Employee or independent contractor? Department of Labor issues new proposed “Five-Factor Test”

By Phoebe B. Mitchell

In the past several years, employers have struggled to determine whether some workers should be classified as employees or as independent contractors. The difference is significant, as employees are entitled to many benefits that independent contractors are not, including overtime for those not exempt under the federal Fair Labor Standards Act (FLSA). As a result, worker misclassification is a costly mistake employers want to avoid.

DOL proposal contracting

U.S. Department of Labor proposes new rules on who is considered an employee and who is considered an independent contractor.

This week, the United States Department of Labor (DOL) issued its anticipated proposed rule regarding classification of workers as independent contractors. According to Secretary of Labor Eugene Scalia, the proposed rule will “make it easier to identify employees covered by the [FLSA], while respecting the decision other workers make to pursue the freedom and entrepreneurialism associated with being an independent contractor.” DOL is accepting comments on the proposed rule for 30 days.

The new rule includes a five-factor test that considers the “economic reality” of the relationship between workers and their employers.

Among the five factors, the DOL made clear that two “core” factors are key:

  1. Control a worker has over their work
  2. The worker’s potential for profit or loss

Both factors help determine if a worker is economically dependent on someone else’s business, or alternatively, if the worker is in business for him or herself.

The nature and degree of the individual’s control over the work

This first core factor examines a worker’s ability to personally control his or her work. For example, a worker is an independent contractor if the worker, as opposed to the company, exercises substantial control over key aspects of performance of work.  A worker exercises substantial control over performance of work by setting his or her own schedule or selecting his or her own projects. Further, the worker exercises substantial control over key aspects of performance of work if the worker has the ability to do work for other employers, including the employer’s competitors.

On the other hand, a worker is properly classified as an employee if the employer, as opposed to the worker, exercises substantial control over key aspects of the performance of the work. For example, if the employer controls the worker’s schedule or workload, or directly or indirectly requires the worker to work exclusively for the employer, the worker should be classified as an employee.

The individual’s opportunity for profit or loss

This second core factor examines a worker’s personal opportunity for profit or loss. If the worker’s profit or loss opportunity is closely tethered to the work he or she performs, the worker is likely an independent contractor. In other words, a worker is a true independent contractor if the individual has the opportunity to earn profits or incur losses based on his or her own exercise of initiative, or management of his or her investment in helpers, equipment, or material to further the work.

Alternatively, an employee does not have as much personal opportunity for profit or loss. A worker who is unable to affect his or her earnings or is only able to do so by working more hours or more efficiently is properly classified as an employee.

Three other factors

The proposed rule includes three other factors:

  1. The amount of skill required for the work
  2. The degree of permanence of the working relationship between the worker and the potential employer
  3. Whether the work is part of an integrated unit of production.

For example, if a worker has specialized training that the employer does not provide, and the work relationship is by design definite in duration, the worker should be classified as an independent contractor. On the other hand, an employee depends on the employer to equip him or her with the skills or training necessary to perform the job, the work relationship is, by design, indefinite in duration or continuous, and the worker’s work is a component of the employer’s integrated production process for a good or a service. Lastly, the actual practice of an employer is more relevant than what may be contractually or theoretically possible in determining a worker’s classification as either an independent contractor or employee.

While these three factors are important, according to DOL, if the two “core” factors point to the same finding, “their combined weight is substantially likely to outweigh the combined weight of the other factors that may point toward the opposite classification.”

The complete proposed rule is available at: https://www.dol.gov/sites/dolgov/files/WHD/flsa/IC_NPRM_092220.pdf.

Phillips Murrah’s labor and employment attorneys continue to monitor developments to provide up-to-date advice to our clients regarding the DOL’s new rules.


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Clients seek lower costs for legal services

[VALUE] Clients, including in-house legal departments, are understandably focusing on lowering their legal expenses. They are looking to mid-market law firms like Phillips Murrah to achieve it.

Force majeure clauses and COVID-19

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on September 17, 2020.


By Phillips Murrah Attorney Kendra M. Norman

Kendra Norman Web

Kendra M. Norman represents individuals and businesses in a broad range of transactional matters.

Force majeure clauses are common clauses in contracts that allocate risk between parties and release a party from liability or obligations during unforeseeable or unpredictable events that are out of the party’s reasonable control.

These events can generally be referred to as acts of God or can be specifically listed in the agreement, often including events like war, strikes, riots or government actions. However, it should be noted that there is not a specific set of events that come under the definition of “acts of God” – this often depends on the context of the contract and the jurisdiction.

Force majeure clauses are ever-evolving and the language used has been influenced by events around us. Before 9/11, most force majeure clauses didn’t include terrorism as a force majeure event. This spurred litigation between parties regarding whether terrorism was an act of God that should be covered by the force majeure clause to excuse performance. Now, terrorism and terrorist attacks are often specifically set forth in force majeure clauses.

The conversation about force majeure clauses now revolves around whether the COVID-19 pandemic qualifies as an act of God and how this will affect contracts. As always, this depends on the type of contract, the language set forth in the contract, the context of the contract, the intent of the parties, and the governing law of the contract. Therefore, this determination is highly fact-specific and depends on several factors.

It is possible that COVID-19 could be considered an act of God in some contracts, or it could fall under force majeure clauses that contain specific references to disasters, national emergencies, government regulations or generally acts beyond the control of the parties. With the extraordinary potential consequences from COVID-19 yet to be determined, businesses should begin ascertaining whether their material contracts contain force majeure provisions and how such provisions may affect their rights and responsibilities going forward. However, given the widespread impact of COVID-19, it is possible that parties may be more likely to negotiate amendments to agreements that have been impacted by COVID-19 rather than forcing parties to rely on and litigate force majeure clauses.

Nevertheless, going forward, those entering into contracts should consider whether adding more specific terms such as epidemic, pandemic or infectious disease as force majeure events will be advantageous for them in the future.

Kendra Norman is an attorney with the law firm of Phillips Murrah.


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Breaking News: IRS issues guidance on Trump’s payroll tax deferral order

On Friday, August 28, 2020, the IRS and Treasury issued guidance implementing President Trump’s order to defer collection of some payroll taxes amid the coronavirus pandemic.

Phillips Murrah attorney Jessica Cory

Jessica N. Cory represents businesses and individuals in a wide range of transactional matters, with an emphasis on tax planning.

On August 8, 2020, President Trump issued a Presidential Memoranda, commonly known as an Executive Order (the “Order”), to defer the withholding, deposit, and payment of certain payroll taxes on wages paid from September 1, 2020 through the end of the calendar year.   The Order applies to any employee whose pretax compensation is less than $4,000 per biweekly pay period (or $104,000 per year, on an annualized basis).  The Order permits the employers of these eligible employees to temporarily suspend the 6.2% Social Security tax typically withheld from employees’ paychecks.

The Order has raised a number of questions for employers and payroll companies considering whether to implement the deferral.  For example, the National Payroll Reporting Consortium (“NPRC”) recently raised concerns about whether sufficient time is available to implement a deferral option by September 1, given the substantial programming changes that such an option would require. Because payroll systems are typically designed to use a single Social Security tax rate for the full year, for all employees, it may be challenging to change a reporting system to apply a different tax rate for part of the year, beginning mid-quarter, for only certain employees of certain employers.

In addition to practical challenges relating to implementation, the Order also raises liability concerns for both employees and employers, who are dually liable for unpaid payroll taxes under the Internal Revenue Code. Under Code Section 7508A, the Secretary of the Treasury can delay tax payments for up to a year during a presidentially-declared disaster, but no authority exists to authorize forgiveness of those deferred amounts. Accordingly, employees, employers, or both could be held liable for any deferred payroll taxes after the deferral period ends. This could represent a substantial burden. For example, for an employee earning $50,000 per year, the deferral would allow the employee to take home an additional $119 per paycheck during the deferral period. But, without Congressional action to authorize forgiveness of the deferred taxes, that employee—or his or her employer—would be facing a $1,073 tax liability in January.

Based on guidance released today from the Treasury Department in Notice 2020-65, employers who opt into the deferral program will be required to collect the deferred taxes ratably from their employees during a four month repayment period beginning on January 1, 2021, through increased withholding. Accordingly, during the repayment period, employers will be required to withhold 12.4% from their employees’ paychecks, rather than the normal 6.2%, to repay the payroll tax liability accumulated from September to December. The guidance does not indicate how an employer should collect the deferred taxes from an employee who terminates his or her employment prior to the end of the repayment period but indicates that employers may make other “arrangements … to collect the total [deferred tax amount] from the employee,” if necessary.

The guidance offered on Friday indicates that the Treasury intends to put the onus of repayment on the employer, with the employer potentially subject to interest, penalties, and additions to tax beginning on May 1, 2021, if the employer is unable to collect the accrued tax liability from its employees. Accordingly, given the voluntary nature of the deferral, the potential liability involved, and the costs and complexity associated with upgrading their payroll systems to accommodate the deferral, employers have a strong incentive to opt out and continue withholding for now.

To the extent an employer does want to participate in the tax deferral, the employer should consider establishing a procedure to allow eligible employees to opt in to the deferral. This procedure should require any employee opting in to provide the employer with a written and signed statement that:

  1. Acknowledges that any deferred taxes will come due in 2021.
  2. Authorizes the employer to withhold tax at a double rate, consistent with the guidance provided in Treasury Notice 2020-65, for those pay periods falling in the four-month repayment period.
  3. Agrees that in the event the employee’s employment is terminated prior to the end of the repayment period, for any reason, the employer can set off any remaining amount owed to the employee by the amount of outstanding deferred taxes, that the employee will be liable for any remaining amount, and the employee will reimburse the employer for any associated liability, including penalties and interest, as necessary.

Employers who decide to establish such an opt-in procedure should consult with counsel to ensure compliance with state labor laws.


For more information on this alert and its impact on your business, please call 405.552.2472 or email me.

Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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U.S. Dept. of Labor releases paid leave guidance for employees with children returning to school

Janet Hendrick

Janet Hendrick is an experienced employment litigator who tackles each of her client’s problems with a tailored, results-oriented approach.

The U.S. Department of Labor issued additional guidance on Thursday, Aug. 28 regarding employees taking paid leave under the FFCRA. This update from the DOL comes soon after the United States District Court for the Southern District of New York issued an opinion invalidating four DOL regulations interpreting the FFCRA: (1) the “work-availability” requirement; (2) the definition of a “health care provider”; (3) the intermittent leave regulation; and (4) the documentation requirements.[1] Thus, the new guidance indicates that the DOL will follow and has adopted the New York Federal Court’s opinion.

For employees who have children returning or who have returned to school, DOL added the following three Families First Coronavirus Response Act Questions and Answers to help employers and employees understand under which circumstances employees may take paid leave of work.

  • My child’s school is operating on an alternate day (or other hybrid-attendance) basis. The school is open each day, but students alternate between days attending school in person and days participating in remote learning. They are permitted to attend  school only on their allotted in-person attendance days. May I take paid leave under the FFCRA in these circumstances? (added 08/27/2020)

Yes, you are eligible to take paid leave under the FFCRA on days when your child is not permitted to attend school in person and must instead engage in remote learning, as long as you need the leave to actually care for your child during that time and only if no other suitable person is available to do so. For purposes of the FFCRA and its implementing regulations, the school is effectively “closed” to your child on days that he or she cannot attend in person. You may take paid leave under the FFCRA on each of your child’s remote-learning days.

  • My child’s school is giving me a choice between having my child attend in person or participate in a remote learning program for the fall. I signed up for the remote learning alternative because, for example, I worry that my child might contract COVID-19 and bring it home to the family. Since my child will be at home, may I take paid leave under the FFCRA in these circumstances? (added 08/27/2020)

No, you are not eligible to take paid leave under the FFCRA because your child’s school is not “closed” due to COVID–19 related reasons; it is open for your child to attend. FFCRA leave is not available to take care of a child whose school is open for in-person attendance. If your child is home not because his or her school is closed, but because you have chosen for the child to remain home, you are not entitled to FFCRA paid leave. However, if, because of COVID-19, your child is under a quarantine order or has been advised by a health care provider to self-isolate or self-quarantine, you may be eligible to take paid leave to care for him or her. See FAQ 63.

