Category: Uncategorized

Alston & Bird have released their May 26 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.

Alston & Bird have released their May 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.

The Paycheck Protection Flexibility Act:  Critics of the PPP have been vocal in outlining the flaws of the program. It was a loan product that was created for the entire middle market; however, in a complex economy, it has not been equally helpful for all businesses.  

Take a restaurant for example: By its nature, a restaurant has high non-payroll costs (e.g., rent) and may have relatively low payroll costs (servers often make minimum wage). After the Pandemic hit, the CARES Act increased unemployment by $600 per week (over and above state unemployment) regardless of a recipients previous earnings. As a result, in some cases, low-wage earners are actually making more money on unemployment than they were when employed, thus giving them no reason to go back to work, especially if a business was shut down due to COVID-19 (like many restaurants were).

The PPP forces restaurants to bring back employees and put them on payroll, resulting in them actually receiving less income than they were receiving when on unemployment. At the same time, the expense the business really needs relief from is rent, and these types of non-payroll expenses are limited to 25% of the loan forgiveness amount. In the end, the employees made less money and the restaurant was unable to get most of its critical expenses paid and forgiven. This scenario happened over and over again in the middle market in ways that many could not have predicted.

Enter the proposed solution: Changes to the PPP to correct for some of these issues were first introduced in the HEROS Act, a bill largely drafted by house Democrats and that has completely stalled in the senate. The HEROS Act is a massive $3 trillion bill (larger than the CARES Act) that introduced a wide variety of stimulus measures. The bill contained pragmatic PPP changes that would have solves the issue above, but it wound up being a victim of the political process. To combat this, the Paycheck Protection Flexibility Act was introduced. It is a standalone piece of legislation that largely carves the PPP changes out of the HEROS Act.  This Forbes article outlines the background of the issues and many of the bipartisan proposed changes.  

This bill apparently has bipartisan support (including the President) and we have heard from multiple sources that it may be voted on as early as next week.  The changes would be VERY meaningful for all borrowers – here are some:

Changes Proposed:

• Extend the covered period from 8 weeks to 24 weeks.
• Remove the “75% rule”, therefore non-payroll costs will not be limited to 25% of all costs incurred.
• Extend the repayment terms from 2 years to a longer term. The CARES Act allowed for “up to” 10 years to repay loan proceeds that were not forgiven. 
• Enhance the payroll deferral and allow those who received the PPP to continue to benefit from the deferral all the way to the end of 2020 rather than up to the date the loan was forgiven.
• Extend the rehiring rule to allow companies to rehire employees past June 30 and therefore obtain a greater forgiveness amount.

We are watching this closely and will report if we see changes or momentum relating to this bill. 

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 Sick Pay Bill (passed prior to the CARE Bill).
• Be in constant communication with your bank (about status of your PPP application).
• 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.

On April 3^rd, Treasury released a PPP Borrower Information Fact Sheet that was meant to clarify key questions with respect to the application process. In particular, this document reaffirmed the definition of “Payroll Costs” (Page 2) and clarified that salaries include bonuses and other forms of compensation subject to the $100k cap. It also clearly shows that “other compensation” such as vacation pay and severance were separate items, to be included over and above the cap. The guidance aligned with the way the law was written.  

In the newly-released loan forgiveness application, the SBA defines “payroll” to include an employee’s Cash Compensation and Non-Cash Compensation. Then it further defines Cash Compensation (see below), which is capped at $15,385 per employee during the covered period, to INCLUDE any form of cash compensation such as severance and vacation payouts. This was a very subtle change that went unnoticed by many. This change is contrary to the way the law is written and will have a meaningful impact on borrowers who were expecting these forms of compensation to be “over and above the cap.” We recommend that you review your calculations to determine what impact, if any, this change produces. We will be monitoring this issue as the SBA seems to have silently reversed its prior guidance.

Cash Compensation: Enter the sum of gross salary, gross wages, gross tips, gross commissions, paid leave (vacation, family, medical or sick leave, not including leave covered by the Families First Coronavirus Response Act), and allowances for dismissal or separation paid or incurred during the Covered Period or the Alternative Payroll Covered Period. For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the Covered Period; therefore, do not enter more than $15,385 in Table 1 or Table 2 for any individual employee. 

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 Sick Pay Bill (passed prior to the CARE Bill).
• Be in constant communication with your bank (about status of your PPP application).
• 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.

