LLC team.
A University of Rhode Island (URI) graduate, Alex was a Civil Engineering major when he interned with Arden last winter. He worked under Arden Engineering Constructors, LLC Project Manager Rob Cote, and enjoyed on-site visits to the new URI College of Engineering building.
Alex Appolonia determines what size fan cover is needed for an exhaust fan at the Infinity Meat Solutions project.
He says, “I have been able to experience the precise detail and coordination it takes to complete a project of substantial caliber. My time here at Arden has given me hands-on experience in the field and shown me that to be a successful project manager or engineer one must be punctual, concise and transparent when coordinating with all the other trades from start to finish of every project.”
Alex is currently working on the Infinity Meat Solutions project, a new $100M, 200,000 sq. ft. meat-packaging facility in North Kingstown, RI. This is a joint project for Unique Metal Works, LLC, Arden Engineering Constructors, LLC, and Earthwise Energy Technologies.
Alston & Bird have released their June 22 COVID-19 update, including the latest news on emergency funding, administrative and regulatory actions, workplace and home issues, and many other topics, as well as to links to all their past updates.
Updated Loan Forgiveness Application: The SBA released two loan applications, one is an updated version and the other is a new “EZ” form. Withum has analyzed both in this article. The EZ form allows borrowers to ignore FTE and headcount reduction calculations and fill out a truncated form if they meet one of three criteria. True to form, some of the criteria requires meaningful clarification, specifically the third one noted in the article. There are rumors that a number of new FAQs are coming out within the next week or so.
With respect to the criteria below, it is unclear if the borrower needs to demonstrate an inability to operate at a point in time, or a period of time. Also the SBA calls out requirements and/or guidance issued by three specific Federal organizations, and for the most part the restrictions on commerce have been imposed by States. Withum assumes more clarification is coming or borrowers will have to scour the websites of the three Federal organizations listed to see what restrictions or guidance have been provided.
“Borrower was unable to operate during the CP at the same level of business activity as before 2/15/20 due to compliance with requirements established or guidance issued between 3/1/20 and 12/31/20 by HHS, CDC or OSHA, relating related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.”
New Bill in Congress Relating to the PPP: It’s a new week, so there is of course a new Bill in the works. This one is called the Prioritized Paycheck Protection Program (P4) Act. This Bill is designed to allow small companies (less than 100 employees) to obtain a second PPP loan if they exhausted their current PPP loan and have suffered a 50%+ reduction in business as a result of COVID. This Bill was just introduced and we will see if it picks up steam in the coming weeks.
Updated Loan Forgiveness Calculation: The rules relating to loan forgiveness have evolved over time. Withum has updated the article on the mechanics of loan forgiveness here for those who are looking for updates and examples.
Reminder Section: (what should I be doing):
Call your payroll company about claiming the payroll tax deferrals and employee retention credits that were made available in the CARES Act.
Talk to your payroll company about the qualified sick/family leave legislation (FFCRA, passed prior to the CAREs Act).
Consider speaking with your bank to discuss changes to terms of existing debt facilities. The banking system remains strong.
If you have already applied for the PPP, start forecasting how you intend to spend the funds and how to qualify for the highest amount of forgiveness possible.
Make sure your service techs have the up-to-date safety training they need to protect themselves from arc flash and electrical shock hazards while working on equipment pushing 480 volts or less. The session covers all applicable OSHA requirements, NFPA 70E provisions, best practices, and real-world accident information.
The next two training webinars will be presented on July 23, 2020. The first webinar will take place from 7:00 a.m. to 9:00 a.m. EST, and the second is from 10:00 a.m. to 12:00 p.m. EST.
OSHA recently released the new COVID-19 publication Guidance on Returning to Work. The publication addresses planning for reopening, applicable OSHA standards, employer FAQs, and much more.
New information from research on COVID-19 is being generated constantly. This reality requires us to carefully monitor the new information and make updates to MCAA’s Model COVID-19 Return to Work Exposure Control Plan as necessary. MCAA’s model plan was recently updated. We recommend that you evaluate the changes to determine whether your company’s plan also requires an update.
The recent changes include:
The addition of Appendix B – Critical Industries Requirements Summary
The addition of Appendix H – OSHA Guidance on Returning to Work
Text changes regarding OSHA now allowing face shields in lieu of cloth face coverings when appropriate
Text changes regarding the cleaning of power tool batteries
MCAA is saddened by the loss of Robert T. Armistead, P.E., who served as our President in 2010. He died peacefully at his home on June 16, 2020, surrounded by his loving family. Our thoughts are with Susan, Robert, Kane, Bryan and the extended Armistead family during this difficult time. “Bob truly loved the MCAA and his time with everyone involved in the organization. He will be greatly missed,” said Timothy J. Brink, MCAA’s Chief Executive Officer.
In an announcement to MCA of New Jersey, Inc. members, Executive Director Marty Drobny said, “We will miss our friend much. His positive impact within the industry will live on forever.”