Also, as explained more fully in FAQ 98, if your child’s school is operating on an alternate day (or other hybrid-attendance) basis, you may be eligible to take paid leave under the FFCRA on each of your child’s remote-learning days because the school is effectively “closed” to your child on those days.

  • My child’s school is beginning the school year under a remote learning program out of concern for COVID-19, but has announced it will continue to evaluate local circumstances and make a decision about reopening for in-person attendance later in the school year. May I take paid leave under the FFCRA in these circumstances? (added 08/27/2020)

Yes, you are eligible to take paid leave under the FFCRA while your child’s school remains closed. If your child’s school reopens, the availability of paid leave under the FFCRA will depend on the particulars of the school’s operations. See FAQ 98 and 99.

These changes show that employer compliance with the New York Federal Court opinion is crucial – even for employers outside of that jurisdiction. The DOL could continue to release new guidance based on other Federal Court decisions examining FFCRA regulations.

[1] State of New York v. United States Dep’t of Labor, 20-CV-3020 (S.D.N.Y. 2020). A copy of the opinion is located at: https://www.fmlainsights.com/wp-content/uploads/sites/813/2020/08/State-of-NY-v.-USDOL.pdf.


For more information on this article and its impact on your business, please call 214.615.6391 or email Janet A. Hendrick.

Phillips Murrah’s labor and employment attorneys continue to monitor developments to provide up-to-date advice to our clients during the current COVID-19 pandemic.

Stay informed with COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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Teleworking and an Employer’s Woes of Record Keeping

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In this era of Covid-19, many employees who have never had the opportunity to telework are now, out of necessity, teleworking.  This creates many challenges for employers – and none is more important than the employer’s obligation to exercise reasonable diligence in tracking teleworking employees’ hours of work.

The Wage and Hour Division of the United States Department of Labor (WHD) issued Field Assistance Bulletin 2020-5 (FAB 2020-5) today on the employer’s obligation to track a teleworking employee’s hours of work pursuant to the Fair Labor Standards Act (FLSA).

FAB 2020-5 acknowledges the employers’ obligation to pay its employees for all hours worked – even if the work was not requested, if the employer “suffered or permitted” the employee to work.  This includes work performed at home.  If an employer knows or has reason to believe that an employee is performing work, the employer must count those hours as hours worked.  An employers’ knowledge may be either actual or constructive.

Employers may exercise reasonable diligence in tracking an employee’s teleworking hours by having a reasonable reporting procedure for unscheduled time and then compensating employees’ for all reported hours.  An employer may not prevent or discourage employees to accurately report all hours the employee works. If the employee fails to use the reasonable procedure “the employer is not required to undergo impractical efforts to investigate further to uncover unreported hours of work and provide compensation for those hours.”  If an employee fails to report unscheduled hours worked through the employer’s established procedure, the employer is generally not required to investigate further to uncover unreported hours worked.

FAB 2020-5 explores when an employer has “reason to believe that an employee is performing work.”  An employer has actual knowledge of the employees’ regularly scheduled hours, and an employer may have actual knowledge of hours worked, through employee reports or other notifications.  An employer has constructive knowledge if the employer should have acquired knowledge of such hours through reasonable diligence.  Reasonable diligence is defined as what the employer should have known – NOT what the employer could have known.  “Though an employer may have access to non-payroll records of employees’ activities, such as records showing employees accessing their work-issued electronic devices outside of reported hours, reasonable diligence generally does not require the employer to undertake impractical efforts such as sorting through this information to determine whether its employees worked hours beyond what they reported.”  Examples given of impractical efforts included in FAB 2020-5 included sifting through CAD records and phone records to determine if an employee was working unreported hours. However, Bulletin 2020-5 does not give a definitive rule that an employer never has to consult records outside of timekeeping records, noting it depends on the circumstances, and there may be instances where an employer’s non-timekeeping records may be relevant to issue of constructive knowledge of an employee’s unreported work hours.

In order for an employer to leverage the most protection from an employee seeking wages for unreported hours, an employer should:

  1. Have a reasonable policy/procedure setting forth clearly that an employee is to report all hours worked, whether scheduled or unscheduled.
  2. The employer should not discourage an employee from utilizing the procedure.
  3. The employer should train on the policy, or otherwise assure that employees are aware of the procedure, and when to use the procedure.

If an employer undertakes these steps, and an employee fails to utilize the procedure to report unscheduled hours worked, the employer’s failure to pay for the unreported hours worked should not be a violation of the FLSA.


For more information on this alert and its impact on your business, please call 405.552.2453 or email me.

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New York Federal Court invalidates department of labor FFCRA regulations creating potential nationwide ramifications

Courthouse in lower ManhattanBy Phoebe B. Mitchell

On August 3, 2020, the United States District Court for the Southern District of New York invalidated multiple Department of Labor (DOL) regulations interpreting the Families First Coronavirus Response Act (FFCRA), Congress’ response to the COVID-19 pandemic.  The FFCRA provides paid leave to employees unable to work during the coronavirus crisis. Congress charged the DOL with issuing FFCRA regulations, with the final regulations being published on April 1, 2020 (85 Fed. Reg. 19,326) (“Final Rule”). Shortly after, the State of New York sued the DOL, claiming it exceeded its statutory authority and unlawfully denied leave to eligible employees.  The Southern District of New York agreed with the State of New York, voiding four FFRCA regulations:

1) “Work-availability” requirement

2) Definition of “health care provider”

3) Intermittent leave

4) Documentation requirements

“Work-Availability” Requirement

The two major provisions of the FFCRA, the Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (EFMLEA), apply to employees who are unable to work due to the COVID-19 pandemic. However, the DOL’s final rule implementing the FFCRA excludes employees who are unable to work because their employers do not have work for them.

The court stated that this limitation is “hugely consequential” for employees whose employers have temporarily shut down due to the pandemic, and thus, have no work for their employees. By invalidating this DOL regulation, the court held the DOL cannot require that employees actually be working in order to take FFCRA leave. In turn, this could subject employers, including employers who were forced to temporarily cease operations due to state or local orders, to claims by furloughed or laid-off employees.

Definition of “Health Care Provider”

Under the FFCRA, an employer may elect to exclude “health care providers” from leave benefits. Thus, the DOL’s definition of “health care provider” could have large ramification for many employers. In its final rule, the DOL defined “health care provider” as:

“anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, Employer, or entity. This includes any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions”

and

“any individual employed by an entity that contracts with any of these institutions described above to provide services or to maintain the operation of the facility  where that individual’s services support the operation of the facility, [and] anyone employed by any entity that provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, or treatments.”

Final Rule at 19,351 (§ 826.25).

The court noted, and the DOL conceded, that this expansive definition, in practice, could include even an English professor, librarian or cafeteria manager at a university with a medical school. Thus, the court held that this definition could not stand. In so deciding, the court reasoned that even employees with “no nexus whatsoever” to healthcare services would be exempt from FFCRA leave.

Intermittent Leave

The DOL’s Final Rule significantly limited intermittent leave under the FFCRA. Intermittent leave means leave taken in separate periods of time, rather than one continuous period. Under the rule, an employee could only use intermittent leave if: (1) the employee and employer agree to the use of intermittent leave; and (2) the use is limited to the employee’s need to care for a child whose school or place of care is closed, or where child care is unavailable.

The court agreed that intermittent leave should not be allowed in situations where the employee is at high risk for spreading the virus to other employees. For example, if an employee is showing symptoms of COVID-19, or caring for a family member showing symptoms of COVID-19, the employee should not be allowed to take intermittent leave, but rather must take continuous paid sick leave until that leave is exhausted or the employee no longer has a reason to be on leave.

However, the court disagreed with the DOL’s interpretation that the employer and employee must agree to the use of intermittent leave. The court held that the regulation “utterly fails to explain why employer consent is required” for an employee to take intermittent leave. Thus, the court ruled that an employer’s consent is not required for an employee to take intermittent leave under the FFCRA.

Documentation Requirement

The DOL’s Final Rule requires employees to submit documentation to their employer prior to taking leave indicating the reason for leave, the duration of the requested leave, and, when applicable, the authority for the isolation or quarantine order qualifying them for leave.

In contrast, the FFCRA states that an employer may require an employee taking leave under the EPSLA to provide reasonable documentation after the employee’s first day of leave. Further, the statute provides that an employee taking leave under EFMLA must provide the employer with notice of leave as is practicable under the circumstances.

The New York court held that, due to the specific notice requirements set out in the statute, the DOL exceeded its authority in requiring that an employee provide documentation before taking leave. Striking down this regulation, however, did not affect the FFCRA’s original notice requirements mandating documentation after an employee takes leave under the statute.

While this decision came from a federal New York court, it could have nationwide ramifications. The decision could prompt the DOL to issue new regulations, which, of course, would be implemented across the United States. Alternatively, the DOL could choose to appeal the decision. Currently, it is unclear if this decision will be applied retroactively. As always, but especially In light of this decision, employers must be vigilant when making decisions regarding employee leave under the FFCRA.

Phillips Murrah’s labor and employment attorneys continue to monitor developments to provide up-to-date advice to our clients during the current COVID-19 pandemic.

Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.


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For more information on this alert and its impact on your business, please call 405.606.4711 or email me.

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Does COVID-19 constitute a material adverse effect?

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on August 6, 2020.


By Phillips Murrah Attorney Travis E. Harrison

Travis Harrison

Travis E. Harrison is a transactional attorney who represents individuals and both privately-held and public companies in a wide range of transactional matters.

In addition to a vast human toll, COVID-19 has wreaked havoc on businesses, markets and supply chains. With infections still spreading, businesses have suffered cash and liquidity constraints and anticipate such suffering to continue.

The pandemic also presents unique risks to parties in acquisition agreements, such as risks concerning the financial viability of the target company. Parties often address these risks by including material adverse effects, or MAE, clauses.

Generally speaking, an MAE is an event, circumstance, change or effect that presents a material threat to the business of the target company. MAE clauses account for this possibility and allocate risk among the parties.

Such clauses are frequently used as conditions to closing and qualifiers to the seller’s representations. If the target company suffers an MAE as defined in the agreement, the clause allows the buyer to unilaterally terminate the deal without being considered in breach of contract. The seller can qualify representations made about the condition of the target company, making it more difficult for a buyer to assert a breach. Also, exclusions to the definition of an MAE are identified, such as industrywide market conditions.

One increasingly common issue is whether COVID-19 constitutes an MAE. The following questions may help determine the answer and assist parties in the negotiation stages:

  • Are there MAE exclusions such as epidemics, pandemics and natural disasters?
  • Has COVID-19 resulted in unique issues for the target company that are disproportionate to other companies in the same industry?
  • Is the buyer obligated to use certain efforts to close the deal notwithstanding events that affect the financial condition of the target company?
  • What other limitations apply to an MAE? For example, can events only occurring after executing the agreement qualify as an MAE?
  • Have the parties contractually shifted the burden to the seller to prove that an MAE has not occurred?

While these questions may provide guidance on the issue, establishing whether an MAE has occurred is a highly fact-intensive issue that depends on the unique circumstances involved and the specific language used in the acquisition agreement. It should also be noted that buyers have faced a significant burden in court to show that any event meets the criteria of an MAE. As more parties litigate the issue, the courts will play an important role in establishing precedent that will shape how parties negotiate acquisition agreements.

Travis E. Harrison is an attorney with the law firm of Phillips Murrah.

What is the status of evictions and foreclosures in Oklahoma amidst the COVID 19 pandemic?

By Gretchen M. Latham

In March 2020, the State Supreme Court entered an Order extending statutory deadlines, which included an extension of any answer deadline on pending civil cases. For foreclosure actions, that means many borrowers were given additional time to reply to a Petition in Foreclosure.

However, even though the State Supreme Court subsequently entered additional COVID 19 related orders, the deadline extension has now expired, and some lenders are resuming the foreclosure process. The same is true for eviction matters, which were not put on hold, but rather, the landlord was required to state whether the action at issue was subject to the CARES Act, which covered certain types of transactions.

Gretchen Latham Web

Gretchen M. Latham’s practice focuses on representing creditors in foreclosure, bankruptcy, collection and replevin cases.

