On September 15, 2021, Governor Pritzker signed Senate Bill 2408 into law.  This bill is known as the “energy omnibus” for its comprehensive changes to the Illinois energy landscape.

As with all major legislative changes, there are both new costs and new opportunitiesIt is difficult to overstate the potential impact of this legislation, especially the breadth and depth of new and expanded opportunities within the renewable energy industry in Illinois.  The opportunities look quite different, however, depending on whether they are viewed from the perspective of an existing developer or owner of renewable generation, an aspiring developer or contractor, or a business looking to take advantage of the clean energy revolution for its facilities or fleet.

From a developer perspective, the energy omnibus frees up an estimated $290 million already collected and held by utilities for the purpose of funding contracts with new solar and wind projects that would (absent the legislation) have been used for other purposes.  The legislation also puts safeguards in place so that these funds are less likely to be held up in the future.  Absent this fix, the Illinois Power Agency projected that some utility contracts with renewable systems were at risk for delayed payment.  This change solves what industry advocates have referred to as the “solar cliff.”

In addition to addressing the solar cliff, the legislation also directs new procurements designed to bring online enough systems to generate 10 million renewable energy credits (RECs) per year.  By 2030, the goal is to incentivize enough renewable energy systems in Illinois to generate another 35 million RECs per year.  Those goals will be met by a combination of wind and solar generation (55% solar, 45% wind), with solar split between utility-scale (47%), solar on brownfields (3%), and smaller “distributed” systems (50%).  While certain of these systems will be procured through competitive procurements (for utility-scale and brownfield systems), smaller solar systems will be procured through the Adjustable Block Program.  This program was modified to improve contracts, add strong new equity standards, and (for many systems) include a prevailing wage requirement.  The first of the new procurements and new “blocks” within the Adjustable Block Program will begin starting 90 days after the effective date of the energy omnibus.

In a “restructured” state like Illinois—where all customers use the delivery network of their incumbent electric utility but may choose from many entities to provide energy supply options—customer opportunities are tied closely to industry opportunities.  The renewable space is no different.  Enhancements to a retail energy benefit known as “net metering” should provide customers with additional financial benefits from distributed systems, both from those on the customer’s premises (“behind the meter”) and from those systems where the output is shared with others, whether or not it is on the customer’s site (“community generation”).  In addition, customers or system owners will be eligible for an expanded “smart inverter rebate” not only for distributed systems themselves, but also for battery storage that is combined with a renewable generation device.

Historically, most retail opportunities were restricted to distributed generation.  The energy omnibus, however, introduces a new self-direct program that allows either very large energy customers (e.g., a data center or a factory) or a number of smaller customers aggregated together (e.g., a retail chain) to see a direct benefit on their energy bill if they enter into an agreement with a new utility-scale system and qualify for the self-direct program.  Details for the program will be determined by the Illinois Power Agency.

While electric vehicles have been receiving increased regulatory attention in Illinois, the energy omnibus is designed to substantially expand the use of electric vehicles as part of a beneficial electrification program.  Incentives include a per-vehicle rebate that begins at $4,000 per vehicle.  Incentives are expected for charging infrastructure buildout as well.

The omnibus legislation addresses a wide range of other topics, including how utilities recover costs, workforce development programs, emission limits for fossil fuel generators, and modifications to utility-led energy efficiency programs.  Substantial, but time-limited, opportunities may be available to your company, your vendors, or your investors.  For instance, where company owners live or other company owner personal history may qualify companies as “equity eligible contractors” that will have expanded opportunities to support renewable energy, electric vehicle, and other development.

Whether your primary line of business is in the energy space or you simply want to optimize your company’s energy usage, you may want to reach out to your attorney to learn more about the opportunities the energy omnibus creates.

Whenever your business is impacted by a cyber-attack or a data breach – whether directly or indirectly – it is important to determine whether there is insurance to cover the resulting costs and potential liability.  While Cyber-Risk/Data Breach policies are common, companies should be aware that there may also be coverage that exists outside of that specific type of policy.  Recently, the United States Court of Appeals for the Fifth Circuit found that a breach of contract action arising out of a data breach was covered under “personal and advertising injury” coverage contained in a commercial general liability policy.

In this case, Landry’s, which operates numerous hotels, restaurants and casinos, entered into a contract with Paymentech for credit card processing services.  Under the contract, Landry’s had to comply with programs designed to protect the credit card companies from loss associated with a data breach, which Paymentech was also required to abide by under its agreements with the credit card companies. 

Paymentech and Landry’s discovered that, from May 2014 through December 2015, there was an unauthorized program installed on Landry’s credit card readers.  The program captured consumers’ credit card data – including name, card number, expiration date, and verification codes.  As a result, Paymentech was assessed significant fines under the credit card companies’ protection programs.  Paymentech then sued Landry’s for breach of contract seeking to recoup those amounts.

Landry’s sought coverage under its commercial general liability policy, asserting that Paymentech’s claim fell within the “personal and advertising injury” coverage.  That provision covered, among other things, “injury arising out of . . . oral or written publication in any manner, of material that violates a person’s right of privacy.”  The insurer denied its duty to defend, and Landry’s filed suit against the insurer.

Ultimately, the Fifth Circuit held, under Texas law, that the claim was covered.  The court first determined that the word “publication,” as required for the personal and advertising injury coverage, was intended to be broadly construed.  Given that broad construction, the court found that Paymentech’s complaint alleged a “publication” because (a) it alleged that the data was exposed (i.e. published) to the hackers, and (b) it alleged the hackers published the data to make fraudulent purchases.  The court then looked at whether Paymentech alleged that its injury was one “arising out of the violat[ion] [of] a person’s right to privacy.”  The court noted that the policy language covered not only claims of violation of privacy rights, but also claims arising out of privacy violations.  The court easily determined that theft of credit card information violated a person’s right of privacy and that Paymentech’s claims arose out of that theft.  The insurer argued that the policy only covered tort claims and not contract claims such as those alleged by Paymentech.  The court rejected that argument, however, stating that the policy made no such distinctions.

This case illustrates an important lesson for companies facing litigation and other costs related to data breaches – insurance coverage may exist under a policy or policies not dealing directly with cyber-security or data breaches.  Therefore, it is important to review your entire insurance portfolio, and not just the coverage dedicated to cyber-risk.  The specific language of each coverage, the exclusions, and the endorsements – not the title of the policy – will determine whether coverage exists.  Having your policies reviewed by an experienced lawyer early on can help ensure that you are able to take advantage of all coverage to which you or your organization may be entitled.

Introduction

Big changes are afoot with respect to Illinois non-competition and non-solicitation law.  Illinois is ahead of the curve when compared with the federal government.  Whereas President Biden’s recent executive order only requested that the FTC adopt rules to limit restrictive non-competition and non-solicitation clauses, the Illinois legislature recently passed amendments to the Illinois Freedom to Work Act (Act) that Governor Pritzker is expected to sign into law.  The amendments would be effective January 1, 2022 and make it more challenging for Illinois employers to enter into enforceable non-competition and non-solicitation agreements with their employees.  Employers should take note of the amendments and prepare accordingly.

Brief Overview of the Act as It Currently Exists

As currently written, the Act only forbids non-competition agreements between an employer and a “low-wage employee.”  Notably, the Act, currently does not contain any limitation on non-solicitation provisions. 

Brief Overview of the Amendments to the Act

The amendments to the Act are expansive.  Significantly, they extend the Act’s restrictions to also prohibit non-solicitation agreements with certain employees.  Moreover, the ability of employers to proscribe non-competition and non-solicitation agreements will be limited to employees with much higher earnings thresholds than the current Act.  The amendments will thus limit the universe of employees potentially subject to non-competition and non-solicitation provisions.  The amendments also grant employees several protections.  Below are some highlights.