FTE Safe Harbor (“Rehire Rule”):  We wanted to do a deep dive into the FTE Safe Harbor rule. The CARES Act and subsequent Interim Final Rules/FAQs go to great lengths to describe how to reduce forgiveness if there is a reduction of FTEs.However, from the beginning, there has been a strangely drafted “rehire rule” that we candidly suspected may have been a drafting error.  However, when the new application came out it became clear that this rule still exists and will be employed. With that being said, we wanted to walk through how this rule works, as the effect is a complete restoration of your FTEs within the calculation even if you don’t hire employees back during the covered period, for some borrowers, this is very meaningful. Here are the rules/steps:

Safe Harbor Rule (i.e., Rehire Rule)

• Compare average weekly # of FTEs from 2/15/20 to 4/26/20 with # of FTEs as of 2/15/20
• If there is a reduction, and it is restored as of 6/30/20, then there is no reduction in the forgiveness amount.

In what appears to be a disproportionate benefit, the SBA is allowing the borrower to completely ignore a mathematical reduction of FTEs during the covered period if 1) it had ANY reduction of employment during the period noted above and 2) it resolved that reduction as of a single point in time (6/30). Documentation requirements appear to require at least a single payment for pay period covering 6/30 and there is no indication how long the individual must remain an employee. We remain skeptical that this will not somehow change or be updated through future guidance, but this is what we have right now.

Let’s look at an example:

Facts:

• Borrower has $250K in eligible expenses during the covered period
• Average weekly # of FTEs during reference period (January 1 –  February 29, 2020) was 300
• Average weekly # of FTEs during covered period was 30 (representing a 90% reduction)
• On 2/15/20, borrower had 35 FTEs
• Between 2/15/20 and 4/26/20, there were 29 average FTEs

Analysis:

• Potential forgiveness amount is $25K (10% of $250K, given 90% FTE reduction)
• If borrower restores to 35 FTEs as of 6/30/20, then the forgiveness amount is $250K (and borrower can ignore the potential reduction of $225K)

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 Sick Pay Bill (passed prior to the CARE Bill).
• Be in constant communication with your bank (about status of your PPP application).
• 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.

Alston & Bird have released their May 20 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.

PPP Forgiveness Application

On Friday, May 15, new guidance regarding the calculation of forgiveness was issued in the form of a forgiveness application. Withum has provided a detailed analysis of the document in this article. The introduction of this document is significant because it clarifies many questions with respect to how the calculation works. We suspect more guidance will come out but it is fair to assume this is the “bulk” of what we should expect to get. We highly recommend that you read the article summarizing the application, but here are some highlights:

• “Paid and incurred” clarified:  This appears to be a big win for borrowers. 
  • For payroll, all costs paid during the covered period will qualify. So if your loan was funded on May 1, and on May 2 you paid payroll relating to the pay period of April 15^th to April 30^th, that can be included. In addition, you can include payroll “incurred” at the end of your covered period even if it was paid outside of your covered period as long as it was paid within the next regularly scheduled pay run. This allows for more than 8 weeks of payroll to be included in the calculation. That said the $15,385 cap is still in place and the certification specifies that “owners” cannot get more than 8 weeks of salary.
  • For non-payroll costs, a similar result, any cost paid during the covered period will be included, and any cost incurred will also be included as long as it is paid by its “next regular due date.” This also opens the door for more than 2 months of rent, interest, etc. to be included. 
• Introduction of “Alternative Payroll Covered Period”: The application allows for the borrower to elect to use an “alternative” covered period for payroll only. This 8-week period would align with you payroll cycle, starting on the first day of the borrowers normal payroll cycle subsequent to their PPP disbursement. This allows borrowers to cleanly align payroll during the covered period. While this makes sense, it seems that there is now a potential benefit to use a normal covered period given the updated “incurred” rules above, allowing for more than 8 weeks of payroll to be forgiven. 
• “Expiration date” of forgiveness application: The application appears to include an “expiration date” of October 31^st. We cannot be sure, but this seems to indicate that applications are due by no later than that date.
• FTEs defined: FTEs are defined as 40 hours per week. There are two methods (Base Method and Simplified Method) to calculate an FTE. You can see both methods in the article linked above.
• FTE reductions: They have expanded exemptions for the FTE reduction calculation, allowing you to ignore employees who were fired for cause, resigned or requested a reduction in hours. Previously you could only ignore reductions for employees who had rejected your offer to return to work.
• FTE reduction “safe harbor”: This FTE reduction “cure” has been in place since the statute was written but has be a source of confusion. Some have thought it was a drafting error but the application clearly concludes it was not. So what does it mean? Even if the borrower reduces their head count during the covered period, they will be deemed to have restored it fully if:
  • (1) the borrower reduced its FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020;
  • And (2) the borrower then restored its FTE employee levels by not later than June 30, 2020 to its FTE employee levels in the borrower’s pay period that included February 15, 2020

There is no question it is illogical, but it appears you can lower your headcount during the covered period as much as you want, as long as, on a single day, you have more FTEs than you did during your February 15, 2020 payroll run.