Bob was President of Armistead Mechanical, Inc., a fourth-generation mechanical contracting and engineering firm that predominantly serves the New Jersey and New York Hudson Valley areas. The company specializes in commercial and industrial plumbing, heating, air conditioning and process piping. Raised in the family business, Bob worked there over summers and school breaks, learned the trade in the field and later worked with the estimators and project managers in the office.
After college and Navy service, Bob returned to the family business, where under his leadership, Armistead Mechanical developed an impressive project portfolio and a staff that is known for excellent customer service.
When Bob brought his energetic style and understanding of the details of the industry to MCAA, his strong belief in educating students led to an invitation to serve on the MCAA Career Development Committee, where he tirelessly volunteered his time to aid in the development of programs and services for our industry’s future leaders. In fact, Bob was one of the committee’s longest serving members, acting as a judge during the final round of the annual Student Chapter Competition at many of our annual conventions, and helping to set the standard for the dynamic program it has become today.
A natural off-shoot of his service on the Career Development Committee, Bob’s passion for perpetuating the flow of talent into the industry also extended to his position on the National Board of the ACE Mentor Program that educates and mentors high school students about careers in the architecture, construction—including the building trades, and engineering. He also served the Mechanical Contracting Education & Research Foundation, now the John R. Gentille Foundation, which funds many of MCAA’s student chapter activities. He also served on the foundation’s Board of Trustees as well as on the MCAA Technology Committee.
On a personal note, Bob was blessed with a beautiful wife of over 50 years, Susan, and three sons, Robert, Kane, and Bryan, who work in the family business. In his spare time, Bob served on the Orange County Industrial Development Agency and was active with the Boy Scouts, winning the Orange County Boy Scouts’ Distinguished Citizen Award in October of 2009.
Due to the current national health crisis and continuing restrictions, funeral services and interment will take place privately, and a memorial event celebrating Robert’s life will be planned for a later date.
Friends are encouraged to share stories, photos, and memories of him with the family by sending letters to: The Armisteads at 6 Hilltop Drive in Goshen, NY 10924.
In lieu of sending flowers, the family asks that you consider a donation to the following organizations:
Episode 5: Today’s MCAA – Get to Know Your New CEO Friday, June 26 at 2:00 p.m. EDT
2020 has brought about more changes so far than anyone could have reasonably imagined! In the midst of adapting to the pandemic, MCAA welcomed a new leader and since we couldn’t conduct a ‘changing of the guard’ at Convention this year, John Koontz is going to chat with MCAA’s new CEO, Timothy Brink. Join us to learn a little bit about how Tim moved from mechanical contractor to MCA Local Exec to the CEO of MCAA. Tim and John will chat not only about Tim’s industry history, but also about his becoming CEO in this time of uncertainty. Sometimes what happens is out of our control, how we react to what happens, however, is within our control. Tim and John will explore how COVID-19 has provided the opportunity for industry partners to come together and provide valuable resources for MCAA members and our industry. Things may not be back to normal just yet, but we know our shared future is bright, and we hope you will join us to hear about it!
The revised version of the original loan forgiveness application hews closely to the original that was released on May 15, 2020, but updates it to accommodate the changes to the PPP made in the PPP Flexibility Act. Both applications (and the two sets of related instructions) clarify some points and, in true PPP form, raise additional questions. Let’s discuss the salient points and the changes, starting with the biggest news.
Introduction of the PPP Loan Forgiveness Application Form EZ
Who Can Use Form EZ?
Borrowers can use the form only if they are able to check one of the following three boxes:
Option 1: Borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time it filed its PPP loan application and it did not include any employee salaries in the computation of its loan amount when it filed its borrower application form.
Option 2: Borrower meets the following two requirements:
Borrower did not reduce the annual salary or hourly wages of any employee by more than 25% during the covered period (“CP”) compared to the reference period (January 1, 2020 – March 31, 2020); AND
The borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the CP. (Ignore reductions that arose from an inability to rehire individuals who were employees on February 15, 2020 if the borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020.) Also ignore reductions in an employee’s hours that the borrower offered to restore and the employee refused.
Option 3: Borrower meets the following two requirements:
Borrower did not reduce the annual salary or hourly wages of any employee by more than 25% during the CP compared to the reference period (January 1, 2020 – March 31, 2020); AND
Borrower was unable to operate during the CP at the same level of business activity as before February 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by HHS, CDC or OSHA, relating related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.
Presentation of Form EZ
The form involves a simplified calculation that adds the payroll and non-payroll costs paid or incurred during the CP, and then applies two limits on such amount: (i) the PPP loan amount and (ii) the 60% payroll cost requirement, e., that payroll costs must constitute at least 60% of the loan forgiveness amount.
The form eliminates the headcount and wage reduction calculations because not having either one of them is a precondition to using the form, as noted above.
The form includes a borrower certification regarding the lack of headcount or wage reductions.
Required Documentation
The instructions to Form EZ lay out the required documentation to be submitted with, and also maintained by, the borrower.