The result of these events is that landlords and lenders are likely to begin resuming both evictions and foreclosures, but they should do so only if allowed under existing law and recent legislation.  The need to check on current status of legislation is becoming even more important, as lawmakers in Washington are looking to extend federal employment benefits and the moratorium on evictions.  The situation is ever-changing, and having a complete knowledge of the law is advisable before beginning any eviction or foreclosure.

This is especially true given the short timeline for evictions in Oklahoma. While many landlords opt to undertake these actions on their own – and are permitted to do so – now more than ever it is critical to be fully aware of the changing legal landscape and the uncertainty of when, or if, COVID 19 will be brought to a manageable level. Landlords are wise to be fully aware of their options when the hard decision to evict must be made.

The same is true for foreclosures, where lenders may be required to include a statement as to whether the mortgage loan in question is subject to the CARES Act and may have to provide the Court with additional information when seeking judgment.  For many loans, foreclosures were placed on hold for a period of time. However, this is not true of all loans and is not in place in every state. The differences between what one state has done vs. the choice of a different state can be confusing to lenders, making it essential for lenders to maintain contact with their attorney regarding the status of foreclosures in any given state.

For Oklahoma, some foreclosures are proceeding on schedule now that the extension of statutory answer deadlines has expired.  For lenders that have not yet resumed foreclosures actions in the Sooner State, the time has come to readjust the lawsuit timeline.

Lenders and landlords are wise to sit down with an attorney to talk over their options when these hard foreclosure and eviction decisions must be made.


To discuss your options, contact Gretchen Latham at the contact information below:

Gretchen M. Latham, Attorney
Phillips Murrah P.C.
EMAIL: gmlatham@phillipsmurrah.com
PHONE: 405.606.4774

Phillips Murrah

Phillips Murrah’s attorneys continue to monitor developments to provide up-to-date advice to our clients during the current COVID-19 pandemic. Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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Equine Estate Planning: What if your horses outlive you?

The following column was originally published in OklahomaHorses Magazine’s July/August 2020 issue.


Kendra Norman Web

Kendra M. Norman represents individuals and businesses in a broad range of transactional matters.

By Phillips Murrah Attorney Kendra M. Norman

It is not an easy topic of discussion, but as a horse owner, it is important to consider the care of your horses after your passing. To ensure proper care and management, it is imperative to make equine-specific prior arrangements as a part of your estate planning.

Careful planning and sound legal advice are central to ensuring the well-being of your horses after your life. Why be so diligent and thorough? The best answer may be to consider what could happen if a horse owner does not take the time and put in the energy to plan appropriately.

In the wrong circumstances, a horse’s fate is up in the air. Without specific guidance and resources set forth in an estate plan, a beneficiary may be surprised by what it takes to appropriately care for a horse or multiple horses. If the beneficiary has little knowledge or interest in caring for them, the horses may not be provided for in the way you desire.

While any estate plan is specific to the particular needs and desires of the person doing the planning, when it comes to planning for horses there are two general considerations with which to begin. First, leave a responsible person in charge with the required knowledge to care for your horse and an ability to make good decisions. Second, carefully specify and plan for the outcome you want for your horses.

 

WHO WILL TAKE OWNERSHIP?

There are several options when considering how to provide for your horses after your death. You may opt to allow your personal representative or trustee to sell them, or leave them in the care of an individual or entity as a beneficiary. If you choose to leave your horses to a beneficiary, you should choose a trusted, capable person who values your horses at a level with which you are comfortable.

It is advisable to consider whether the beneficiary has the resources to care for them. Are they able to cover associated costs, or are you prepared to provide funds? Based on the age of and your intentions for the horses, how much funding should you provide? Are you leaving land and facilities to the beneficiary, or are they in the position to provide the horses with a proper living condition? Over time, how might the beneficiary’s circumstances change that could affect the horses’ future? These are all important factors that you should discuss with your attorney, and finding the right person to trust with such responsibility is an important personal decision.

When planning, gather specific information that the beneficiary will need, such as the health history of all horses, your veterinarian’s name, and costs associated with temporary and permanent care, as well as setting aside required funds, if necessary. Even if your estate plan calls for the horses to be sold, it may be some time before the sale can occur. In the interim, an effective estate plan will take this into account. All aspects need to be well thought out, clear, and specific to protect the horses’ quality of life.

 

WILL OR TRUST?

Another critical decision is how you should structure the equine-related portion of your estate planning. Generally speaking, there are two vehicles for planning an estate that ensure the intensions of the decedent: a will and a trust.

With respect to a will, it is important to note that the estate will probably be required to go through the probate process to verify the legality of the will and ensure distribution according to the decedent’s intentions. Probate is a public, costly and time-consuming court processes that often takes up to nine months to several years, depending on the complexity of the estate and whether any family members challenge the validity of the will.

While probate assets are tied up during administration, the will’s executor has a fiduciary responsibility to care for the estate’s assets, including proper care for the horses. Unless the beneficiary of the horses and the executor are the same person, this could be problematic. Additionally, a will takes effect only upon death, which leaves in question what would happen if you become ill or incapacitated.

A living trust, also known as a revocable trust, is a popular alternative for numerous reasons, including the flexibility and privacy it offers. A living trust can be established for your benefit during your lifetime and provide for the disposition of your assets, including your horses, upon your death. You can specify the beneficiaries who will receive your horses after your death, and money can be set aside in a trust account to fund their care. Additionally, the trust may provide directions for your horses if you become ill or incapacitated, and your horses can be transferred by the successor trustee according to your wishes immediately upon death, avoiding a public probate and related costs and court delays.

Importantly, a living trust must be fully funded to avoid probate. You must transfer your assets to it and change the titles of assets to the name of the trust. A trust and its trustee cannot control any assets that are not transferred to the trust, so it is important to make sure the necessary assets are in the trust and not owned in your personal name.

When funding a trust for the future benefit of your horses, consider that when the trust runs out of money, the financial requirements fall to the beneficiary who becomes the caregiver. If they are unwilling or unable to care for them, the outcome may not be what you had originally intended.

 

PET TRUST

In some states, including Oklahoma, a pet trust may be included in a living trust, or as a stand-alone trust. In 2010, Oklahoma Governor Brad Henry signed HB 1641, which validates trusts for the care of domestic pets. Under such an arrangement, rather than your horse being considered an estate asset within a living trust, you can create a trust where your horses are the initial beneficiary for the rest of their lives.

In a pet trust, a trustee is assigned and compensated for the caregiving and must adhere to accounting requirements. You must also assign a separate trust enforcer to ensure the trustee is abiding by the obligations set forth in the trust. Additionally, you must name a remainder beneficiary. After the horses have passed away or the obligations of the trust are otherwise met, any leftover funds are distributed to the remainder beneficiary or beneficiaries under the guidance of the trust.

This type of trust is beneficial to horse owners, in particular, to ensure the beneficiary will have the financial ability to give the horses the care and treatment that you desire. If a caring and responsible trustee lacks the resources to care for the horses, such a trust will eliminate this issue.

Properly planning for the well-being of your horses in the event that they outlive you is a complicated investment in time, energy and money, but for horse lovers, it is all well-spent. An attorney can help you by drawing up the legal documents stating your intentions to ensure your equine interests are handled in the way you intend.

Kendra M. Norman is an attorney at Phillips Murrah who represents clients in a broad range of transactional matters, including estate planning and business succession.

ALERT: Supreme Court ruling impacts property and title rights across large portion of Oklahoma

SCOTUS Ruling graphicToday, the Supreme Court ruled nearly half of the State of Oklahoma is an Indian Reservation.

From a New York Times article:

  • The 5-to-4 decision, potentially one of the most consequential legal victories for Native Americans in decades, could have far-reaching implications for the 1.8 million people who live across what is now deemed “Indian Country” by the high court.
  • Justice Neil M. Gorsuch said that Congress had granted the Creek a reservation, and that the United States needed to abide by its promises.

The outcome could have far-reaching implications for the State of Oklahoma and its citizens as it relates to property rights and land titles, taxation, and other matters involving tribal affairs.


To discuss how this may affect your business, contact Zac Bradt at the contact information below:

Zachary K. Bradt, Director
Phillips Murrah P.C.
EMAIL: zkbradt@phillipsmurrah.com
PHONE: 405.552.2447

Phillips Murrah

Efficiency programs help reduce energy load, costs

The following column was originally published in The Journal Record on June 30, 2020.


Eric Davis

Eric Davis is an attorney in the Firm’s Clean Energy Practice Group and the Government Relations and Compliance Practice Group. He represents clients in a range of regulatory and energy matters.

By Phillips Murrah Attorney C. Eric Davis

Summer’s here. That means warmer weather – and higher electric bills. However, there are ways to reduce your energy usage and save money. And chances are your utility company already has programs in place to help you do it.

If you’re unfamiliar with these programs, you’re not alone. Most people don’t think to turn to their electric company to learn how to use less energy. But in fact, utilities across the state, including Oklahoma’s two largest, have a variety of programs to help consumers avoid energy waste and lower their bills. Despite their effectiveness, many customers are unaware of these programs, and this knowledge gap was a topic of discussion at a recent multi-day Town Hall held by statewide nonprofit The Oklahoma Academy. The conclusions from the Town Hall were subsequently announced at a press conference with elected officials.

At the press conference, The Oklahoma Academy released recommendations concerning the state’s energy future. These included increasing Oklahomans’ awareness of energy efficiency and demand response programs that are designed to avoid energy waste or shift energy usage to times when the grid is less strained. The aim of the programs is to reduce utilities’ overall electricity demand, which has several benefits. One, it reduces the need, thus expense, for utilities to build additional generation plants and power lines. As a result, associated environmental impacts are reduced and customers’ electricity bills decrease. Moreover, dollar for dollar, experts consider these programs to be among the most cost-effective investments for utilities to serve their load.

So, what types of programs are available? Depending on your utility, you may be eligible to have an energy efficiency consultant visit your home, have your HVAC system tuned up, or even have your home weatherized. Likewise, specialized energy efficiency and demand response programs may be available to commercial and industrial customers, such as rebates for upgrading to more efficient heating, cooling, and lighting systems, or lower rates for customers who shift energy usage to periods when the electric system has more capacity.

Because the costs of these services may be spread among all customers, many times there is no additional cost for those taking advantage of them. So, take the advice of The Oklahoma Academy and explore what programs are out there. You can save money, help the environment, and give the grid a break.

Eric Davis is an attorney at Phillips Murrah and a member of The Oklahoma Academy. Davis also participated in The Oklahoma Academy’s town hall on Oklahoma’s energy future.

Texas Lawyer: Mid-Market Strategy to Achieve Cost Reductions that Clients Seek

On June 14, 2020, Mark E. Golman a Director in Phillips Murrah’s Dallas office, wrote the following article that was published in the Analysis section of ALM/Law.com’s publication, Texas Lawyer:

Logo Texas LawyerMid-Market Strategy to Achieve Cost Reductions that Clients Seek

Legal industry surveys demonstrate the complexity of defining “value” in the legal industry. The exact meaning depends on who you ask, when you ask, and the nature of the circumstances. Fundamentally, the quality of provided services represents one significant indicator of value. However, clients view the cost of those services as an important component of value, which has specific and increasing importance during our current challenging economic times.

Mark Golman portrait image

Mark E. Golman helps clients achieve their strategic objectives and reduce risk in the areas of corporate law, finance and bankruptcy. Mark represents clients in the purchase and sale of businesses and assets, including purchases out of bankruptcy proceedings, financings and contract negotiations.

Informed by strategies that date back to the Great Recession of the previous decade, clients are understandably focusing on lowering their legal expenses and looking to mid-market law firms to achieve it. Simply put, it is a win-win – clients find more attractive billing rates by shifting Big Law work to mid-market firms, and mid-market firms are increasingly in a strong competitive position.

Prior to the pandemic crisis, our firm devised a strategy whereby major-market clients can achieve desired cost reductions while retaining the quality of a top-tier firm: location, location, location. Phillips Murrah is a 34-year-old firm headquartered in Oklahoma City. Two years ago, the firm opened its Dallas office to not only expand its footprint, but to also pass along substantial cost savings opportunities to clients as a result of lower comparative overhead costs.