• “75% rule” appears to be clarified:  As we suspected, the 75% calculation does not appear to be binary (meaning if 75% of the loan is not spent on payroll there is no forgiveness). The application clarifies that non-payroll costs cannot exceed 25% of total forgivable costs. Therefore, you can spend as much or as little of the loan that you wish, however, the amount of non-payroll costs that are forgiven will not exceed 25% of total forgivable expenses (the remaining 75% constituting payroll costs). Example: If a borrower receives a $500k loan, and spends $250k on payroll costs, the max forgivable non-payroll costs are $83.3k ($250k/75% – $250k).
• Clarifications on how to calculate “wage reductions”:  The application clarifies how the wage reduction calculation will work. It also clarifies that the wage reduction calculation will only be applied to employees who were employed during the covered period. See the article linked above for details. Importantly, the wage reduction calculation will exclude any employee who “during any pay period” made, on an annual basis, more than $100,000 per year. Presumably this would mean that if an employee received a bonus that put them over $1,923 during 1 week of salary, they would be excluded.

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 Sick Pay Bill (passed prior to the CARE Bill).
• Be in constant communication with your bank (about status of your PPP application).
• 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.

Alston & Bird have released their May 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.

Can I re-apply for a loan if I returned it? – Last week (May 15), the SBA confirmed that a safe harbor exists for borrowers whose loan is less than $2M. The SBA will not question eligibility as all borrowers in this population will be deemed to have made the application in good faith. This was a significant development as many borrowers returned their loans because, while they believed they were eligible, they were uncomfortable with the amount of ambiguity relating to the “eligibility” standards in place and the threat of criminal action. Based on a discussion with a bank this week, we learned that borrowers could re-apply if they returned their original loan and wish to obtain a new one. We recommend discussing with your bank if this applies to you.

How do you treat furloughed employees with respect to loan forgiveness – We have been getting this question quite a bit over the last few weeks: Is a furloughed employee still and employee or considered laid off for purposes of the forgiveness calculation?  Why does this matter? It matters because when you calculate forgiveness you start with determining a ratio of FTEs during the covered period to FTEs during a base period (see forgiveness calculation). If a furloughed employee is considered laid off, then they represent a reduction in FTEs which reduces overall forgiveness. If they are considered an employee, you need to consider whether they add to the FTE count (based on hours worked) and whether they also have a “salary reduction in excess of 25% of compensation” if they make less than $100,000 a year annually. The current guidance does not address this directly, but it is something we are monitoring closely because the forgiveness impact is different under each scenario. Regardless, we believe that if an employee is furloughed, and the company is still covering benefits, then those benefits would be includable as a forgivable expense.

Partnerships can increase their PPP loans – On May 14, the SBA issued an interim final rule that confirmed partnerships can increase their PPP loans if their initial loan amount did not include partner compensation. During the application process there was a lot of confusion regarding what constituted “payroll costs.” Partners in partnerships are technically not considered employees and many lenders excluded the income allocated to partners from the payroll cost definition. This resulted in a significant decrease in their loan amount and also left partners out in the cold when it came to getting compensated from the PPP loan proceeds during the covered period. This clarification allows partnerships to go back to their lender and to request an increase in the loan amount, which is a welcome change for many especially since it appears that funds continue to remain available for borrowers.

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 Sick Pay Bill (passed prior to the CARE Bill).
• Be in constant communication with your bank (about status of your PPP application).
• 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.

Alston & Bird have released their May 15 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.

Guidance on Eligibility – FAQ 46 was released on May 13 (full text below) which provided additional guidance on eligibility. Withum has released an article on this FAQ as well given its importance. Shortly after that, FAQ 47 was released which extended the deadline for those who wish to return their PPP funds to May 18^th.

So what are the highlights?