Non-Competition Agreement Restrictions

  1. Non-competition agreements are only allowed for employees earning over $75,000 per year.  Beginning 1/1/27, the figure will increase $5,000 every 5 years up to and including 2037.
  2. Covers agreements limiting work for another employer for a period of time, restricting work within a specified geographic area or prohibiting work for another employer that is “similar to [the] employee’s work” for the employer.
  3. Also covers agreements that impose financial penalties for competitive activities after termination of employment.
  4. Excludes agreements prohibiting disclosure of confidential or trade secret information, invention assignment agreements, covenants or agreements in connection with the sale of goodwill of a business or disposal of an ownership interest, certain termination agreements, agreements to not reapply after termination, and others.

Non-Solicitation Agreement Restrictions

  1. Non-solicitation agreements are only allowed for employees earning over $45,000 per year.  Beginning 1/1/27, the figure will increase $2,500 every 5 years up to and including 2037.
  2. Non-solicitation agreements are defined to include covenants against soliciting employees, customers, vendors, or even interfering with prospective relationships.

Prohibitions upon Certain Terminations

  1. Non-solicit and non-compete agreements are generally not allowed as part of a termination or furlough due to COVID or similar circumstances.
  2. Such restrictions are acceptable when they include paying employees their base salary through the period of enforcement, less any other amounts they earn from another job.

Adequate Consideration

  1. Adequate consideration for such restrictions is either (a) the employee continuing work for the employer for 2 years after signing the restrictive covenant, and/or (b) additional financial or professional consideration sufficient to support the non-compete or non-solicit covenant.
  2. An employee terminating his or her employment prior to two years can invalidate the covenant if there was not separate financial and/or professional consideration.  Thus, offering financial and/or professional benefits is advisable.

Requirements to Inform Employees to Consult with an Attorney and Give Time to Review Covenant

The amendments provide that a non-competition or non-solicitation covenant is illegal and void unless: (1) the employer advises the employee in writing to consult with an attorney before entering into the covenant, and (2) the employer provides the employee with a copy of the covenant at least 14 calendar days before the commencement of the employee’s employment or the employer provides the employee with at least 14 calendar days to review the covenant. 

Remedies

The amendments include an employees’ only attorneys’ fees provision.  This unilateral attorneys’ fees provision requires employers to exercise extreme caution when drafting and endeavoring to enforce such covenants.  The amendments grant the Illinois Attorney General discretion to initiate or intervene in a civil action if there is reasonable cause to believe there is a pattern and practice that the Act as amended prohibits.

Next Steps If signed into law, the amendments to the Act will become effective on January 1, 2022.  The changes will neither be retroactive nor affect existing non-competition and non-solicitation agreements.  This leaves a window of time for employers to verify whether their existing agreements are enforceable under current law.  In this regard, employers will want to ensure that their existing non-competition and non-solicitation agreements provide employees with specific and special consideration to support the restrictions.  It also leaves time for employers to prepare agreements for employees that will be enforceable under the Act’s amendments come January 1, 2022.  Among other things, employers should review whether employees meet the forthcoming $75,000 and $45,000 earning thresholds.  Given the 14-day review requirement under the amendments, employers may also want to review and revise their hiring protocols and timetables for hiring employees who will be subject to non-competition and non-solicitation agreements.  Because of the many significant amendments to the Act, employers should consult with their legal counsel to discuss their individual situations.

Last year, we published a newsletter commenting on possible estate planning changes that might result from the 2020 elections.  See our August 2020 newsletter, “Pandemic and 2020 Election Estate Planning: Frequently Asked Questions.”  On March 25, 2021, Senator Bernie Sanders (VT) and Representative Jimmy Gomez (CA) introduced the “For the 99.5% Act.”  If enacted, the law will dramatically change estate planning by reducing the federal estate and gift tax credits, increasing estate, gift, and generation-skipping transfer (“GST”) tax rates, and including certain assets that are not now includable in an individual’s taxable estate, among other changes.  Additionally, on March 29, 2021, senators Chris Van Hollen (MD), Cory Booker (NJ), and others introduced the “Sensible Taxation and Equity Promotion (STEP) Act.”  Among other things, the STEP Act proposes the taxation of unrealized gains of certain assets on transfers by gift, in trust, or at death, and changes to the taxation of assets held in trust.  Lastly, the Biden administration has proposed significant changes to income tax laws, including higher taxes on investment income and new capital gains taxes at death.

This newsletter provides a summary of current law and proposed changes, with some comments and considerations. In the conclusion, we also list some actions to consider taking before any new federal law affecting estate and tax planning is enacted or goes into effect. 

The For the 99.5% Act (the “Act”)

  1. Tax Rates and Exemptions
    1. Current law:  The maximum federal rate for estate and gift taxes is 40%, and the exemption per individual is $11.7M.  As a result, married couples are able to shield up to $23.4M in assets from the federal estate tax through the lifetime exemption.
    2. Proposed changes:  The Act proposes a gift tax exemption of $1M, and an estate tax exemption of $3.5M, thereby drastically reducing the amount an individual and a married couple can give away.  Moreover, tax rates would be increased to progressively higher levels from between 45% for estates under $10M to 65% for estates over $1B.
    3. Comment:  These changes would have a huge impact on not only wealthy couples but also couples and individuals whose net worth is currently under the exemption amount.  A hypothetical couple with a net worth of $20M who would have no tax liability under current federal estate tax laws, could owe $6.35M in taxes upon the death of the second of them to die.
  2. Annual Exclusion Gifts
    1. Current law:  Individuals may make unlimited $15,000 annual gifts (per recipient), and these gifts do not count against the lifetime exemption.  There is no limit on the number of gifts a donor can make, and no limit on the number of gifts a recipient can receive.
    2. Proposed changes:  The Act would impose a limit on annual gifts to double the annual exclusion with respect to any transfer to a trust, transfer of an interest in a pass-through entity, transfer of an interest subject to a prohibition on sale, or any other transfer of property that cannot be immediately liquidated.
    3. Comment:  Making annual exclusion gifts is a popular approach to reducing an individual’s estate.  The Act’s reduction to available annual exclusion gifts would have far-reaching implications for estate planning techniques.  It would be particularly problematic for transfers to trusts and certain family entities, and for life insurance trusts funded with annual gifts. Individuals with life insurance policies that are currently funded by making annual exclusion gifts may consider paying the policies in full in 2021.
  3. Valuation discounts
    1. Current law:  The value of one’s assets may be discounted for estate and gift purposes due to factors like lack of marketability and lack of control.
    2. Proposed changes:
      1. Discounts would be limited to assets used in an active trade or business. “Non-business assets” would receive no discount; and
      2. Transfers of minority interests would be limited where majority family members retain ownership.
    3. Comment:  The proposed changes represent a significant departure from the current ability to transfer business interests, particularly for family businesses that are to be transferred to a new generation. 
  4. Grantor Trusts
    1. Current law:  Individuals have been able to take advantage of high gift and estate tax exemption rates by making transfers to grantor trusts.  An important additional benefit of having a grantor pay taxes on the trust assets can allow even more money to be transferred out of the estate.
    2. Proposed changes: Grantor trusts would be included in the estate of the deceased grantor and be subject to the estate tax.  Distributions would be treated as gifts to the beneficiaries and subject to the gift tax.
    3. Comment:  Currently, the proposed changes would only be applied to trusts created after the date of the enactment of the bill.  Individuals and couples considering grantor trusts would be wise to consider creating and funding their trusts before any new laws are enacted.
  5. Generation-Skipping Transfer (“GST”) Trusts
    1. Current law: Individuals can transfer up to $11.7M to a long term “generation-skipping” trust (a “GST-Exempt Trust”).  Distributions to any grandchild or more remote descendant (“skip-persons”) are not subject to any estate or gift tax.
    2. Proposed changes:  GST-Exempt Trusts would be limited to 50 years.  The rule would apply to both new and pre-existing trusts.  After the 50-year period, distributions to skip-persons would be subject to GST tax at the same rates as the estate tax.
    3. Comment:  Currently, very few families are subject to any GST tax.  The proposed change would capture tax on distributions to successive generations.
  6. Grantor Retained Annuity Trusts (“GRATs”)
    1. Current law:  As an estate planning technique, a GRAT allows an individual to transfer future appreciation of an asset out of his or her estate by creating an annuity trust.  GRATs are typically used in situations where assets are expected to increase in value. 
    2. Proposed changes:  GRATs would have a required minimum term of 10 years.  Additionally, the gift made at the inception of the trust would have to be the greater of $500,000 or at least 25% of the value of the trust.
    3. Comment:  The proposed minimum term and the gifting requirements would significantly limit the benefit of GRATs as an estate-planning tool.