As a result of this model, clients in Texas and across the country receive services from experienced shareholders whose billing rates are usually lower than those of first-year associates at large firms. Providing more experience at a lower billing rate improves efficiency and enhances value for our clients.

Of our more than 75 attorneys, six practice full-time from the Dallas office. Additionally, several of our Oklahoma City attorneys who previously practiced in Texas bring additional relationships and synergies to the firm. With Dallas as a prime example, we deliver a breadth and depth of service offerings as well as experienced attorneys at what amounts to bargain rates.

Since Phillips Murrah opened our Dallas office, more than half of our Oklahoma lawyers have worked on relationships managed by a Texas lawyer while each member of our Dallas office has worked on relationships managed from Oklahoma City. The collaborative opportunities provided by this low-overhead geography is accentuated by Oklahoma City being as close or closer to Dallas as Austin and Houston.

This strategy allows us to offer the best of both worlds to clients in Texas and beyond: top-tier legal services at a reasonable cost.

Mark E. Golman, a Phillips Murrah Shareholder, helps clients achieve their strategic objectives and reduce risk in the areas of corporate law, finance and bankruptcy. Mark represents clients in the purchase and sale of businesses and assets, including purchases out of bankruptcy proceedings, financings and contract negotiations.


Learn more HERE.

To contact Mark E. Golman, you can EMAIL or call 214.434.1919.

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Reprinted with permission from the June 14, 2020 edition of the Texas Lawyer © 2020 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.

Supreme Court Rules Title VII Protects Gay and Transgender Employees

By Lauren Barghols Hanna

Phillips Murrah attorney Lauren Hanna

Lauren Barghols Hanna

Earlier this morning, the United States Supreme Court issued a landmark ruling that an employer who fires or otherwise discriminates against an employee for being gay or transgender violates Title VII of the Civil Rights Act of 1964.

In Bostock v. Clayton County, Georgia, the Supreme Court heard three cases in which employers had fired long-term employees simply for being gay or transgender.  A Georgia county employee was fired for “conduct unbecoming” an employee after he joined a gay recreational softball league.  A funeral home terminated an employee who presented as a male when she was hired, after the employee advised her manager that she planned to “live and work full-time as a woman.”  A skydiving company fired a skydiving instructor days after he advised a customer that he was gay.

In a 6-3 decision, the Supreme Court held that Title VII’s prohibition against discrimination “because of sex” prevents an employer from taking any adverse actions against employees on the basis of gender, sexual identity, or sexual expression.  Justice Gorsuch, author of the majority opinion, unequivocally declared that “[a]n employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex.  Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.”

The Bostock opinion considers an employer with two employees, both of whom are attracted to men.  The employees are materially identical in all respects, except that one is a man and the other is a woman.  If the employer fires the male employee because he is attracted to men, the employer necessarily is discriminating against him for the traits or actions it tolerates in the female employee.  Similarly, if an employer fires a transgender person because she was identified as male at birth but now identifies as a female, the employer is firing the individual for displaying traits or actions it would otherwise tolerate in an employee identified as female at birth.  Employers cannot discipline employees for being “insufficiently feminine” or “insufficiently masculine” without violating Title VII.

Title VII of the Civil Rights Act outlawed discrimination in the workplace on the basis of race, color, religion, sex, or national origin.  The Supreme Court noted that the legislators who adopted the Act in 1964 may not have anticipated this particular outcome, but that those same legislators may also not have anticipated that the Act would ultimately prohibit discrimination on the basis of motherhood, prohibit sexual harassment of female employees, and—eventually–prohibit sexual harassment of male employees to the same extent as female employees.  But, as Justice Gorsuch noted, the phrase “because of…sex” is clear and unambiguous; thus, the “limits of the drafters’ imagination supply no reason to ignore the law’s demands.”

Today, the Supreme Court clarified that “[a]n individual’s homosexuality or transgender status is not relevant to employment decisions” and that “[a]n employer who fires an individual merely for being gay or transgender defies the law.”

See the United States Supreme Court opinion HERE.


Phillips Murrah stands ready to assist employers in ensuring that employee handbooks and hiring and disciplinary practices are fully compliant with Title VII and all relevant employment laws.

Contact us by EMAIL or call 405.235.4100.

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SB 1928: Key changes to ABLE laws make curbside sales and delivery of alcohol permanent

By Phillips Murrah Attorneys Ellen K. Spiropoulos and Justin G. Bates

In response to the outbreak of the novel coronavirus, and in keeping with the sweeping changes to modernize Oklahoma’s liquor laws effective in October 2018, the ABLE Commission temporarily authorized curbside and delivery of beer, wine and spirits by liquor stores, beer and wine by grocery and convenience stores, and by restaurants holding the appropriate licenses.

Phillips Murrah attorney Ellen SpiropoulosLauren Hanna

Ellen assists local and national businesses in the restaurant, entertainment and hospitality industries with obtaining applicable operating licenses and permits for food and alcoholic beverage service, as well as any related compliance or enforcement issues.

The passage of Senate Bill 1928 in the last days of the session, which became law this week, effectively made the ABLE Commission’s previous directives about curbside sales and delivery of alcohol permanent. The key changes to the alcohol laws now expand sales for ABLE licensees effective immediately under the following conditions:

  • Liquor stores can sell beer, wine and spirits in sealed, original containers via curbside and delivery.
  • Grocery and convenience stores can sell beer and wine (up to 15% alcohol by volume) in sealed, original containers via curbside and delivery.
  • Restaurants, bars and clubs can sell beer and wine in closed packages via curbside and delivery.
  • Small brewers and small farm wineries may sell curbside-only alcoholic beverages produced by the brewery or winery in sealed, original containers.
  • Payment can be made by cash, check, transportable credit card devices and advance online payment methods.
  • Curbside sales and all deliveries must be made by ABLE-licensed and trained employees of the business.
  • No third-party services can be used for any deliveries.

Some states already permit third-party delivery sales from liquor stores, as well as drive-thru and to-go sales of alcoholic beverages from restaurants. As a result of restaurant dining closures and the need for social distancing, several more states are, at least temporarily, expanding alcohol delivery options and sales of cocktails to-go. The Oklahoma legislature was not willing to go that far.

Nevertheless, the actions taken by the ABLE Commission since March, and the bills passed with overwhelming majorities by the Oklahoma House and Senate this session, are continuing advances in the modernization of Oklahoma’s liquor laws.

It is hard to believe that less than two years ago, Oklahoma still had dry counties and only 3.2 beer in grocery and convenience stores. We have come a long way and there is no telling where the trail will end. Cheers!


For more information on this alert and its impact on your business, please contact:

Ellen Keough Spiropoulos is an Of Counsel attorney at Phillips Murrah who assists local and national businesses in the restaurant, entertainment and hospitality industries with obtaining applicable operating licenses and permits for food and alcoholic beverage service, as well as any related compliance or enforcement issues. Contact her by phone, 405.552.2422 or by email.

Justin G. Bates is a litigation attorney who represents individuals and both privately-held and public companies in a wide range of civil litigation matters. Contact him by phone, 405.552.2471 or by email.

Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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Governor Signs S.B. 300 Providing Immunity for Physicians, Hospitals and Other Providers

By Phillips Murrah Healthcare Attorney Mary Holloway Richard

Since the first emergency orders signed by Governor Stitt, Oklahoma physicians, hospitals and other healthcare providers have anticipated the emergency granting of some measure of statutory immunity to support care during the COVID-19 pandemic.  On April 20, the Governor amended Emergency Order 2020-13 but stopped short in filling the gap needed to support the healthcare system at this challenging time leaving the task to the legislature upon its return this month.

Oklahoma Opioid Decision by Phillips Murrah healthcare attorney Mary Holloway

Mary Richard is recognized as one of pioneers in health care law in Oklahoma. She has represented institutional and non-institutional providers of health services, as well as patients and their families.

On May 6, the Senate approved S.B. 300 granting limited immunity to providers on the front lines of this epidemic.  The bill provides for civil immunity “…for any loss or harm to a person by an act or omission by the facility or provider that occurs during the COVID-19 public health emergency…” so long as the act or omission did not result from the provider’s or facility’s “willful or wanton misconduct” in providing the services.  The grant of immunity excludes immunity from liability for provision of services to people who do not have suspected or confirmed COVID-19 diagnoses at the time the care was provided.  The grant of immunity expires on October 31, 2020, unless amended by the legislature.

The statute adopts the following definition of Health Care Providers from the Catastrophic Emergency Powers Act 63 O.S. §6104(6):

  • Physicians

  • Dentists

  • Pharmacists

  • Physician Assistants

  • Nurse Practitioners

  • Registered and Other Nurses

  • Paramedics

  • Laboratory Technicians

  • Ambulance and Emergency Medical Workers

The statute also adopts the following expansive definition of Health Care Facilities also from 63 O.S. §6104(5) of the Catastrophic Health Emergency Powers Act:

  • Hospitals

  • Ambulatory Care Facilities

  • Outpatient Facilities

  • Public Health Clinics and Centers

  • Dialysis Centers

  • Intermediate Care Facilities

  • Mental Health Centers

  • Residential Treatment Facilities

  • Skilled Nursing Facilities

  • Special Care Facilities

  • Medical Laboratories

  • Adult Day Care

These facilities, not an exclusive or complete list, may be proprietary or non-proprietary, non-federal buildings.  Further, property used in connection with such facilities may be included such as pharmacies, offices and office buildings for persons engaged in the health care professions, research facilities and laundry facilities.

The statute defines “Health care services” as those provided by a health care facility or provider, or by an individual working under the supervision of such a facility or provider, related to “…the diagnosis, assessment, prevention, treatment, aid, shelter, assistance, or care of illness, disease, injury or condition.”

In summary, the act provides for immunity for civil liability for loss or harm to a person with a suspect at or confirmed COVID-19 diagnoses caused by the provider or facility during the pandemic as long as the act or omission occurred during the course of treatment including decision-making, staffing, capacity of space of equipment in response to the epidemic and as long as the act or omission was not the result of the gross negligence or willful or wanton misconduct of the provider or facility.  The statute do not grant such immunity to providers of services to individuals who do not have suspected or confirmed cases of COVID-19.


For more information on this alert and its impact on your business, please call 405.552.2403 or email me.

Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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Returning to Work – A Post-Pandemic Workplace Safety Guide

By Phillips Murrah Attorneys Janet Hendrick and Phoebe Mitchell

As stay-at-home orders have begun to expire in recent weeks, more than half of the states – including Oklahoma and Texas – have lifted restrictions on businesses. With many Americans returning to work after months at home due to the COVID-19 virus pandemic, employers should be aware of claims relating to workplace reentry. Employers can anticipate novel causes of action, including lawsuits alleging a failure to provide a safe workplace.

Phillips Murrah Director Janet Hendrick portrait

Janet Hendrick is an experienced employment litigator who tackles each of her client’s problems with a tailored, results-oriented approach.

For example, in New York, nurses’ unions have filed multiple lawsuits against the state, claiming “grossly inadequate” protections against the virus in the workplace. These suits likely mark a trend, as employees may attempt to hold their employers liable for lost work, hospitalizations, and even deaths caused by COVID-19, especially where employees may have contracted the virus in the workplace.

The Occupational Safety and Health Administration (OSHA), the federal agency charged with regulating workplace safety, has not issued new guidance relating to airborne diseases in response to the coronavirus pandemic. Instead, the agency has relied on its “general duty” clause, which mandates that employers provide a place of employment “free from recognized hazards that are causing or likely to cause death or serious physical harm” to their employees.  This simply means that employers have a general duty to provide a safe working environment for their employees.

On April 10, 2020, OSHA did issue new guidance regarding recording cases of COVID-19 in the workplace. Under the Occupational Safety and Health Act, employers must record instances of illnesses contracted in the workplace, or “occupational illnesses.” OSHA’s new guidance provides that COVID-19 is a recordable illness, and employers will be responsible for recording cases of COVID-19 in the workplace if three criteria are met:  (1) the case is a “confirmed case” of COVID-19 as defined by the CDC; (2) the case is “work-related” as defined by 29 C.F.R. § 1904.5; and (3) the case involves one or more of the general recording criteria set forth in 29 C.F.R. § 1904.7.