The following documentation is required to be submitted to the lender:
Payroll –
Documentation verifying eligible cash compensation and non-cash benefit payments from the CP or APCP – including tax filings and/or third-party payroll service provider reports for payroll costs and payment receipts, cancelled checks and/or account statements for health insurance and retirement plan contributions
If a borrower selected Option 2 above, documentation supporting the average number of FTE employees on payroll on January 1, 2020 and the end of the covered period (since the certification requires that there was no reduction, we presume lenders will want to see support for the entirety of the period in between, as well, and recommend that borrowers are prepared to provide this)
Nonpayroll – it does not appear that there were any changes to the requested documentation from the initial loan forgiveness application
The following documentation is required to be maintained, but is not required to be submitted. Please note that the lenders may require this information at their discretion:
Documentation supporting certification that annual salaries or hourly wages were not reduced by more than 25% during the CP or APCP relative to January 1, 2020 – March 31, 2020. Employees must be separately listed and it must show amounts paid to each employee during both periods.
Documentation regarding any employee job offers and refusals, refusals to accept restoration of reductions in hours, firings for cause, voluntary resignations, written requests by any employee for reductions in work schedule, and any inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.
Documentation supporting the certification, if applicable, that the borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the CP (other than any reductions that arose from an inability to rehire individuals who were employees on February 15, 2020, if the borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020). This documentation must include payroll records that separately list each employee and show the amounts paid to each employee between January 1, 2020 and the end of the CP.
Documentation supporting the certification, if applicable, that the borrower was unable to operate between February 15, 2020 and the end of the CP at the same level of business activity as before February 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19. This documentation must include copies of the applicable requirements for each borrower location and relevant borrower financial records.
Revised PPP Loan Forgiveness Application
Calculation Form
Allows the borrower to select its enter the CP – either 8 weeks or 24 weeks.
For loans received on or after June 5, 2020, the instructions make it clear that a 24-week CP is required.
The PPP application and instructions also retain the alternative payroll covered period (“APCP”) as an option for borrowers regardless of the time of their CP, as long as they have either bi-weekly or more frequent payroll cycles.
The formula in the calculation remains the same form the previous application, except they modified line 10 to reflect the 60% threshold adopted in the PPP Flexibility Act.
Schedule A and FTE Reductions
Compensation to owners (i.e., owner-employees, self-employed individuals, and general partners) – borrowers are limited on forgiveness based on their selected CP, including all cash compensation and other payroll costs (insurance premiums, retirement contributions and state and local taxes), in the following manner:
24-week CP: lesser of 2.5 months’ worth of their 2019 compensation (subject to $100k cap) or $20,833
8-week CP: lesser of 8/52 worth of 2019 compensation (subject to $100k cap) or $15,385 (i.e., no change from prior PPP Application)
The PPP Application now provides three different options for borrowers to avoid having to complete the daunting FTE reduction calculation (though the instructions still require borrowers to compute and to keep the supporting schedules):
No reduction in employees or average paid hours: if a borrower has not reduced the number of employees or average paid hours between January 1, 2020 and the end of the CP.
FTE Reduction Safe Harbor 1: if a borrower was unable to operate between February 15, 2020 and the end of the CP at the same level of business activity as before February 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020, by HHS, CDC, or OSHA guidelines related to the maintenance of standards for sanitation, social distancing or any other worker/customer safety requirement related to COVID-19.
In order to claim this safe harbor, the instructions require that borrowers maintain in its files documentation that supports this certification, including copies of the applicable requirements for each borrower location and relevant financial records.
Borrowers must also sign an additional certification surrounding this selection, if made.
FTE Reduction Safe Harbor 2: if a borrower can meet the standard of a 5-step safe harbor calculation found on the PPP Schedule A Worksheet.
There was one update to this calculation from the previous version – Step 4 now requires a borrower to “enter the borrower’s total FTE as of the earlier of December 31, 2020, and the date this application is submitted” – presumably, this means that a borrower claiming this safe harbor can file after the end of its CP and before December 31, 2020 if its FTE levels have been restored by the date of its application.
In order to claim this safe harbor, the instructions require that a borrowers maintain documentation supporting the FTE information claimed in the 5 steps.
Curiously, regardless of whether or not one of the safe harbor options apply, the PPP Application still requires that borrowers submit documentation showing the average weekly number of FTEs for the chosen reference period (either February 15, 2019 – June 30, 2019, January 1, 2020 – February 29, 2020 or, if seasonal, any consecutive 12-week period between May 1, 2019 and September 30, 2019).
Overall, the PPP Application and PPP EZ Application are borrower-friendly in terms of the amount of forgiveness that will be available to borrowers. There is still uncertainty about the threshold and information required of borrowers seeking to avail themselves of the FTE safe harbor pertaining to their inability to operate at the same levels as February 15, 2020. How will lenders and borrowers ascertain the reasonableness of this certification? What ”financial information” will be required to support the claim? Can a borrower claim the safe harbor if the COVID-19 restrictions have been lifted but business operations have still not recovered to the same levels? Does this certification apply through the date of application, or does it apply through December 31, 2020? This safe harbor option offered by the updated application process is bound to be one of the most widely-discussed issues in the coming weeks.
Alston & Bird have released their June 18 COVID-19 update, including the latest news on emergency funding, administrative and regulatory actions, workplace and home issues, and many other topics, as well as to links to all their past updates.