The Sensible Taxation and Equity Promotion (STEP) Act 

  1. Step-Up in Basis
    1. Current law: Assets receive a “step-up” in basis if they are transferred through a bequest.  The step-up in basis allows assets like stocks to pass to heirs without capital gains tax on their appreciation value.
    2. Proposed changes:  Property transferred by gift or bequest, or transferred to a non-grantor trust, would be treated as sold for fair market value, triggering immediate capital gains taxes.
    3. Comment: The STEP Act would effectively eliminate the step-up in basis at death and preclude assets from being passed to heirs without a capital gains tax on their appreciation value.  Because the STEP Act’s effective date is December 31, 2020, gifts made in 2021 to take advantage of the current gift tax exemption may trigger capital gain recognition, should the STEP Act become effective.  Clients will need to carefully consider the tax implications of gifts made this year.
  2. Trust taxation
    1. Current law:  Gains are reported upon transfer by sale or gifts during the grantor’s lifetime.
    2. Proposed changes:  Non-grantor trusts would have to report gain on all of their appreciated assets every 21 years.  Trusts with over $1,000,000 in assets or more than $20,000 gross income would have additional reporting requirements.
    3. Comment:  The STEP Act’s proposed changes to the transfer taxes would apply retroactively to gifts or inheritances after December 31, 2020.

Biden Tax Plan Proposals

  1. Taxes on Capital Gains
    1. Current Law:  The top capital gains tax rate is 20%.
    2. Proposed Changes:  The top capital gains tax rate would be increased to 39.6%, and long-term capital gains over $1,000,000 would be taxed as ordinary income.
    3. Comment:  The proposed changes may propel high-income investors to sell off assets before the tax increase takes effect.  Individuals may want to consider other alternatives to lower capital gains taxes.

Conclusion

Given the broad scope and significant measures being proposed, there seems to be momentum in favor of changes to the present income, gift, and estate tax system in the current legislative session.  Notwithstanding the current proposals, several parts of the current system are already set to expire at the end of 2025.  Therefore, now is the time for well-to-do individuals to be proactive and consider options for their estate planning.  These options include, for example, using lifetime exemptions this year, making annual exclusion gifts, obtaining or paying up life insurance policies, and setting up tax advantageous trusts, including spousal lifetime access trusts (also known as SLATs). While none of the proposed changes described in this newsletter are law at this time, it is important to understand how they may affect the wealth of you and your family.  Individuals should consult with their financial advisors and legal counsel to plan a strategy and take action now, while there is still time.

As everyone is well-aware, the COVID-19 pandemic has left too many businesses either closed or gasping for air. Governmental lockdown orders, major supply chain interruptions, and spikes in COVID-19 cases have all left certain businesses unable to fulfill their contractual obligations. The resulting hardship faced by businesses over the last year will undoubtedly have a lasting effect on contract drafting and negotiations in the years to come, particularly with respect to an often-overlooked contract provision: the force majeure clause.

Black’s Law Dictionary (9th Ed.) defines a force majeure clause as a “contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event or effect that the parties could not have anticipated or controlled.” In the end, of course, the precise definition of any given force majeure clause lies in the contract itself. As federal, state, and local governments began imposing various social distancing and shelter-in-place orders last year, many businesses rushed to see whether the force majeure clauses contained in their contracts might offer any reprieve from the hardships they were facing.

In JN Contemporary Art LLC v. Phillips Auctioneers LLC, (S.D.N.Y. Dec. 16, 2020), an art seller sued an auctioneer for breach of contract after the auctioneer terminated the auction agreement pursuant to its force majeure clause. Ruling in favor of the auctioneer, the court found that the COVID-19 pandemic constituted a force majeure event even though the word “pandemic” was nowhere to be found in the contract. The court pointed to the contract’s broad definition of a force majeure event followed by numerous examples, including “natural disaster,” explaining that “[i]t cannot seriously be disputed that the COVID-19 pandemic is a natural disaster.” Id. at 7. Similarly, the court in In re Hitz Restaurant Group (Bankr. N.D. Ill. June 3, 2020) decided to reduce a tenant’s rent in proportion to the tenant’s reduced ability to generate revenue due to Governor Pritzker’s moratorium on indoor dining in March of 2020. The court reached this decision even though the lease stated that “[l]ack of money shall not be grounds for Force Majeure” because the lack of money was a direct result of “government action” and the issuance of an “order”—both of which were listed as force majeure events in the lease. Id. at 377.

Conversely, in a different case involving a commercial lease, the court held that the tenant’s breach was not covered under the force majeure clause. See In re CEC Entertainment, (Bankr. S.D. Tex. Dec. 14, 2020). In this case, the court did not even consider whether the pandemic constituted a force majeure event and instead concluded that because the clause at issue explicitly stated that it did not apply to the inability to pay rent, relief pursuant to such clause was not appropriate. The force majeure clause in Future St. Ltd. v. Big Belly Solar, LLC, (D. Mass. July 31, 2020)similarly failed to free a recycling bin distributor from its contractual obligation to pay its supplier. The court explained that because its failure to perform certain obligations preceded the pandemic, the distributor could not show that such failure was caused by the pandemic as required by the force majeure clause.

These cases and others showcase how a well-crafted force majeure clause can either make or break a breach of contract claim. A sound force majeure clause should define what constitutes a force majeure event, the type of breach excused by such an event, the relationship of the force majeure event to the non-performance, and the scope of any relief granted by the clause. The presence and construction of these elements may determine whether the parties will be held to their original obligations under the agreement.

Going forward we can expect that such contract provisions will be more carefully crafted and bargained for, specifically with respect to what constitutes a force majeure event and the effect of the event on the obligations of each party. For starters, parties should avoid using old, boilerplate language and relegating force majeure clauses to portions of the contract that typically do not require much review or negotiation. Instead, parties should consider their positions, what events may come into play, and whether open-ended definitions, like “circumstances beyond the reasonable control of the parties,” or a specific lists of events, such as “pandemic” or “public health crisis,” or both, are most beneficial. Parties should also give careful consideration to the type of breach that a force majeure event may trigger, the appropriate relief required, and what happens when the force majeure event ends. For assistance with drafting force majeure clauses and other contract provisions, contact your legal counsel.

A vexing problem for businesses whose products are criticized online has become more challenging.  A federal appellate court recently held that a manufacturer did not defame a competitor with comparative advertising, reasoning “trade libel” should require more proof than defamation of persons (and perhaps corporations) but allowing that each state could differ.

The United States Court of Appeals for the Seventh Circuit explained that the manufacturer’s statements should be privileged from liability when they do not include specific, verifiably false statements about the competitor or its products. “In competition,” the court stated, “a bruised (corporate) ego should be dealt with by hiring an advertising agency, not by hiring a lawyer.” 

The statements at issue were contained in product reviews of Next Technologies’ standing desks written by a competitor, Beyond the Office Door. The case is called Next Technologies Inc. v. Beyond the Office Door, LLC.

While the lower court had dismissed the case by applying First Amendment protections, the appellate court declined to treat products the same as people and reasoned that competitors need leeway for comparative advertising. Instead of Constitutional protection for “trade libel,” the appellate court decided each state could make its own rules. It then dismissed on the grounds that manufacturers must prove “a statement that the speaker knows to be false or makes with reckless disregard of its truth or falsity.” In cases involving individuals, public figures (e.g., politicians and celebrities) are required to make a similar showing, but other plaintiffs are not.