Phillips Murrah attorney Phoebe B. Mitchell portrait

Phoebe B. Mitchell is a litigation attorney who represents individuals and both privately-held and public companies in a wide range of civil litigation matters.

(1) “Confirmed case”

The CDC defines a confirmed case of COVID-19 as “an individual with at least one respiratory specimen that tested positive for SARS-CoV-2, the virus that causes COVID-19.”

(2) “Work-related”

As defined by OSHA regulations, a case is “work-related” if “an event or exposure in the work environment either caused or contributed to the resulting condition or significantly aggravated a pre-existing injury or illness.”

(3) General recording criteria

As defined by OSHA regulations, a case meets one or more of the general recording criteria if it results in any of the following: “death, days away from work, restricted work or transfer to another job, medical treatment beyond first aid, or loss of consciousness.” Further, the case also meets the general recording criteria if it “involves a significant injury or illness diagnosed by a physician or other licensed health care professional, even if it does not result in death, days away from work, restricted work or job transfer, medical treatment beyond first aid, or loss of consciousness.”

Because of community transmission of COVID-19, the guidance states that the only employers who must make the above work-relatedness determinations with relation to cases of COVID-19 in the workplace are the healthcare industry, emergency response organizations (which includes emergency medical, firefighting and law enforcement services), and correctional institutions. OSHA will not require other employers to make these same work-relatedness determinations, unless there is objective evidence that a COVID-19 case may be work-related, and the evidence was readily available to the employer. The guidance is intended to help employers focus on implementation of good hygiene practices and mitigation of COVID-19’s effects in the workplace, rather than forcing employers to make difficult work-relatedness decisions where there has been community spread.

Based on this OSHA guidance and the inevitable surge of litigation in the post-pandemic US, employers should act now to both protect their employees and minimize potential liability.

Before employees return to the workplace, employers should:

1) Create and implement concrete polices and guidelines regarding workplace hygiene, social distancing, face covering usage and reporting of symptoms

2) Monitor employees to ensure compliance with new COVID-19 policies

3) Encourage employees to stay home if they are sick

4) Allow at-risk employees to work from home where possible

5) Allow employees to return to work in phases where possible

6) Close off common areas in the workplace, such as break rooms, in an effort to encourage social distancing

 


For more information on this alert and its impact on your business, please call:

Janet Hendrick is a Shareholder in the Dallas office of Phillips Murrah who specializes in advising and representing employers. (click name for profile page) Contact her by phone, 214.615.6391 or by email.

Phoebe Mitchell is an Associate in the Oklahoma City office of the firm. (click name for profile page) Contact her by phone, 405.606.4711, or by email.

Phillips Murrah’s labor and employment attorneys continue to monitor developments to provide up-to-date advice to our clients during the current COVID-19 pandemic. Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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Affidavit of Support Implications in Divorce in Marriage-Based Immigration

By Cassity B. Gies &  Sajani “Ann” Zachariah
This article originally appeared in the FEB 2020 Oklahoma Bar Journal.

Being the spouse of a United States citizen is the most common way to attain lawful permanent resident status, informally referred to as “getting a green card.” Each year, the United States Citizen and Immigration Services (USCIS) admits more lawful permanent resident statuses through marriage than any other major type of admission. (1) In a country where nearly half of all marriages end in divorce, (2) couples using marriage as grounds for obtaining a green card face special issues during their divorce and even after. Because Oklahoma has one of the highest divorce rates in the country, with as many as two out of every three marriages ending in dissolution, (3) family lawyers should be especially aware of the implications that come through marriage-based immigration.

Phillips Murrah family law attorney Cassity Giles

Cassity practices family law including divorce and separation, custody, and child support issues.

When a principal applicant for lawful permanent resident status seeks to immigrate using their spouse as a sponsor, the sponsoring spouse must submit, amongst a host of other things, an Affidavit of Support. (4) The affidavit is required to show that the immigrant will have adequate means of financial support and will not become a public charge. (5) Form I-864, an Affidavit of Support, is a legally enforceable contract between the federal government and the sponsoring spouse. (6) A sponsoring spouse accepts legal responsibility for financially supporting their alien spouse until they either become a United States citizen, die or are credited with 40 quarters of work (approximately 10 years). Divorce does not end that financial obligation. (7)

Three obligations arise for an I-864 sponsor:

1) the sponsor must reimburse the government for means-tested benefits received by the beneficiary over the obligatory 10-year period;

2) the sponsor must maintain the immigrant spouse at 125% above the federal poverty or at 100% of the federal poverty level for the household if the sponsor is an active military member; and

3) the sponsor must report any change in address to the attorney general and the state in which the sponsored alien lives during the period that the affidavit is enforceable. (8)

Signing an Affidavit of Support puts a sponsor in privity with both the beneficiary spouse and also with the federal government. If at any point before citizenship is granted or the 10 years pass, the beneficiary spouse receives means-tested public assistance from a federal, state or local agency, that agency can legally sue the sponsor and require him to repay the money that the agency provided to the beneficiary. (9) The term “means-tested public benefits” include food stamps, Medicaid, Supplemental Social Security Income (SSI), Temporary Assistance for Needy Families (TANF) and the State Child Health Insurance Program. (10) This area of immigration practice has seen a lot of discussion lately, with recent memorandums released by the Trump Administration criticizing governmental agencies for not properly enforcing reimbursement. (11)

In addition to the privity between the United States and the sponsor, the signor of an Affidavit of Support also obliges themself to the beneficiary and pledges to maintain the spouse at 125% above the federal poverty line. The current federal poverty line for a single household is $12,490, (12) and 125% of that amount results in a promise to maintain the beneficiary at an annual income of $15,612.50.

Several interesting arguments can be crafted by an attorney who is aware of the implications of an Affidavit of Support. Oklahoma courts, albeit in unreported case law, recognize the Affidavit of Support as a cause of action, independent of divorce that can be brought by the beneficiary ex-spouse. (13) Oklahoma case law presently offers no precedent utilizing the Affidavit of Support as a consideration for spousal support awards in divorce proceedings, how-ever, divorce attorneys in other states successfully argue it as both grounds for spousal support or, alternatively, as a separate support obligation apart from the divorce itself.

In Erler v. Erler, a California court order granted separate enforcement of the I-864 pledge of support despite the divorce judgment not recognizing it due to a premarital contract. There, the Turkish ex-wife succeeded in an appellate action to enforce the I-864 obligation. (14)

Thus, under federal law, neither a divorce judgment nor a premarital agreement may terminate an obligation of support. Rather, as the Seventh Circuit has recognized, “[t] he right of support conferred by federal law exists apart from what-ever rights [a sponsored immigrant] might or might not have under [state] divorce law.” We therefore hold that the district court correctly determined that Yashar has a continuing obligation to support Ayla. (15)

Enforcing the obligation as part of an award for spousal support was recognized in Motlagh v. Motlagh. (16) During a divorce, initiated by the sponsoring spouse, the lower court concluded that the I-864 affidavit was not an obligation to pay defendant 125% of the federal poverty line and that the husband was only obliged to act as a “safety net.” This decision was reversed by the court of appeals, holding that the husband was required to satisfy his support obligation by paying whatever amount was necessary for the beneficiary spouse to reach the 125% mark, permitting consideration of all income sources that the beneficiary receives. The court explained that this could be achieved either through a spousal support order arising from the divorce proceedings or a separate I-864 support obligation enforcement action.

Other courts, however, go the opposite direction, finding the I-864 inadequate as grounds for spousal support. In 2014, an Intermediate Washington State Appeals Court shot down the Motlagh argument reasoning that the state’s statutory factors listed for consideration in awards of spousal support do not include an I-864 obligation. (17)

Creative lawyering in this area could help forge a new argument for Oklahoma clients seeking spousal support as more attorneys become aware of the ongoing obligations that the I-864 creates. The argument could also be used to defend against spousal support by pointing out that the obliging spouse will continue to face liability from federal agencies on behalf of any assistance his ex-spouse receives during whatever time remains under the 10-year pledge.

As the Oklahoma immigrant community continues growing, these family law arguments are likely to develop and grow as well, highlighting how many hats a divorce lawyer wears every day as we answer questions ranging from immigration policies to tax concerns. Knowing all these legal issues while balancing a client’s emotional stress during one of the hardest times of their lives makes for a well-rounded and well-in-formed family law practice.

ABOUT THE AUTHORS

Cassity B. Gies, associate attorney at Phillips Murrah, is passionate about family law. Her practice focuses on family law including divorce and separation, custody and child support issues. Her experience in immigration, domestic abuse, and employment law provide a comprehensive understanding of collateral matters relating to family law. She graduated summa cum laude from the OCU School of Law in 2019 as a Hatton W. Sumners scholar and represented her graduating class as the William Conger Distinguished Student.

Sajani “Ann” Zachariah immigrated to the United States in 1984 at 5 years old. She graduated from the OCU School of Law in 2011, joining Mazaheri Law Firm in 2012. She practices family law and immigration law, two areas in which she has personal experience.

 


ENDNOTES

    1. Persons Obtaining Lawful Permanent Resident Status By Type And Major Class Of Admission: Fiscal Year, U.S. Dept. Homeland Sec., 2014 to 2016, www.dhs.gov/immigration-statistics/yearbook/2016/table6, (last visited Sept. 16, 2019).
    2. Joshua A Krisch, “Mapping Americans’ Divorce Risk By State Paints an Unnerving Picture,” Fatherly, (June 7, 2018), www.fatherly. com/health-science/american-divorce-rate-state/.
    3. Id.
    4. I-485, Application to Register Permanent Residence or Adjust Status, U.S. Citizenship & Immigration Serv., www.uscis.gov/i-485, (last visited Sept. 16, 2019).
    5. Affidavit of Support, U.S. Citizenship & Immigration Serv., www.uscis.gov/greencard/affidavit-support (last visited Sept. 16, 2019).
    6. Id.
    7. Id.
    8. 8 U.S.C. §1183(a) (2009).
    9. Form I-864P, 2019 HHS Poverty Guidelines for Affidavit of Support, U.S. Citizenship & Immigration Serv., www.uscis.gov/i-864p (last visited Sept. 17, 2019).
    10. Id.
    11. Memorandum on Enforcing the Legal Responsibilities of Sponsors of Aliens, 2019 Daily Comp. Pres. Doc 201900334 (May 23, 2019).
    12. Poverty Guidelines, U.S. Dep’t Health & Human Serv., aspe.hhs.gov/poverty-guidelines (last visited Sept. 18, 2019).
    13. See Schwartz v. Schwartz, No. 04-CV-00770, 2005 WL 1242171.
    14. Erler v. Erler, 824 F.3d 1173, 1177 (9th Cir. 2016).
    15. Id.
    16. 100 N.E. 3d 937, 944 (Ohio App. 2d Dist.2017).
    17. In re Marriage of Khan, 332 P.3d 1016,

 

 

 

 

 

 

CARES Act and independent contractors – How businesses can mitigate risk related to CARES Act unemployment claims

By Phillips Murrah Attorney Martin J. Lopez III 

Below is an expanded version of a Gavel to Gavel column that appeared in The Journal Record on May 14, 2019.

attorney Martin J Lopez III

Martin J. Lopez III is a litigation attorney who represents individuals and both privately-held and public companies in a wide range of civil litigation matters.

Businesses should identify and mitigate risk related to CARES Act independent contractor unemployment claims

In response to the COVID-19 national emergency, Congress has taken the extraordinary measure to allow independent contractors, gig-workers, and self-employed individuals access to unemployment insurance benefits for which they are generally ineligible. This article is geared towards businesses that regularly use independent contractors who may file claims for unemployment insurance benefits—discussing the risks involved and how businesses can mitigate those risks.

Background Regarding Relevant CARES Act Provisions

On March 27, 2020 President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Among other provisions, the CARES Act significantly expands the availability of unemployment insurance benefits to include workers affected by the COVID-19 national public health emergency who would not otherwise qualify for such benefits—including independent contractors. This increased accessibility to unemployment insurance benefits theoretically provides an avenue for a state unemployment agency to find an independent contractor applicant to be an employee. Such a finding introduces the risk of the state unemployment agency assessing unpaid employment and payroll taxes for those a business previously treated as independent contractors. Tangentially, such a finding could serve to establish or bolster independent contractors’ claims in wage and hour litigation.