• Safe Harbor for loans below $2M: The big news is that the FAQ indicates that any borrower who received a loan that was less than $2M is “deemed to have made the required certification concerning the necessity of the loan request in good faith.”  This means that there is effectively a safe harbor in place for loans under $2M and those borrowers should NOT expect to have their eligibility questioned.
• What about those who gave back proceeds?:  Many Company’s returned their PPP loans because they were concerned or frightened by what they were reading and hearing about eligibility. This new Safe Harbor begs the question:  Can I (and if so Should I) re-apply for my PPP loan if I returned it? We recommend if you want to explore that, you should discuss with your bank. We don’t know if borrowers can re-apply but certainly this FAQ allows for borrowers to feel more comfortable with the process.
• Important clarity for companies above $2M of loans:  The FAQ provides relief for loans above $2M as well by indicating that while these Borrowers may still be subject to scrutiny regarding eligibility, the recourse for being found ineligible will be repayment of the loan (the SBA will NOT refer the borrower for civil or criminal penalties). Of course, the DOJ could always institute criminal charges on its own initiative, but the SBA is saying they won’t refer the case if the loan is repaid within the safe harbor period. This allows borrowers to at least have the confidence that the penalty is economic (repayment of the loan) rather than punitive. That is a big win for borrowers whose officers/employees have been stressed about this decision while having limited or unclear guidance. Certainly criminal penalties can still be in play for those who did not act in good faith.

“If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request,SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request”

• Extension of repayment date: The SBA extended the date in which Borrowers can repay their PPP loan to May 18^th if they have concluded that they are ineligible. The question now is, why would you? If the penalty for being ineligible is repayment in the future (and is not criminal), and the loan is not personally guaranteed, perhaps the only reason to repay it would be to not saddle the Company with debt.

46. Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates,20 received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith. SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns. Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.

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 Sick Pay Bill (passed prior to the CARE Bill).
• Be in constant communication with your bank (about status of your PPP application).
• 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.

The HEROS Act:  We now have new legislation that is in play, the Health and Economic Recovery Omnibus Emergency Solutions (“HEROES”) Act. This was introduced by the House yesterday, you can find expanded text here.  This is obviously a first draft of new legislation and it needs to go through the legislative process.  Right now we believe this was a bill largely authored by Democrats in the House, thus it needs to get Republican support, go through the Senate and get congressional committee level support as well. So what does that mean? At a minimum, expect changes, and it is possible this never actually makes its way into law – e.g., some Republicans have announced that the bill is “dead on arrival”.

There is no way to cover everything from the bill in one email, but for now, let’s break down cover what is most impactful to the middle market:

Massive costs: The Act is a $3 Trillion stimulus package, much larger than the CARES Act ($2.2T) which introduced the PPP to the business community.

Proposed changes to the PPP:

There are several changes suggested in Section 90004 of the Act, here are the most impactful to borrowers:

• Extends the 8-week covered period to 24 weeks. 
• Eliminates the 75/25 rule on use of loan proceeds.
• Establishes a minimum maturity on PPP loans of 5 years (right now the loans have a 2 year maturity).
• Creates a safe harbor for borrowers who cannot rehire in the prescribed timeframe.
• Expands eligibility to all section 501(c) entities.

Additional direct payments to individuals: This means a second round of economic impact payments of $1,200 per family member, up to $6,000 per household.

Enhanced ERC and payroll credits for first responders:  The bill would provide an enhanced employee retention tax credit that encourages employers to keep employees on payroll. There is also a section that introduced tax credits for companies that employ “first responders”.

Enhanced tax credits/deductions: Individual tax credits like the Child Tax Credit and Earned Income Credit would be enhanced. Also additional tax deductions would be introduced for “first responders”.

More EIDL money: $10B would be set aside for the EIDL program to continue to fund businesses.

Business interruption credit for the self-employed:  The bill would provide a 90% refundable individual income tax credit for certain self-employed individuals who have experienced a significant loss of income.

Restoration of the state tax deduction: Individuals have a cap on how much they can deduct on their personal tax returns for state taxes paid relating to income and real estate taxes – the so-called SALT limitation, which is $10k, that was introduced in the 2017 Tax Cuts and Jobs Act. This bill looks to restore individuals ability to take a “full” deduction for all state taxes paid on their returns.

Extension of unemployment benefits: This would extend the federal unemployment benefit program to ensure the weekly $600 federal unemployment payments continue through January 2021. The CARES Act provided for 4 months of this benefit.

Assisting in rent and mortgage payments: $175B would be set aside to assist renters and homeowners make monthly rent, mortgage and utility payments.

Multi-Employer plans get support: Plans would receive financial assistance to keep them solvent for thirty years—with no cuts to the earned benefits of participants and beneficiaries.

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 Sick Pay Bill (passed prior to the CARE Bill).
• Be in constant communication with your bank (about status of your PPP application).
• 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.

Alston & Bird have released their May 13 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.

Cohen Seglias’ Labor & Employment Group have released a Q&A on the PPP program with an eye towards using and tracking the proceeds.

LEARN MORE

The law firm of Cohen and Seglias has put together the following “COVID-19” 3.0 package for contractor members to use as the situation dictates for protection and to ensure relief — time, money, etc. This packet is for the use of our members. These forms will need to be edited to a given project’s specific circumstances. This information is not an endorsement, simply a resource as we navigate these uncertain times as an industry. 