Although the appellate court was interpreting Wisconsin law, its skepticism of product disparagement claims may be predictive of its approach to similar issues under Illinois law. Several Illinois courts have expressed doubt as to whether a lawsuit for product disparagement is viable in the State and few, if any, defamation cases in commercial contexts have succeeded. In some situations, competitors may have other remedies available to them under unfair competition laws including the federal Lanham Act.

FVLD successfully defended a media client in what might be the seminal Illinois case involving defamation among competitors – Imperial Apparel, Ltd. v. Cosmo’s Designer Direct, Ltd. The Supreme Court of Illinois analyzed that case as a traditional defamation case (and dismissed the case) but might have approached it differently if it involved solely criticism of competing products as opposed to personal attacks directed at the competitor’s principals.

In addition to the legal hurdles a corporate plaintiff must overcome to state a defamation claim arising from a negative review, businesses should consider the potential that such litigation might backfire and call attention to the criticism (or lead to more criticism).

Practical Considerations When Dealing With OnLine Reviews

The issue of dealing with negative, or even false, reviews becomes even more complex when the reviews are online.  The likelihood of holding an online platform – such as Twitter, Facebook, YouTube, or Instagram – liable is limited due to the protections offered under Section 230 of the Communications Decency Act.  While there has been discussion recently about limiting or removing these protections, the likelihood of legislation being passed is very unclear. 

Businesses can take legal action against actual reviewers if the reviews are defamatory or otherwise unlawful but most criticism is shielded from liability. Moreover, litigation often will not make economic sense because the reviewers (unless they are competitors posing as customers) are generally individuals who may not be able to pay a judgment. When the reviewers are anonymous, the process of identifying them can add significant additional expense (and courts often decline to “unmask” them).

Further, responding in the online world can do more damage as cease and desist letters, responses thereto, and even common legal filings can be posted to create more unwanted attention. Relatedly, the time for an effective response online is limited due to the constantly changing focus of social media – if you are not prepared, you may be better off not responding (despite the harm that may have been done to your business) because your response might just refocus attention on the issue.  Some tips for businesses include:

  • Don’t have employees, family members, or friends pretend to be clients and post good reviews as that can run afoul of Federal Trade Commission rules and other state statutes;
  • Do create a program or easy method to encourage actual clients to leave good reviews, such as a link on an electronically mailed invoice;
  • Don’t stoop to the other side’s level and make false accusations;
  • Do make positive and truthful statements about your business and its products and services;
  • Don’t respond online immediately in reaction to the problematic post; and
  • Do have a policy about who can respond to bad reviews or posts, and the process for doing so.

Conclusion Negative reviews and false comparisons can threaten a company’s bottom line by driving away long-standing as well as potential customers. Businesses should work with legal counsel and other professionals to plan for, and properly respond to, such issues.  While litigation may be attractive in the immediate aftermath of a post, it is not always the best option, especially in the online world.  Having a purposeful – rather than simply reactive – approach to your brand reputation and how you protect it can solidify your company’s reputation to withstand the tornadoes that can come with occasional viral posts.

On March 23, 2021, Governor Pritzker signed Senate Bill 1480 into law.  SB 1480 amends the Illinois Human Rights Act (the “IHRA”) to constrain employers’ use of criminal background checks.  It also amends the Illinois Business Corporation Act (the “IBCA”) to require those Illinois employers obligated to file EEO-1 reports to include in their annual corporate reports information that is substantially similar to employment data reported under Section D of the corporation’s EEO-1 form.  Through an amendment to the Illinois Equal Pay Act (the “EPA”), SB 1480 further mandates that employers report EEO-1 and pay data to the Illinois Secretary of State.  Illinois employers that fail to abide by these changes may suffer substantial penalties.  This newsletter provides an overview of the foregoing changes.

The IHRA and Criminal Background Checks

Illinois already has in place laws limiting an employer’s ability to inquire about criminal histories.  For example, under the IHRA, it is a civil rights violation for an employer to take action against an applicant or employee because the individual has been arrested for a crime.  Likewise, an employer may not ask about a sealed or expunged criminal record.  Under Illinois’ “ban the box” law (the Job Opportunities for Qualified Applicants Act), employers may not inquire about an applicant’s criminal background until after an interview or a conditional employment offer has been made.

Under SB 1480’s amendment to the IHRA, it is a civil rights violation for an employer to use a “conviction record” to disqualify or take adverse action against a person in a hiring or employment context unless either:

  • there is a substantial relationship between the criminal offense or offenses and the employment position; or
  • there would be an unreasonable risk to property or to the safety or welfare of specific individuals or the general public.

A “substantial relationship” means “a consideration of whether the employment position offers the opportunity for the same or a similar offense to occur and whether the circumstances leading to the conduct for which the person was convicted will recur in the employment position.”

In making a determination, an employer shall consider the following six factors (the “Mitigating Factors”):

  1. the length of time since the conviction;
  2. the number of convictions that appear on the conviction record;
  3. the nature and severity of the conviction and its relationship to the safety and security of others;
  4. the facts or circumstances surrounding the conviction;
  5. the age of the individual at the time of the conviction; and
  6. evidence of rehabilitation efforts.

Before an employer may disqualify or take adverse against an individual, however, it must undertake an interactive assessment.  If, after considering the Mitigating Factors, the employer makes a preliminary decision that the individual’s conviction record disqualifies the individual, the employer must notify the person in writing of the following:

  • the disqualifying conviction or convictions that are the basis of the preliminary decision and the employer’s reasoning for the disqualification;
  • a copy of the conviction history report, if any; and
  • an explanation of the right to respond to the employer’s preliminary decision before the decision becomes final.  The explanation must inform the individual that the response may include, but is not limited to, submission of evidence challenging the accuracy of the conviction that is the basis for the disqualification or evidence in mitigation, such as rehabilitation.

The employer must give the individual at least five business days to respond to the notification before making a final decision.  The employer is required to consider the information the individual submits before making a final decision.  If the employer decides to disqualify or take adverse action solely or partially because of the conviction record, the law requires the employer to notify the person in writing of the following:

  • notice of the disqualifying conviction or convictions that are the basis for the final decision and the employer’s reasoning for the disqualification;
  • any existing procedure the employer has for the individual to challenge the decision or request reconsideration; and
  • the right to file a charge with the Illinois Department of Human Rights (the “IDHR”).

An employer, employment agency, or a labor organization that unlawfully discriminates because of a conviction record may be liable for extensive relief.  This includes a cease-and-desist order; actual damages to compensate for loss or injury; hiring, reinstatement, or promotion with back pay and fringe benefits; action to make the injured party whole; admission into or restoration of membership; and attorneys’ fees and costs.

The amendments became effective immediately.  For more information, contact your legal counsel or visit the FAQ that the IDHR has published on its website.

EEO-1 and Employment Data Reporting

SB 1480 also amends the IBCA.  It mandates that, beginning with annual reports filed on or after January 1, 2023, those corporations required to file an EEO-1 report with the Equal Employment Opportunity Commission include some of the same information in the corporation’s annual reports filed with the Illinois Secretary of State.  Within 90 days of receiving a properly filed annual report, the Secretary of State will publish the data on the gender, race and ethnicity of each corporation’s employees on the Secretary of State’s website.

Amendments to the EPA

SB 1480 also amends the EPA by requiring private employers with more than 100 employees in Illinois to “obtain an equal pay registration certificate from the Illinois Department of Labor within 3 years after the effective date of” SB 1480 and recertify every two years thereafter.  In order to obtain the certificate, an employer must pay a $150 filing fee and submit an equal pay compliance statement.