To qualify as a “covered individual” under the Pandemic Unemployment Assistance (“PUA”) provisions of the CARES Act, a self-employed individual must self-certify that she is self-employed, is seeking part-time employment, and does not have sufficient work history or otherwise would not qualify for unemployment benefits under another state unemployment program. Further, the self-employed individual must certify that she is otherwise able to work and is available for work within the meaning of applicable state law, but is “unemployed, partially unemployed or unable or unavailable to work” because of one of the following COVID-19 related reasons:

  • The individual has been diagnosed with COVID-19 and is seeking a medical diagnosis;
  • A member of the individual’s household has been diagnosed with COVID-19;
  • The individual is providing care for a family member or member of the individual’s household who has been diagnosed with COVID-19;
  • A child or other person in the household for which the individual has primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the COVID-19 public health emergency and such school or facility care is required for the individual to work;
  • The individual is unable to reach the place of employment because of a quarantine imposed as a direct result of the COVID-19 public health emergency;
  • The individual is unable to reach the place of employment because the individual has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • The individual was scheduled to commence employment and does not have a job as a direct result of the COVID-19 public health emergency;
  • The individual has become the breadwinner or major support for a household has died as a direct result of COVID-19;
  • The individual has to quit his or her job as a direct result of the COVID-19 public health emergency;
  • The individual’s place of employment is closed as a direct result of the COVID-19 public health emergency.

If the individual meets the above criterion, she is a “covered individual” and is eligible for unemployment assistance authorized by the PUA provisions of the CARES Act. Such assistance was available beginning January 27, 2020 and provides for up to thirty-nine (39) weeks of unemployment benefits extending through December 31, 2020. Covered individuals’ unemployment benefits are calculated state-by-state, according to each state’s conventional unemployment compensation system. In addition, under the PUA provisions of the CARES Act, covered individuals may receive an additional $600 for each week of unemployment until July 31, 2020.

What Businesses Can Do to Protect Themselves

To counteract the risks discussed above, I recommend a business implement the following best practices when responding to a claim of unemployment by an independent contractor:

  • respond proactively to unemployment claim notices for independent contractors;
  • state clearly in the response that the relevant individual-claimants were independent contractors and not employees of the business;
  • affirmatively state that each independent contractor claimant was an independent contractor to whom the business occasionally (or routinely) provided work, but that it is unable to provide the same volume (or any) work to the individual at present because of the COVID-19 national emergency;
  • specify in the response that the individual’s eligibility for unemployment benefits must be entirely predicated on the PUA provisions of the CARES Act allowing for independent contractor participation in the program; and
  • provide the claimant’s independent contractor agreement to the state unemployment agency.

In providing this information and documentation to the state unemployment agency, the business will be able to demonstrate its independent contractor relationship with the individual. Together with the fact that these individuals’ eligibility to receive unemployment income rests exclusively on relevant CARES Act provisions, the business should be well-positioned to avoid the typical risks that can result from a successful unemployment claim by an independent contractor.

Martin J. Lopez III is an attorney at the law firm of Phillips Murrah.

[UPDATE] SBA, Treasury extended the safe harbor repayment date for PPP loans

In its most recent update to the list of frequently asked questions (FAQs), the Small Business Administration (SBA) and Treasury Department extended the safe harbor repayment date for loans under the Paycheck Protection Program (PPP) established by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

The PPP application form requires borrowers to certify that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” In an effort to address this vague requirement, the SBA and Treasury issued guidance on April 23, 2020 specifying that, while the CARES Act suspends the requirement that borrowers be unable to obtain credit elsewhere, applicants must still certify in good faith that their PPP loan request is necessary. Specifically, FAQ 31 directs borrowers to consider current business activity and the ability to access other sources of liquidity.

The guidance initially provided a safe harbor provision that a borrower who applied for a loan prior to April 24, 2020 and repays the loan in full by May 7, 2020 will be deemed to have made the certification in good faith. The update issued on May 5, 2020 extends the repayment date for the safe harbor to May 14, 2020. According to FAQ 43, borrowers are not required to apply for the extension. FAQ 43 also states that the SBA will provide additional guidance on how it will review the certification.

Link to FAQs:  https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf


Phillips Murrah attorney Kara Laster

Kara K. Laster represents individuals and businesses in a broad range of transactional matters including real estate and mergers and acquisitions.

For more information on this alert and its impact on your business, please call 405.606.4762 or email me.

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SBA, Treasury update PPP reg guidance for laid-off employee forgiveness exclusion

The Small Business Administration and Treasury continue to issue guidance regarding the Paycheck Protection Program (PPP) established by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The most recent update to the list of frequently asked questions (FAQs) addresses whether a borrower’s loan forgiveness amount will be reduced if one of the borrower’s employees turns down an offer to be rehired.

According FAQ 40, laid-off employees will be excluded from the forgiveness reduction calculation so long as the borrower made a good faith, written offer of rehire and the employee’s rejection of the offer is documented. The FAQ specifies that the offer must have been for the same salary/wages and the same number of hours. It also notes that employees who reject offers of re-employment may forfeit eligibility for unemployment compensation.

Link to FAQs:  https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf


Phillips Murrah attorney Kara Laster

Kara K. Laster represents individuals and businesses in a broad range of transactional matters including real estate and mergers and acquisitions.

For more information on this alert and its impact on your business, please call 405.606.4762 or email me.

Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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Phillips Murrah presents COVID-related employment law update for Petroleum Alliance

On the morning of April 22, Phillips Murrah Director Kathryn D. Terry presented an in-depth labor and employment videoconference about changes to employment rules resulting from new COVID-19-related federal legislation.

Chairman David Le Norman hosted the broadcast, and Phillips Murrah Director Elizabeth K. Brown, who is also a PAO Director, helped kick off the presentation. This was the forth episode of the The Petroleum Alliance of Oklahoma’s Morning Fuel webinar series.

Topics covered in this presentation

The topics include three new major components of recent changes, which include Emergency Paid Sick Leave (EPSL) and Expanded Medical Family Leave (EFMLA) as related to the Family First Coronavirus Response Act (FFCRA).

Important subtopics that Kathy discusses in this video include:

  • What are EPSL qualifiers?
  • What are EPSL benefits?
  • How should EPSL and EFMLA be documented?
  • How is EFMLA different from FMLA?
  • Other miscellaneous issues and FAQs

To watch, click on the video presentation below:


Kathryn Terry portrait

Kathy Terry is a litigator who practices in the areas of insurance coverage, labor and employment law and civil rights defense. She also represents corporations in complex litigation matters.

For more information on this presentation and its impact on your business, please call or email me:

Kathryn D. Terry
DIRECTOR
405.552.2452
kdterry@phillipsmurrah.com

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UPDATE: Senate approves bill to revive, revise PPP program

By Lauren Barghols Hanna

Phillips Murrah attorney Lauren Hanna

Lauren Barghols Hanna counsels and represents management in all phases of the employment relationship.

On Tuesday, April 21, the Senate approved a $484 billion bill, allocating an additional $310 billion in funds to the Small Business Association’s Paycheck Protection Program, whose original funds were depleted after only one week. The legislation now heads to the House and is scheduled to be taken up Thursday.  If approved by the House, it will be sent to the President for signature.  President Trump has already promised to sign the bill into law.

Of the $310 billion in additional funds to be allocated for the Paycheck Protection Program, $125 billion will be earmarked “exclusively to the unbanked, to the minorities, to the rural areas, and to all of those little mom and pop stores that don’t have a good banking connection and need the help,” Senate Minority Leader Chuck Schumer promised.  The bill also provides $60 billion in additional funds to a separate small-business emergency grant and loan program.

TAKEAWAY

Start working with your bank right now to secure qualifying PPP loans in this second wave before the allocated funds are again depleted. Let us know if you need additional information regarding your eligibility for a PPP loan or other federal/state loan programs that may mitigate the effects of the coronavirus pandemic on your business.


Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

For more information on this alert and its impact on your business, please call 405.606.4732 or email me.

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Business risk related to independent contractor unemployment claims under CARES Act

COVID-19 Contractor benefits header
In response to the COVID-19 national emergency, Congress has taken the extraordinary measure to allow independent contractors, gig-workers, and self-employed individuals access to unemployment insurance benefits for which they are generally ineligible. This article is geared towards businesses that regularly use independent contractors who may file claims for unemployment insurance benefits—discussing the risks involved and how businesses can mitigate those risks.

Martin J. Lopez portrait

Martin J. Lopez III is a litigation attorney who represents individuals and both privately-held and public companies in a wide range of civil litigation matters.

Background Regarding Relevant CARES Act Provisions

On March 27, 2020 President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Among other provisions, the CARES Act significantly expands the availability of unemployment insurance benefits to include workers affected by the COVID-19 national public health emergency who would not otherwise qualify for such benefits—including independent contractors. This increased accessibility to unemployment insurance benefits theoretically provides an avenue for a state unemployment agency to find an independent contractor applicant to be an employee. Such a finding introduces the risk of the state unemployment agency assessing unpaid employment and payroll taxes for those a business previously treated as independent contractors. Tangentially, such a finding could serve to establish or bolster independent contractors’ claims in wage and hour litigation.

To qualify as a “covered individual” under the Pandemic Unemployment Assistance (“PUA”) provisions of the CARES Act, a self-employed individual must self-certify that she is self-employed, is seeking part-time employment, and does not have sufficient work history or otherwise would not qualify for unemployment benefits under another state unemployment program. Further, the self-employed individual must certify that she is otherwise able to work and is available for work within the meaning of applicable state law, but is “unemployed, partially unemployed or unable or unavailable to work” because of one of the following COVID-19 related reasons:

  • The individual has been diagnosed with COVID-19 and is seeking a medical diagnosis;
  • A member of the individual’s household has been diagnosed with COVID-19;
  • The individual is providing care for a family member or member of the individual’s household who has been diagnosed with COVID-19;
  • A child or other person in the household for which the individual has primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the COVID-19 public health emergency and such school or facility care is required for the individual to work;
  • The individual is unable to reach the place of employment because of a quarantine imposed as a direct result of the COVID-19 public health emergency;
  • The individual is unable to reach the place of employment because the individual has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • The individual was scheduled to commence employment and does not have a job as a direct result of the COVID-19 public health emergency;
  • The individual has become the breadwinner or major support for a household has died as a direct result of COVID-19;
  • The individual has to quit his or her job as a direct result of the COVID-19 public health emergency;
  • The individual’s place of employment is closed as a direct result of the COVID-19 public health emergency.

If the individual meets the above criterion, she is a “covered individual” and is eligible for unemployment assistance authorized by the PUA provisions of the CARES Act. Such assistance was available beginning January 27, 2020 and provides for up to thirty-nine (39) weeks of unemployment benefits extending through December 31, 2020. Covered individuals’ unemployment benefits are calculated state-by-state, according to each state’s conventional unemployment compensation system. In addition, under the PUA provisions of the CARES Act, covered individuals may receive an additional $600 for each week of unemployment until July 31, 2020.

What Businesses Can Do to Protect Themselves

To counteract the risks discussed above, I recommend a business implement the following best practices when responding to a claim of unemployment by an independent contractor:

  • respond proactively to unemployment claim notices for independent contractors;
  • state clearly in the response that the relevant individual-claimants were independent contractors and not employees of the business;
  • affirmatively state that each independent contractor claimant was an independent contractor to whom the business occasionally (or routinely) provided work, but that it is unable to provide the same volume (or any) work to the individual at present because of the COVID-19 national emergency;
  • specify in the response that the individual’s eligibility for unemployment benefits must be entirely predicated on the PUA provisions of the CARES Act allowing for independent contractor participation in the program; and
  • provide the claimant’s independent contractor agreement to the state unemployment agency.

In providing this information and documentation to the state unemployment agency, the business will be able to demonstrate its independent contractor relationship with the individual. Together with the fact that these individuals’ eligibility to receive unemployment income rests exclusively on relevant CARES Act provisions, the business should be well-positioned to avoid the typical risks that can result from a successful unemployment claim by an independent contractor.