With states re-opening, many jobs, including construction will have a new normal on jobsites. The CDC, OSHA, and local and state governments have issued requirements and recommendations for returning to work. In taking the proper precautions, the impact on costs and schedules is inevitable. Questions have come up, but there is no clear answer.

Cohen Seglias’ Construction Contracts & Risk Management Group prepared sample notice letters for use on jobs where construction has or is about to resume under pre-existing contracts. Also included in this packet is sample language to add to change orders and monthly releases.

Additionally, with many companies still bidding and entering into contracts for new work, sample language to include in your proposal to help protect you in the event of a future shutdown or new guidelines is also included in this package. When bidding, remember that COVID-19 is not likely going to be considered a force majeure event due because it should be anticipated when developing your proposal. We suggest that the parties on a project discuss the use of an allowance to cover these costs. A letter to that effect is also enclosed. These forms may need to be revised to fit particular circumstances. 

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WASHINGTON, DC – On May 11, the U.S. Department of Labor launched its Industry-Recognized Apprenticeship Program (IRAP) Standards Recognition Entities (SREs) online application and updated resources, the same day that the IRAP rule goes into effect. 

In June 2017, President Donald J. Trump signed an Executive Order on Expanding Apprenticeships in America. Section 4 of the order, “Establishing Industry-Recognized Apprenticeships,” directs the Secretary to consider proposing regulations that promote the development of apprenticeship programs by third parties. The Task Force on Apprenticeship recommended the establishment of Industry-Recognized Apprenticeship Programs to address America’s skills gap and to rapidly increase the availability of high-quality apprenticeship programs in sectors where apprenticeship opportunities are not widespread.

“As workers seek to reenter the workforce following the economic disruption caused by coronavirus, Industry-Recognized Apprenticeship Programs and the SREs that recognize them will provide new opportunities for Americans to earn a living while learning the skills needed in a changing job market,” said U.S. Secretary of Labor Eugene Scalia. “I encourage industry leaders, educators, and others to consider forming SREs to help drive the expansion of apprenticeships and assist in the economic rebound. In these challenging times, the new apprenticeship opportunities created by IRAPs can open doors to good-paying jobs in industries such as telecommunications, health care, cybersecurity, and other sectors.”

IRAPs are high-quality apprenticeship programs recognized by third-party entities – SREs – under standards established by the department’s recently issued Final Rule. As described in the Final Rule, the department may recognize various types of organizations as SREs, including trade groups, companies, educational institutions, state and local governments, non-profits, unions, joint labor-management organizations, and certification and accreditation organizations. 

“Industry-Recognized Apprenticeship Programs provide an additional apprenticeship pathway that is industry-led and market-driven,” said Assistant Secretary for Employment and Training John P. Pallasch. “Through these programs, individuals will be able to obtain valuable workplace-relevant training and learn progressively advancing skills, resulting in an industry-recognized credential, all while getting paid for their work. Now that we are accepting applications to serve as Standards Recognition Entities, we encourage eligible workforce stakeholders, through applying and forming an SRE, to play a large role in the way industries and regions train future workers.”

Over the coming weeks, the department plans to host virtual forums to share how industry and workforce stakeholders are taking advantage of this new opportunity.

Entities interested in evaluating and recognizing high-quality IRAPs, consistent with the department’s standards, should follow the process outlined in the Final Rule to become SREs and submit an application online. Following its evaluation, the Department’s Office of Apprenticeship will notify the applicant.  Once recognized by the Department, SREs will work with employers and other entities to establish, recognize and monitor high-quality IRAPs that provide apprentices with industry-recognized credentials. SRE recognition is valid for five years.

In addition to technical assistance available from the Office of Apprenticeship, the department has developed several digital resources on www.apprenticeship.gov for those interested in becoming an SRE or starting an IRAP, including:

• Fact Sheets
• Frequently Asked Questions
• Program Side-by-Side
• Pre-application Checklist
• IRAP General Webinar recordings and slides
• Webinar for Prospective SRE recordings and slides

The department remains committed to fulfilling critical workforce needs and addressing the workforce-related impacts of the coronavirus pandemic. Strategies like apprenticeship that are innovative, flexible, and responsive to the needs of American employers and workers will be essential to addressing the workforce-related impact of this pandemic. IRAPs will serve as a complement to the successful registered apprenticeship program that has been in place for over 80 years. 

The mission of the Department of Labor is to foster, promote and develop the welfare of the wage earners, job seekers and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.