In addition, the business must furnish a copy of its most recently filed EEO-1 report for each county in which it has a facility or employees, along with proof of total wages that it paid to each employee in Illinois during the preceding calendar year (grouped according to gender, race, and ethnicity).  The data needs to show there is not a pattern of relative underpayment by gender or race or explain with nondiscriminatory factors any pattern that is contained in the data. 

The amendment to the EPA also contains audit provisions and whistleblower and retaliation protections.  It authorizes civil penalties against employers who do not comply with the law, including up to one percent of the business’s gross revenue for the year of the violation.  It also provides a variety of remedies for employees against whom an employer retaliates, including payment of attorneys’ fees.

It behooves covered employers to review their EEO-1 payroll records to make sure they will be able to comply with the EPA and to determine whether they should revise their employment practices and policies.

Conclusion The amendments to the IHRA and the EPA are substantial.  Employers that fail to abide by them run the risk of audits, penalties, and lawsuits, as well as adverse publicity.

As the pandemic continues, and unemployment benefits are extended and increased, a new type of identity theft and fraud has arisen.  Identity thieves will obtain key information about an employee – including social security number, workplace, and possibly even the employee’s salary.  The identity thief will then use the employee’s information to make a claim for unemployment benefits.  In Illinois, as well as other states, such benefits are paid through a debit card mailed to the claimant.  The identity thief will either try to steal the debit card from the mail, or file a change of address with the unemployment office to redirect the debit card or other payment.  The thief will then try to use the money before the scam is discovered and the claim is denied.  Employers and their employees must be vigilant and work together to avoid becoming victims.

How do I know if our organization/our employee is a victim?

The scam is usually uncovered in one of two ways.  First, when an individual files an unemployment claim, the employer against whom the claim is filed receives a notification of the claim.  In the case of the scam, the employer will receive notice of the claim, but will realize that the claim is by a current employee.  Second, an employee may receive mail or another communication from the unemployment office regarding the claim – such as a copy of the claim, an address verification, correspondence regarding the debit card, or the debit card itself. 

What can our organization do as an employer to protect itself and our employees?

There are a few steps an employer can and should take when it receives a fraudulent claim as part of this scam:

  1. inform the employee of the claim, confirm that the employee did not file it, and provide the employee with any and all information you can about the claim (so the employee can protect himself or herself);
  2. assuming it is fraudulent, report the claim as fraudulent to the unemployment office;
  3. file a response to the claim, including indicating that the employee is still employed and the claim is fraudulent; and
  4. check your computer system for any intruders or malicious files that may have released employee information.

What can our organization’s employees do to protect themselves?

An employee who is a victim of this scam should also take certain actions to protect themselves.  These include the following:

  1. the employee should report the fraudulent claim to the unemployment office – some offices have telephone hotlines and/or webpages for individuals to use to report this scam.  Given the prevalence of the scam, the employee may not receive a response for some time;
  2. the impacted employee should report the incident to the local police department where he or she lives, and make sure to get a police report number.  This will help should the employee need to make any claim to a creditor or credit rating bureau regarding identity theft;
  3. the employee should visit the Federal Trade Commission’s website at www.identitytheft.gov for additional advice regarding this scam.  Further, if the employee has other identity theft concerns, those can be reported here as well.  The employee’s state’s Attorney General’s website may also have helpful information;
  4. the employee should obtain free copies of his or her credit reports from each of the three reporting agencies (Experian, Equifax and Transunion), and review each for errors or unknown accounts.  If there are errors, unknown accounts, or other issues, the employee should report them immediately to that bureau;
  5. the employee should place a fraud alert (or a credit freeze) on his or her credit report;
  6. the employee should consider purchasing personal identity theft protection services, such as www.lifelock.com;
  7. if the employee’s data was part of a recent data breach (from your or another organization), the employee should take advantage of any offers of protection (such as additional fraud monitoring); and
  8. if the employee receives a debit card related to the claim, he or she should not activate or use the card, but rather should destroy the card.

Conclusion The ongoing pandemic has created numerous opportunities for identity thieves to exploit holes in the system or individuals’ fears.  It is important to be even more vigilant in these challenging times.  If your business or employees have been victimized in any scam, you may also want to contact your legal advisors.

The Occupational Safety and Health Administration (“OSHA”) has issued a new workplace safety guidance for employers during the COVID-19 pandemic titled, “Protecting Workers: Guidance on Mitigating and Preventing the Spread of COVID-19 in the Workplace” (the “Guidance”). The Guidance is not mandatory and does not create any new legal obligations for employers. The Guidance only provides recommendations that are advisory in nature as well as descriptions of existing mandatory safety and health standards. Pursuant to the General Duty Clause under the Occupational Safety and Health Act, employers, however, are still required to provide a workplace free from any recognized hazards that are causing or likely to cause death or serious physical harm. Accordingly, employers, as part of their obligation to provide a safe and healthful workplace, should review the Guidance, which is intended to provide assistance in recognizing and abating hazards that are likely to cause death or serious physical harm.

OSHA Recommends Implementation of Workplace COVID-19 Prevention Program

The Guidance encourages employers to implement COVID-19 prevention programs in the workplace, as OSHA has taken the position that “implementing a workplace COVID-19 prevention program is the most effective way to mitigate the spread of COVID-19 at work.” The Guidance specifically recommends that a COVID-19 prevention program include the following 16 elements in order for the program to be effective:

We wish our clients and friends a healthy, happy, and prosperous 2021. Our January Legal Update highlights new laws and amendments that may be of interest to Illinois businesses and individuals. We encourage all those potentially affected by these developments to consult with counsel to ensure that they are in compliance with, or consider taking advantage of, these new laws.

New Laws and Amendments Effective January 1, 2021

In addition to other consequences of the pandemic, COVID-19 caused Illinois to cancel much of the 2020 Illinois legislative session. As a result, only three new Illinois laws became effective on January 1, 2021. By contrast, over 250 Illinois laws went into effect at the beginning of 2020.

Wage Amendments to the Illinois Minimum Wage Law (“IMWL”)

Illinois has further increased its minimum wage to $11.00 per hour this year under the IMWL, which was amended in 2019. The IMWL will further increase the minimum wage by an additional $1.00 per hour every year until it reaches $15.00 per hour in 2025. Under the IMWL, the minimum wage for tipped workers and employees under 18 years of age working part-time will increase proportionally as well. The Illinois Department of Labor has published a state minimum wage chart by year, which is available here. Notably, the minimum wage in Cook County is already $13.00 per hour, and the minimum wage in the City of Chicago is currently $13.50 per hour for small employers and $14.00 per hour for larger employers. Employers must comply with the highest applicable minimum wage rate. For more information regarding minimum wage requirements in Illinois, please see our July 2020 Legal Update.

Increases in the Federal Estate, Gift, and Generation-Skipping Transfer (“GST”) Tax Limits

The Internal Revenue Service has announced the federal estate, gift, and GST tax exemption limits for 2021. In 2020, these federal tax exemption limits were $11.58 million per person or $23.16 million for a married couple. For 2021, these limits are increasing to $11.7 million per person or $23.4 million for a married couple. These limits are scheduled to increase annually for inflation through 2025, when they will return to $5 million per person, adjusted for inflation, on January 1, 2026. The annual federal gift tax exclusion amount of $15,000 per donor, per recipient remains unchanged for 2021. Married couples may combine the gift tax exclusion amounts and make gifts of up to $30,000 to any individual. The Illinois estate tax exemption is $4 million per person and does not increase for inflation, but Illinois does not impose a gift tax.

Review of Some Changes in the Law in 2020

COVID-19 Changes to the Chicago Fair Workweek Ordinance

Our July 2020 Legal Update reported that the new Chicago Fair Workweek Ordinance requires certain large employers to comply with new work schedule requirements. These requirements include providing “covered employees” in specific industries with 10 days’ advance written notice of work schedules (14 days after July 1, 2022), predictability pay for shift changes, and good faith written estimates of the projected work for new employees, among other requirements. Although the Ordinance took effect on July 1, 2020, in response to the pandemic, the City of Chicago delayed the effective date for an employee’s private right of action for violations of the Ordinance until January 1, 2021. Moreover, Chicago has issued a COVID-19 rule, which states that if the pandemic causes a material change to an employer’s operations that creates a need for a schedule change, the employer may be exempt from certain provisions of the Ordinance.