For more information on this alert and its impact on your business, please call 405.552.2418 or email me.

Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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Roth: Utility demand peaks lowered, overall Oklahoma energy industry impact yet to be seen

Director Jim A. Roth is quoted as a source for an article in the Oklahoman newspaper by Jack Money, lending an update on the Oklahoma energy industry and consumer energy use due to COVID-19. This article was originally published on April 16, 2020.


oklahoma energy law attorney Jim Roth Web

Jim Roth is a Director and Chair of the firm’s Clean Energy Practice.

Jim Roth, an attorney who is a past elected corporation commissioner, works on energy-related deals and also is dean of Oklahoma City University’s school of law.

On Tuesday, Roth agreed it will take some time to truly see what impact the ongoing pandemic will have on Oklahoma’s electrical energy industry.

Roth noted independent system operators like the Southwest Power Pool are indeed seeing some reduction in overall demands.

Plus, they are seeing fewer significant demand peaks because of changes in consumer behavior.

Many industrial facilities that used to create those demands are offline. Additionally, traditional spikes in residential demand at the end of each day have all but disappeared, as more and more people work remotely.

Roth observed the SPP’s operations are somewhat insulated compared to grids serving other parts of the nation where the illness’ impact has been more severe.

“The number I saw for electricity demand in March was the lowest the nation had seen for that time period in 16 years,” Roth said.

For customers, Roth said the slowdown in demand is a good thing, given that system operators are able to avoid having to use more-expensive power generators to meet demand spikes when they occur.

For utilities’ bottom lines, Roth doesn’t see much of an impact especially in Oklahoma, given utilities have relied significantly the past decade on purchases of cheaper electricity from renewable energy sources to meet their customers’ needs.

Having that supply of energy available helped them avoid having to go out and build their own plants.

“That makes utilities’ operational costs much more predictable, and should insulate our utilities from the kind of dramatic impact that a general economic slowdown might otherwise have on their bottom lines,” Roth said.

As for the pandemic’s impact on future energy projects in Oklahoma, Roth said he has not yet seen a reluctance from market players to back proposed renewable energy projects here.

He said future plans could be impacted by changes in federal incentives and tax law that might happen, but said developers would have to see what those are before evaluating whether to proceed.

“So far, I think Oklahoma is still a very attractive place to invest, given the value of its solar and wind resources and how those factor in” to a project’s return on investment, Roth observed.

Still, he said unanswered questions about the future remain.

“We do not yet know what the permanent effects of this crisis will be to lives or the economy,” he said. “If there is an economic shift underway that never fully reverses itself back to where we were, that will impact energy consumption in America.

“We just don’t yet know what this crisis will do to change permanent trajectories to the energy industry, but things are going to change, and I don’t think it will ever go back exactly to the way it was before.”

 


For more information on this and its impact on your business, please call 405.235.4100.

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General Contractor Bankruptcy – protect your rights

Given the uncertain economic times and the potential delays for projects, it is more important than ever to protect your rights to payment or to completed, timely projects without additional costs. The shutdown of the economy and, hopefully, the accompanying economic recovery, will not be without its victims.

Unfortunately, the risk of bankruptcy is high.  If you are a subcontractor or owner on a project where the general contractor has declared bankruptcy, you should act quickly to ensure, to the extent possible, that your rights are protected.

Image for general contractor bankruptcyThe key point is to communicate up and down the chain. Owners need to know what claims are outstanding and who was working on the projects so they can protect their rights and move forward with the project. Similarly, and for the same reasons, subcontractors need to let owners and the surety, if applicable, know that they have outstanding unpaid bills and receive guidance on how to proceed.

1) Whether you are a subcontractor or owner:  Examine your contract and realize that termination due to bankruptcy is likely unavailable. Once an individual or corporation files bankruptcy, a provision called the “automatic stay” comes into play, which allows the individual or corporation filing bankruptcy to avoid creditors’ demands while organizing for the coming proceedings. Thus, generally, a contract with a general contractor cannot be terminated unless the bankruptcy court lifts the automatic stay.

2) If you are a subcontractor:  You should contact the surety (if the project is bonded) or the owner (if it is a private, unbonded project) to make sure that the owner or surety has a formal written claim from you that shows what has been paid, what invoices were submitted but not yet paid, and the balance to finish. Make sure that the owner or surety, as the case may be, is also aware of any submitted changed orders that may be going through the approval process. Note that lien rights are unaffected by a general contractor’s bankruptcy, as liens are against the owner and not the general contractor.

3) If you are a subcontractor:  Your automatic reaction may be to stop or slow work. However, simply pulling from the job may not be the best option in all circumstances. General contractors can still enforce their rights for performance under the subcontract, and you do not want to be dealing with a breach claim at the same time as trying to receive payment for work performed but unpaid. However, if a general contractor decides to enforce his or her rights to performance, the general contractor will have to pay you for that work. To ensure payment, joint checks from the owner may need to be negotiated. In either event, slowing work while working with the general contractor, owner, or surety may be the best option to preserve all rights and make sure you do not incur additional costs or obligations.

4) If you are an owner:  If the project is bonded with a performance or payment bond, you will want to make sure you are in close communication with the bonding company. Additionally, you will want to make sure the surety is paying claims so you are not faced with lien claims by unpaid subcontractors or suppliers.

While this article addresses certain considerations after bankruptcy is declared, owners and subcontractors should consider contacting legal counsel to make sure they are protected while moving the project forward and to protect their rights in the bankruptcy proceedings.


A. Michelle Campney portrait

Click to visit Michelle Campney’s attorney profile page.

For more information on this alert and its impact on your business, please call 405.552.2487 or email me.

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Horse Management Facilities: Mitigating risk during COVID-19

On March 25, 2020, Governor Stitt amended the Fourth Amended Executive Order 2020-07 (EO 2020-07) via a memorandum designating horse management facilities as critical infrastructure businesses.   With the critical infrastructure designation, it is imperative that horse management facilities now work to mitigate risks associated with operating during the COVID-19 pandemic.  Facilities must balance public health order compliance, horse owner expectations with safety while taking care of the horses stabled on their property.  The following outlines several proactive steps horse management facilities can take to manage risk while operating during the COVID-19 pandemic.

Mary Westman portrait

Mary Westman is an attorney with Phillips Murrah. She also has an MBA, is a Morgan horse breeder and a registered nurse.  A native of West Virginia, she now lives with her husband, David, in Norman, Oklahoma. Click photo to visit Mary’s profile page.

First, implement best practice strategies designed to assist horse management facilities to continue to care and keep horses during a public health emergency and at the same time, protect the health of horse owners and barn workers.  Horse facilities are accustomed to biosecurity measures implemented to prevent the spread of contagious diseases among the horses on their property, but the COVID-19 outbreak presents unique challenges.  Biosecurity strategies designed to protect horses may not be enough to protect the humans who come onto the property.  To provide much needed direction to address this gap, on March 24, 2020, the Kentucky Department of Agriculture published guidelines for “Farm, Veterinary and Other Equine Activities.”

These guidelines incorporate the White House “Coronavirus Guidelines for America” and urge that the CDC website be monitored frequently for updates on best practices in mitigating the spread of the coronavirus among humans. In addition, the guidance includes best practice strategies for managing the daily care and keep of horses, cleaning equipment and surfaces, as well as managing communication, employees and medical procedures. Lastly, horse facilities should implement a schedule for horse owners to visit the facility with the aim of decreasing the number of people on the property so that proper social distancing can be accomplished.

Second, incorporate best practices for COVID-19 mitigation into barn rules and disseminate them to your clients, vendors and employees.  Utilizing email, social media and other forms of electronic communication will support social distancing efforts and model best practice.  Posting barn rules in prominent locations throughout the facility will also serve to disseminate important health and safety rules.

Next, review and revise your stable liability waiver to include illnesses contracted from communicable disease.  To begin, if you are an equine professional or own an equine facility, it is important to understand that “Oklahoma Livestock Activities Liability Limitation Act” (the Act) does not provide unlimited protection from liability.  The Act can be broken down into three parts.  First, the Act provides liability protection from “injuries” resulting from the “inherent risks of livestock activities.”  Second, the Act provides protection when the equine professional is acting in good faith, and third, the Act provides protection when the equine professional acts consistent with recognized industry standards.  You should understand the Act provides liability protection from “injuries” but does not reference “illness.”  Moreover, the Act specifically does not limit liability from death resulting from the “inherent risks of livestock activities.”

Additionally, reliance on liability insurance policies is a risky approach.  Most homeowner policies will not cover equine related operations absent a care, custody and control rider (CCC rider).  Unfortunately, even a with a CCC rider, or even a separate commercial general liability policy, may be of no use during pandemics.  In fact, such insurance policies generally exclude illnesses contracted from communicable disease. To determine if your liability insurance policy covers illness contracted from communicable disease, contact your insurance agent.

Since we have established the Act does not provide unlimited liability protection and most liability insurance policies exclude illness contracted from communicable disease, do you need a written liability release?  Simply put, yes.  As mentioned above, liability protection is limited, and the Act specifically carves out certain events that would not be protected by the statute.  According to Oklahoma law, parties can agree, in writing, to extend the limitation of liability.

Most equine facilities utilize written liability releases, but will these releases achieve complete protection particularly in the context of a communicable disease such as COVID-19?  Well, it depends.  In a 2012 Oklahoma case, Brown v. Beets, a trial court dismissed a personal injury negligence claim related to an injury from a horse kick because the riding participant had signed a liability release.  However, on appeal, Oklahoma Court of Civil Appeals reversed the trial court decision.  The appeals court found a dispute as to whether or not the trail ride leader had used reasonable effort to determine the ability of the riders and whether or not the trail ride leader had followed industry standards. This case would seem to imply that if an equine professional fails to determine the ability of the potential rider/participant, fails to match to the right horse based on the rider/participant’s ability, and fails to adhere to industry standards, a liability release may not be effective in limiting liability.  In light of this Court decision and with regard to operating during the COVID-19 outbreak, it is critical that horse management facilities implement and adhere to best practices (such as the COVID-19 guidelines referenced above) to ensure that properly drafted stable liability waivers will give maximum liability protection.

Also, because a liability release or waiver is a contract, principles of contract law apply.  Liability releases should be clear and definite.  We also know that Oklahoma law requires the liability release to be in writing, and of course, a minor cannot sign a liability release form.  A parent, ideally both parents, or guardian(s) must sign a liability release when a minor engages in an equine activity.  The question of whether the release should include a helmet requirement is a topic for another article.

The take-a-way here is a stable liability release or waiver is necessary to fill in gaps related to the Act but may not completely release you from liability if you are otherwise negligent or fail to follow industry standards to include the standards related to combating COVID-19.  Liability releases could also prove to be ineffective for other reasons for example lack of specificity or clarity.

In conclusion, as of March 25, 2020, Oklahoma designated horse management facilities as critical infrastructure businesses.  With this designation comes the responsibility to continue to care and keep horses during a public health emergency and at the same time, protect the health of horse owners and barn workers.  Horse management facilities can proactively take steps to manage risk while operating during the COVID-19 pandemic such as implementing best practice guidelines for preventing the spread of COVID-19; communicating barn rules; and implementing stable liability waivers that include a waiver of liability for illnesses contracted from communicable diseases. We will get through this current crisis, but we must learn, adapt and implement best practices for future situations.


For more information on this alert and its impact on your business, please call 405.237.8737 or email me.

Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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FAQs: Impact of Covid-19 On Commercial Real Estate

2020 Coronavirus Guidance header 2

By Phillips Murrah Directors Sally A. Hasenfratz and Bobby Dolatabadi, and the Real Estate Practice Group 

The impact of COVID-19 on the commercial real estate industry is unprecedented. We have been asked a broad range of questions as a result of the pandemic, some of which include:

What if a tenant cannot pay rent?

Many landlords and tenants are seeking counsel about what happens if a commercial tenant cannot pay rent. Some considerations include:

Are commercial transactions being closed?