Illinois Hotel and Casino Employee Safety Act Delayed

As discussed in our January 2020 Legal Update, the new Hotel and Casino Employee Safety Act requires hotel and casino employers to protect employees against sexual assault and harassment by guests by providing “panic buttons” and written anti-sexual harassment policies, among other requirements. The Act was scheduled to become effective July 1, 2020, but was delayed until March 1, 2021. Regardless of the Act, Chicago already requires hotel employers to provide “panic buttons” to certain employees under the Chicago “Hands Off Pants On” ordinance.

Public Act 101-0640 to Remain Relevant

Earlier last year, Governor Pritzker signed Public Act 101-0640 into law. The Act aims to adapt governmental functions to the challenges presented by the COVID-19 pandemic. Notable provisions of the Act include granting the Secretary of State emergency powers to extend the validity of driver’s licenses, permits, and identification cards; an amendment to the Open Meetings Act to allow for remote participation in public meetings; an amendment to the Illinois Freedom of Information Act exempting public bodies from liability for certain delays in responding to information requests; and changes to the Electronic Commerce Security Act to allow for remote witnessing and notarization of certain documents, among many others. As long as Governor Pritzker’s COVID-19 emergency declaration remains in effect, we should expect many of the Act’s provisions to remain in place this year.

Annual Sexual Harassment Prevention Training Reminder

As discussed in previous Legal Updates, Illinois amended the Human Rights Act to require all employers with at least one employee working in Illinois to provide sexual harassment prevention training to all employees who work in Illinois by December 31, 2020, and annually thereafter. Illinois has not adjusted this requirement for any COVID-19-related hardship. For more information on these training requirements, please see our August 2019 Legal Update and November 2019 Legal Update.

Failure of Illinois Senate Bill 687: Fair Tax Amendment

Senate Bill 687, which was scheduled to take effect in 2021, no longer will. The bill would have created new income tax brackets by switching to a graduated income tax structure, but was contingent on Illinois voters approving a constitutional amendment changing the state tax laws from a flat tax structure to a graduated or progressive income tax. The ballot measure failed, and as such the graduated structure will not go into effect. Although the bill will not go into effect, it is worth noting because lawmakers will likely put forth new measures to address the state’s budget deficit in the upcoming year. FVLD will continue to monitor and update our clients about these proposals as they arise.

Conclusion Please note that this Legal Update is not comprehensive of all of the new laws that may affect you or your business and provides an overview for informational purposes only. It is general in nature and is not intended to constitute legal advice or to take into account all of the exceptions, exemptions, and nuances that may apply to you or your business. Certain laws that we do not mention, including new federal laws and laws in other states, may nonetheless affect you or your business. In addition, we anticipate that under the Biden administration a number of new laws – especially in the employment arena – will be passed. You should consult with your legal and other advisors about the entire legal landscape that may impact you.

On December 27, 2020, President Trump signed the Consolidated Appropriations Act (the “Act”).  The Act is designed to (a) provide appropriations to keep the government running through September 2021, and (b) provide additional COVID-19 emergency response and relief to businesses and individuals.  This newsletter focuses on three of the key areas in the COVID-19 response and relief part of the Act.

Effect of the Act on the Families First Coronavirus Response Act (“FFCRA”)

The Act did not extend an employer’s obligation to provide employees with emergency paid sick leave and expanded paid family and medical leave for a COVID-19 related absence under the FFCRA, which expired on December 31, 2020.  Additional information regarding the FFCRA can be found in our March 2020 Legal Update and in our April 3, 2020 COVID-19 Legal Update.

Although the Act did not extend the FFCRA paid leave requirements, the Act did extend the substantial FFCRA-related tax credits to pay for the cost of FFCRA leave until March 31, 2021.  Accordingly, employers may voluntarily continue to provide FFCRA paid leave benefits to employees and remain eligible to receive the refundable payroll tax credits equal to the cost of the paid sick leave under the FFCRA until March 31, 2021.  If an employer is going to extend FFCRA paid leave until March 31, 2021, it would be advisable to notify its employees accordingly.

PPP/Business Assistance

The Act also made a number of changes to the Paycheck Protection Program (“PPP”).  We have previously written about the PPP, including in our March, April, and July 2020 newsletters (among others).  While a recitation of all of the changes to the PPP under the Act is not possible here, below are some of the key provisions of which business should be aware:

Changes to Allowable and Forgivable Uses:  The Act adds a number of expenses as allowable uses of PPP funds that may be forgiven under the PPP:

  • “Covered operations expenditure” – includes expenditures for “business software or cloud computing that facilitates” business operations;
  • “Covered property damage cost” – includes costs “related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that [were] not covered by insurance or other compensation”; and
  • “Covered worker protection expenditure” – includes expenditures to adapt “business activities of an entity to comply with requirements established or guidance issued by” certain governmental entities from March 1, 2020 to the end of the COVID-19 national emergency relating to “the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement” (the Act contains examples).

These changes apply both to new loans made after the Act’s effective date, as well as loans already made under the PPP, but not to loans that have been forgiven.

Payroll Costs:  The Act added that payments for “group life, disability, vision or dental insurance” are included in the definition of “payroll costs.”  This change was similarly made retroactive to apply to loans already made under the PPP.

Second Draw PPP Loans:  The Act created the ability for certain businesses to obtain a second PPP loan (the “Second Draw”).  To be eligible, in addition to other requirements, a business must (a) employ less than 300 employees, and (b) have at least 25% less in gross receipts compared to past fiscal quarters (which quarters can be compared depends on when the business started and when the Second Draw is requested).  Additionally, the business’s prior PPP loan must have been used, or will be used, by the time of disbursement of the Second Draw.

The calculation for the maximum amounts available under the Second Draw are similar to those under the original PPP, but are capped at $2 million.

The Act also provides for the SBA Administrator to issue guidance to address “barriers to accessing capital for minority, underserved, veteran, and women-owned business concerns for the purpose of ensuring equitable access to covered loans.”  Businesses that fall into these categories should be vigilant in monitoring such guidance and consult with their legal and financial advisors when it is issued.

Other Changes:  The Act also provides other business assistance through changes to certain portions of the Economic Injury Disaster Loan program, the microloan program, and low interest refinancing of certain loans.  Finally, the Act includes provisions providing grants for “shuttered venue operators,” also known as “Save Our Stages.”

Tax Changes

The Act makes a number of changes and clarifications regarding tax issues, two of which are discussed below.

First, the Act clarifies that a PPP loan that is forgiven is not included in the income of an entity (forgiveness of a loan normally is treated as income).  The Act also clarifies that otherwise deductible expenses that are paid with the proceeds of a PPP loan (e.g., payroll, rent, utilities, etc.) remain deductible.  This reverses an IRS Notice that took the position that expenses paid with forgiven PPP loans were not deductible.

Second, the Act extends and enhances the Employee Retention Tax Credit.  Previously, the tax credit allowed eligible businesses a refundable tax credit up to 50% of qualified wages.  The Act extends this program for the first 2 quarters of 2021 and allows a tax credit for up to 70% of qualified wages (up to $7,000 per quarter), as well as other enhancements.  The Act also loosens the restrictions on who qualifies for the tax credit.  Most notably, the Act allows PPP Loan recipients to claim the credit, something they were previously unable to do. If you have any questions about the new stimulus law, you should contact your legal and financial advisors.

As anticipated in our December COVID-19 Legal Update, the Equal Employment Opportunity Commission (EEOC) has updated its guidance on employer-mandated COVID-19 vaccinations.  Please note that this guidance only relates to issues within the EEOC’s authority and should be discussed with legal counsel in conjunction with the issues highlighted in our prior newsletter.  Here are some key points:

1.         Employers can generally require that their employees receive a COVID-19 vaccine, subject to exceptions for those employees with disabilities or sincerely held religious beliefs that prevent them from receiving a vaccine.

2.         Under the Americans with Disabilities Act (ADA), employers can physically exclude employees who cannot be vaccinated from the workplace if they pose a “direct threat to the health or safety of individuals in the workplace” that cannot be eliminated with a reasonable accommodation, absent undue hardship.  This does not mean that the employment of these employees may automatically be terminated.  Employers will need to determine whether such employees have any additional protections under EEO laws or other federal, state, and local laws or regulations.

3.         Under Title VII of the Civil Rights Act, employers on notice of employees’ sincerely held religious beliefs that prevent them from receiving a vaccination are required to provide a reasonable accommodation, absent undue hardship.  If a reasonable accommodation is not possible, employers may physically exclude the employees from the workplace.  This does not mean that employers may automatically terminate the employment of these employees.  Employers will need to determine whether such employees have any additional protections under EEO laws or other federal, state, and local laws or regulations.

4.         Employers who administer vaccines (or contract with a third-party to administer vaccines) to their employees should know that the administration of a vaccine does not constitute a medical examination under the ADA.  Employers should be aware, however, that pre-vaccination medical screening questions and proof of vaccination requests may elicit protected information about a disability or genetic information.  Questions and requests that elicit information about a disability should be avoided, unless they are “job-related and consistent with business necessity.”  Employers should also consider warning employees not to provide genetic information in response to any vaccine-related questions or requests. The full EEOC Vaccination Q & A can be found here.  For assistance navigating employer and employee rights with respect to employee vaccine policies and programs, contact your legal counsel.

Introduction

As public health officials across the country gear up to administer Pfizer’s COVID-19 vaccine, many questions have been raised regarding the safety, efficacy, and distribution of such a vaccine.  While there currently is no law that specifically and explicitly prohibits employers from compelling their employees to take a COVID-19 vaccine, employers face no shortage of legal and employee relations challenges doing so, especially given that the vaccine has only been authorized for emergency use thus far.  Business owners have been particularly curious about the impact of a vaccine on their determination to return to business as usual.  In their effort to create a safe work environment, some employers face the question whether they may or should compel their employees to receive a COVID-19 vaccine as a condition of employment or certain job functions.  Guidance documents from the Food and Drug Administration (FDA), the Occupational Safety and Health Administration (OSHA), and the Equal Employment Opportunity Commission (EEOC) provide a nuanced framework for the conditions under which an employer may compel employees to be vaccinated, but the jury is still out on this issue. The safest course of action for employers may be simply to recommend that employees follow Centers for Disease Control (CDC) guidelines with respect to any COVID-19 vaccine.

Labor and Employment Considerations

            Most employees in the US are at-will and employers are free to determine the terms and conditions of their employment within the bounds of federal and state laws.  The EEOC has not released specific guidance for a COVID-19 vaccine.  Its previous guidance, however, suggests that anti-discrimination laws, such as the Americans with Disabilities Act (ADA) and Title VII of the Civil Rights Act of 1964 (Title VII), may stand in the way of an employer’s effort to mandate vaccinations for its employees.  For example, an individual may be exempt from mandated vaccinations due to a disability under the ADA or a sincerely held religious belief protected by Title VII.  If an employee were to refuse a vaccination under these circumstances, a covered employer could be required to provide the employee with a reasonable accommodation, such as the ability to work from home or additional personal protective equipment, unless such accommodation would cause undue hardship.  Whether an accommodation is reasonable is determined on a case-by-case basis.  Healthcare workers, for example, will have difficulty demonstrating that they can safely perform their jobs without the vaccine.  Many of them are already required to receive a flu shot every year.  Employers with unionized workforces may find that vaccination is subject to negotiation under a collective bargaining agreement.  Even employers with non-unionized workforces should bear in mind that the concerted protest of a mandatory vaccination policy by their employees may qualify as protected activity under the National Labor Relations Act.  Given the foregoing, the best course for employers may be to recommend, but not require, that their employees be vaccinated.

OSHA Considerations

            While OSHA has yet to provide any guidance with respect to mandatory COVID-19 vaccinations, the agency’s 2009 letter of interpretation during the H1N1 outbreak provides some insight.  The letter of interpretation stated that OSHA does not require employees to take seasonal flu or H1N1 vaccines, but employers may do so subject to an employee’s reasonable belief that a serious medical condition creating a real danger of serious illness or death prevents the employee from taking the vaccines.  While OSHA has never done so in the past, some in the legal community speculate whether the agency may utilize its power under the General Duty Clause of the Occupational Safety and Health Act to issue citations to any employers who fail to offer COVID-19 vaccines.  OSHA’s power to issue such citations will depend on the CDC’s guidance on COVID-19 vaccines in the workplace and the extent to which an employer follows other COVID-19 safety guidelines from public health officials.  Although issuing citations may be within OSHA’s power, many legal commentators believe doing so would be a bridge too far for the agency.  It will be important to continue to monitor developments on this issue, particularly under the incoming administration.

Additional Risks of Requiring Vaccinations and Potential Limits on Liability

Given that companies like Pfizer and Moderna developed their vaccines in mere months, rather than the usual timeline of years, employees may perceive the risk of side effects as greater than vaccines that have been subjected to a longer development, testing, and approval process.  In addition to potential claims under federal and state laws, an employer may face workers’ compensation claims if a COVID-19 vaccine has undesirable side effects from mandatory vaccinations.  Depending on state law, there is a possibility that an employee or an employee’s family member might make arguments regarding the workers’ compensation exclusivity bar if the employer’s intentional act or reckless conduct results in an employee’s illness or death.

For certain employers with a COVID-19 vaccine administration program, the Public Readiness and Emergency Preparedness Act (the “PREP Act”) may offer additional protection specific to the administration program.  The PREP Act affords “Covered Persons” protection from liability related to the distribution, administration, or use of COVID-19 vaccines, including any vaccine authorized for emergency use.  Employers may be considered “Covered Persons” if they administer vaccines or provide facilities for vaccine administration.  To receive the full protections of the PREP Act, an employer must administer the vaccine in accordance with FDA guidelines and obtain an authorization from the federal government or a state or local health authority.

            Yet another approach might be for an employer not to require its employees to be vaccinated but to offer them an incentive if they are vaccinated.  For example, an employer might offer employees a bonus or other remuneration if they receive FDA approved COVID-19 vaccinations and substantiate that they have done so.

Conclusion

Employers face a challenging balance between protecting their employees and those who they may come into contact with by requiring employees to receive a COVID-19 vaccine as a condition of presence in the workplace and the still-evolving limits on how far an employer may go.  The practical limits on a mandatory vaccination program for employees will depend on guidance or rules issued by the EEOC and OSHA as well as evolving state and federal law.  In other words, there are currently more questions than answers, but we can expect to receive more guidance as COVID-19 vaccines become more widely available.  In the meantime, for assistance navigating employer and employee rights and potential employer liability resulting from employee vaccine policies and programs, contact your legal counsel.

Businesses have faced enormous challenges this year during the COVID-19 pandemic. In the midst of the resulting economic turmoil, launching new products or services has required careful planning as well as a solid branding strategy. Selecting a distinctive brand name for an innovative new product or service can add enormous value to a business. Indeed, a trademark or service mark can be a company’s most valuable intellectual property asset. Too many businesses, however, choose new brand names with little knowledge of basic trademark concepts and without conducting proper due diligence. In this Legal Update, we discuss important considerations and best practices in selecting and clearing new trademarks and service marks.