  • Many commercial purchase and sale transactions have reached a screeching halt, with buyers terminating agreements and lenders having underwriting concerns. Often buyers are terminating during an inspection period where they are entitled to a return of earnest money. In instances where an inspection period is not available or has expired, buyers are looking for conditions precedent to closing, such as a material adverse change, which would excuse performance. Otherwise, on a unilateral termination, buyers may face a loss of earnest money or trigger a default under the agreement.
  • For some transactions that appear to be moving forward, there remains uncertainty as to whether the County recording offices will be open at the time of closing for the filing of deeds, loan instruments, and other closing documents. Accordingly, parties should consult with their title companies and underwriters in order to determine if and how the title company will facilitate a closing in the event of a shutdown of the recording office.  Also paramount will be issues relating to “gap coverage” as a result of potential delays between closing and recording documents, as well as use of online remote notaries and other logistics for closings.
  • Most purchase and sale agreements contemplate a specific list of closing deliveries for each party, together with a “catch-all” requiring such other documents as are reasonably requested by the other party and/or title company. In light of the uncertainties regarding whether a recording office will be open or shut-down on the closing date, title companies may require new, additional indemnities and covenants from the parties at closing in order to achieve closing, which documents may prohibit, for instance, a seller (whom still may appear in the real estate records as the fee owner) from executing any other conveyances concerning the property. Parties should consider expanding the “catch-all” clause accordingly.
  • For transactions that are teetering, sellers and buyers should consider agreeing to extend the inspection period or the time to close to let the pandemic subside prior to any such closing. Any such extensions should be in writing.
  • In lieu of closing or extending, buyers may move to the sidelines, waiting for values to decline and proceeding after the pandemic is resolved.

How are lenders and borrowers handling the consequences of the pandemic?

  • Bank regulators have provided guidance encouraging financial institutions to cooperate with customers dealing with the adverse economic effects of COVID-19.
  • For borrowers unable to make debt service, we are seeing short-term accommodations, such as interest only or reduced payments for 3 months, with full payments continuing after that time.
  • Should the pandemic prove to have more long-term effects, we would expect to see forbearance agreements, workouts and bankruptcies. Time will tell whether these more drastic measures will be necessary. If so, the tax consequences of these arrangements should not be ignored.
  • Prior to exploring any of these options, it is prudent to thoroughly review all loan documents, with emphasis on restrictions on transfer, default, notice and cure and force majeure provisions.
  • For non-recourse loans, documents should be thoroughly reviewed so as not to inadvertently trigger recourse liability. For example some non-recourse loans have “bad boy” carve-outs which trigger full or partial recourse liability to borrowers and guarantors where a borrower (i) admits in writing the inability to pay its debts as they come due; or (ii) makes a “transfer” which is not permitted by the loan documents. A “transfer” is often broadly defined as including making amendments to lease agreements without the lender’s consent. Accordingly, borrowers should exercise caution in taking actions to renegotiate loan documents or compromise lease obligations, which in certain circumstances, could trigger recourse liability.

Are Force Majeure clauses available to delay or terminate performance obligations?

  • Force Majeure clauses are contractual clauses that extend or in some instances terminate performance obligations when “acts of god” or other named events prevent or delay a party’s ability to perform their obligations. Force Majeure clauses appear in many, but not all, types of real estate contracts and such clauses are limited to the exact language, which may not be standard from agreement-to-agreement and in most cases don’t appear broad enough to include the current pandemic situation. For example, Force Majeure clauses are typically not in short-term agreements such as purchase and sale agreements, but may be included in loan agreements, leases, construction agreements and the like.
  • Each Force Majeure clause should be carefully reviewed to determine whether it applies in this situation and if so, whether any notices need to be given to the parties under the agreement.
  • Use of Force Majeure clauses in the future should be considered, with expressly including references to epidemics, pandemics or other health related crises beyond the control of the parties.

What else should be considered in light of the pandemic?

  • Business interruption insurance policies should be reviewed to determine whether there may be coverage.
  • For property management, responsibility should be evaluated to identify whether there are special duties to maintain health and cleanliness.

For more information on how the COVID-19 pandemic may affect your business, please contact:

Portrait of Sally A. Hasenfratz

 

Sally A. Hasenfratz
Director
405.552.2431
EMAIL

 

 

Portrait of Bobby Dolatabadi

 

Bobby Dolatabadi
Director
405.606.4742
EMAIL

 

 


Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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SBA disaster loan summary

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on April 2, 2020.

This Gavel to Gavel column is a summary of our full-length Q&A on Small Business Administration (SBA) loan programs.


By Phillips Murrah Director Alison J. Cross and Attorney Kara K. Laster

Phillips Murrah Attorney Kara K. Laster and Director Alison J. Cross

On March 27, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, which expanded two Small Business Administration loan programs – the Paycheck Protection Program and the Economic Injury Disaster Loan Program.

Small business owners, in particular, are anxious to receive relief under the historic act. Below is a summary of highlights of these two expanded lending programs:

• PPP loans: Eligible businesses may use PPP loans for payroll costs, health care, interest on mortgage payments, rent, utilities, and interest on any other debt. Eligibility requires that applicants had no more than 500 employees per physical location, were operational prior to Feb. 15, had employees on payroll, and paid wages and payroll taxes. They may receive the lesser of 2.5 times the average monthly payroll costs during the prior year or $10 million.

The dates to begin applying are small businesses and sole proprietorships on April 3 and independent contractors and self-employed individuals on April 10. The application deadline is June 30, but businesses should apply as soon as possible because there is a funding cap.

Businesses need to submit a PPP loan application along with payroll documentation to an approved lender. Businesses must certify that they suffered substantial economic injury from COVID-19 and that funds will be used to retain workers and maintain payroll, or make mortgage payments, lease payments, and utility payments.

• EIDL loans: Eligible businesses may use EIDL loans for working capital and they can be up to $2 million with interest rates of 3.75% for small businesses and 2.75% for nonprofits. Loan amounts are based on actual economic injury. Eligibility requires that applicants had no more than 500 employees in existence as of Jan. 31 and that they suffered substantial economic injury from COVID-19.

Additionally, if the loan is made before Dec. 31 and is $200,000 or less, there is no guarantee requirement. Applications should be submitted directly to the SBA, which can be found on its website.

There are numerous additional stipulations and details related to these two small business disaster loans that cannot fit onto this column format, including loan forgiveness criteria, amount determination and approved lenders. Applicants should consider discussing their application with legal representation.

Phillips Murrah attorneys Kara K. Laster and Alison J. Cross contributed to this column.

Tax Law Q&A: COVID-19 Tax Issues for Businesses

What are some of the recent tax changes designed to help businesses?

As part of the Families First Coronavirus Response Act (the “FFRCA”) and the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, Congress made a number of favorable changes to the Internal Revenue Code that benefit both businesses and individuals.  Specifically with respect to businesses, the following provisions may be extremely helpful during the economic crisis stemming from COVID-19:

    • Credits for paid sick and FMLA leave and for employee retention
    • Delay of payment of employer payroll taxes
    • Relaxation of limits on business losses and business interest
    • Delay of payment for employer payroll taxes
    • No cancellation of indebtedness income for certain government-provided relief loans and grants
Phillips Murrah attorney Jessica Cory

Jessica N. Cory represents businesses and individuals in a wide range of transactional matters, with an emphasis on tax planning.

 What are the new payroll tax credits and how do I qualify for them?

Congress enacted three new payroll credits as part of the FFCRA and the CARES Act.  These three credits are (1) the paid sick leave credit, (2) the paid family leave credit, and (3) the employee retention credit.

 The Paid Sick and Family Leave Credits

The first two credits, for paid sick and family leave, are intended to help businesses provide the paid leave required by the FFCRA.  Under the FFRCA, certain small and medium size employers must now provide workers with approximately two weeks of paid sick leave and 10 weeks of paid family leave.  In exchange, these employers can take a dollar for dollar credit in an amount equal to 100% of the leave wages paid by the employer with respect to a calendar quarter, up to certain limits.

For purposes of the paid sick leave credit, qualifying sick leave wages are wages and compensation paid by an employer, as required by the FFCRA, because the employee (1)  is under a quarantine or isolation order related to COVID-19, (2) has been advised by a health-care provider to self-quarantine due to COVID-19 related concerns, (3) is experiencing symptoms of COVID-19 and is seeking a diagnosis, (4) is caring for an individual who is subject to such a quarantine or isolation order or who has been advised to self-quarantine, or (5) is caring for the employee’s child due to school or child care closures or unavailability stemming from COVID-19 precautions (or a substantially similar situation, to be set out in the Regulations).

For purposes of this credit, an employer can count sick leave wages paid between April 1, 2020 and December 31, 2020, up to $511/day for an employee falling under categories (1) through (3), and up to $200/day for an employee falling into categories (4) or (5), for up to 10 days of work. For purposes of the paid family leave credit, qualifying family leave wages are wages and compensation paid by an employer, as required by the FFCRA, to an employee who is unable to work or telework due to a need to care for a child under 18 whose school or childcare is closed or unavailable due to an officially declared public health emergency with respect to COVID-19.  This type of paid leave is available to an employee for up to 10 weeks but may not exceed $200/day and $10,000 in the aggregate.

The Employee Retention Credit

The third credit, the employee retention credit, is designed to encourage employers to retain employees despite a significant decline in business or closure due to COVID-19.  This credit is available to employers (1) whose business is fully or partially closed during any calendar quarter pursuant to a government order limiting commerce, travel, or group gatherings due to COVID-19, or (2) who have suffered as significant decline of at least 50% in gross receipts as compared to the same calendar quarter in the prior year.  Employers can take a credit equal to 50% of the amount of qualified wages paid to an employee from March 12, 2020 to January 1, 2021, for wages paid up to $10,000.  This provides an employer with a credit equal to $5,000/employee.  However, it is important to note that an employer cannot take advantage of this credit and the new SBA Payroll Protection Program, which provides certain small and medium businesses the ability to borrow funds on extremely favorable terms (including the possibility of tax-free loan forgiveness) to cover costs such as payroll, health care benefits, other compensation, mortgage interest obligations, rent payments, utilities, and certain interest payments.  Accordingly, this credit may be most useful to employers would not qualify for this program, such as large employers with more than 500 employees.

Is there any other relief for current payroll tax obligations?

Yes, in addition to the three new payroll tax credits, there is also a new provision allowing an employer to delay making certain payroll tax payments over two years.  Generally, employers must regularly deposit payroll taxes representing both the amount withheld from employee checks and a portion paid directly by the employers.  Under the CARES Act, employers can now delay payment of the employer-paid portion of these taxes incurred this year.  For employers who choose to defer payroll taxes during 2020, the first 50% of the deferred amount must be paid by December 31, 2021, and the other 50% must be paid by December 31, 2022.  Self-employed individuals can likewise defer up to 50% of the self-employment tax they would otherwise be required to regularly deposit through estimated tax payments.

Do the limitations on business losses and interest expense deductions still apply this year?

Not completely, no.  Under the Tax Cuts and Jobs Act (“TCJA”) enacted by Congress at the end of 2017, certain limitations were imposed on how businesses use losses and the amount businesses could deduct for their interest payments.  The CARES Act relaxes these restrictions, amending the Internal Revenue Code to allow most businesses to carry back losses arising in taxable years beginning after December 31, 2017 and before January 1, 2021 to each of the five taxable years preceding the loss year.  Carrying losses back allows a business to take advantage of a loss sooner, as compared to pre-CARES Act law, which only permitted businesses to carry losses forward.  Likewise, the CARES Act also permits businesses to use losses to offset more than 80% of taxable income, and modifies the limitations on business interest expense deductions.  Under the rules set out in the CARES Act, businesses can now figure their business interest expense by looking at 50% of adjusted taxable income (“ATI”), versus only 30% before, and based on 2019 ATI instead of 2020, given that many taxpayers may have significantly reduced income in 2020.

Should I worry about any unexpected tax if I have an SBA loan forgiven under the new Paycheck Protection Program (“PPP”)?

 No, the debt forgiveness built into the SBA loans covered by the CARES Act will not trigger additional tax.  Normally, when a lender forgives an outstanding debt, the borrower must pay tax on the forgiven portion of the liability, as taxable “cancellation of indebtedness” income.  In this case, however, the CARES Act specifically provides that any forgiveness or cancellation of SBA loans made pursuant to its terms will not be treated as income for federal tax purposes.


For more information on this alert and its impact on your business, please call 405.552.2472 or email me.

Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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