Selecting Distinctive Marks

A brand name, in legal parlance, is a trademark or service mark. A trademark is any word, phrase, design, or device (e.g., sounds or colors) that is used to identify and distinguish one’s products from those of its competitors. A trademark therefore identifies a particular product or group of products as coming from a single source. For example, the Nike “swoosh” design logo, the NIKE brand name, and the “Just Do It” slogan are trademarks that identify athletic shoes and apparel of Nike, Inc. The difference between a trademark and a service mark is that a service mark identifies and distinguishes services, rather than products. While the remainder of this newsletter mostly refers to trademarks rather than service marks, the principles are applicable to both kinds of marks.

Special care should be taken in trademark selection because the choice will impact whether, and to what extent, a trademark will be legally protectable if a dispute arises and whether the mark will be registrable with the U.S. Patent and Trademark Office. Trademark counsel should play an important role in the selection process. Experienced trademark practitioners counsel their clients to select strong, distinctive trademarks. They do so for a good reason. Distinctive trademarks are legally protectable, while those that lack distinctiveness are not. In selecting a trademark, it is therefore important that companies have a basic understanding of the following types of trademarks and how they differ in distinctiveness and protectability.

Fanciful Trademarks. Fanciful trademarks consist of words coined or invented solely to function as trademarks, and thus have no other meaning or significance in language. Examples of fanciful trademarks are STARBUCKS, EBAY, and PEPSI. Fanciful trademarks are considered the strongest of all types of trademarks in terms of distinctiveness. They are immediately protectable and eligible for federal registration when used in commerce.

Arbitrary Trademarks. Arbitrary trademarks are words that have a meaning in language, but are used incongruously as trademarks for the products they identify – that is, they are used entirely out of the context of their ordinary meaning. Examples of arbitrary trademarks are APPLE for computers and AMAZON for an online marketplace. Like fanciful trademarks, arbitrary trademarks are considered strong, distinctive trademarks. They, too, are immediately protectable and eligible for federal registration.

Suggestive Trademarks. Suggestive trademarks are those that hint at the nature or an attribute of the product without, however, actually describing it. Instead, some thought or imagination is necessary to make an association between the trademark and the product it identifies. Examples of suggestive trademarks are COPPERTONE for suntan lotion and GLEEM for toothpaste. Although not as strong as fanciful or arbitrary trademarks, suggestive trademarks also capably serve to identify and distinguish the source of a product or service from those of others. As such, suggestive trademarks are protectable and may be registered.

Descriptive Trademarks. Descriptive trademarks describe a quality, characteristic, function or the nature of the products they identify. Many trademark owners and marketers favor descriptive trademarks because they effectively communicate information about a product or service. Trademark law, however, recognizes that descriptive words should be available to competing sellers for use in describing their own products in the marketplace. Trademarks that are merely descriptive are therefore not considered distinctive trademarks. They are accordingly given very little – if indeed any – protection, and are not registrable on the Principal Register of the U.S. Patent and Trademark Office until they acquire distinctiveness. Examples of descriptive trademarks are DENT EXPERTS for auto body repair services and PERENNIALS for magazines in the field of gardening.

A descriptive trademark acquires distinctiveness or “secondary meaning” when, through wide use over a period of time, consumers come to associate the trademark with a particular company or source. For instance, HOLIDAY INN was merely descriptive for hotel services for holiday travelers, but acquired distinctiveness and trademark protection through extensive use over many years. As this discussion illustrates, there is a trade-off between choosing a descriptive trademark for the benefit it may have for marketing purposes and choosing a fanciful, arbitrary or suggestive trademark that is distinctive and legally protectable. Having the guidance of experienced trademark counsel in the selection process is vital.

Generic Terms. The name of a product or service itself is a generic term and is afforded no protection under trademark law. No one can, for example, adopt the term “cell phone” as a trademark for a wireless telephone device and claim exclusive trademark rights to it. Generic terms are in the public domain. Interestingly, a number of once strong brand names have become generic terms and fallen into the public domain when their owners misused them and permitted the general public to use them in a way that they became the commonly known name of the product itself. Examples include “aspirin,” “escalator,” “thermos” and “cellophane.”

Trademark Clearance

Prior to adopting a trademark, a company should take steps to determine whether it is available for use and not precluded by another trademark owner’s prior use of the same or a confusingly similar trademark. The first step is to conduct a preliminary screening or “knock-out” search of the proposed trademark. The object of a preliminary search is to screen for obvious conflicts that might show up with a quick search and eliminate the need for a more comprehensive trademark search. Typically, a proposed trademark is searched in the U.S. Patent and Trademark Office’s database for existing trademark registrations and pending applications. Another important screening tool is to search a proposed trademark using one or more Internet search engines, such as Google.

If no conflict is found with a preliminary screening search, the next step to clear a trademark is to conduct a full, exhaustive trademark search. A trademark search company will formulate search strategies to uncover not just identical trademarks, but also phonetic equivalents, those having the same or similar prefixes, suffixes or root words, corrupted spellings, synonyms and homonyms, as well as other trademarks that might be regarded as confusingly similar to the proposed trademark. The search should cover not only trademarks that have been registered or are the subject of pending applications, but also trademarks that are not registered – known as “common law” trademarks – which may also preclude the use and adoption of the proposed trademark. The full search encompasses numerous government records, business and news databases, as well as domain names and uses on the Internet. The analysis of comprehensive trademark search reports is not an easy task and often presents difficult legal questions concerning a proposed trademark’s availability for use and registration.

Finding an available trademark for use in today’s global marketplace can be challenging.  For that reason, companies should have at least a few back-up alternatives if their first choice for a trademark cannot be cleared. Experience also shows that it is often easier to clear a proposed trademark that consists of a fanciful word or term because, by its very nature, the word or term was conceived to serve as a trademark. Trademark owners may therefore be rewarded with lower search costs by selecting a highly distinctive, fanciful trademark.

Conclusion A trademark can be a company’s most valuable intellectual property asset. Your organization should therefore follow best practices in selecting and protecting its trademarks and be sure to work with an experienced trademark practitioner who can guide you every step of the way.

Working from home is no longer the exception – it is the rule. Because the pandemic shows no signs of slowing, companies will need to adapt to this reality. But working from home gives criminals new vulnerabilities to exploit. These criminals will use any vulnerabilities to gain access to company systems, to steal data or money, or to lock the company’s computers and ransom access. Below are six areas that companies should review with their technical and legal advisors to determine whether their technology, policies and procedures address the added vulnerabilities as employees work from home.

  1. Training

One of the most important actions a company can take to protect itself is training. The best policies and procedures cannot undo the unwitting actions of employees who click an email link because they think they “won $10,000 dollars,” open a pdf with alleged instructions to reset their company email mailbox, or send out a large wire transfer to help the CEO close a deal. Each of the aforementioned are well-known email scams. Employers should train employees how to be safe online – how to spot malicious emails, avoid ransomware, and protect against scams seeking to liberate corporate information. Moreover, employees should actually know what the company’s policies and procedures are for security – especially those related to logging in to the company system, technology use, and what to do if they suspect there has been a data breach. Employees, rather than technology, can be the best front line protection.

  1. Remote Access

While employees work from home, they still need to access their employer’s systems. Companies should institute or update policies about accessing company systems while off-site (at home or otherwise) to ensure security when accessing the systems and using and transferring data between a remote user and the company system. Important areas to consider are password requirements, Bring Your Own Device related policies, any needed home technology requirements, and overall technology use policies.

Companies should also consider utilizing technology that can provide additional security for employees accessing data offsite. For example, many companies today are using Virtual Private Networks, or VPN, that can provide additional security for remote access. Companies should also consider adding two-factor authentication for employees to log in from home. This adds an extra layer of protection by requiring each employee to not only log in with a unique password, but also to type a code obtained from an app or a text on a different device (e.g., the employee’s cell phone) that is created when the employee attempts to log in. Thus, even if the employee’s login credentials are compromised, the company’s system is still protected.

  1. Wi-Fi Use

When employees work from home, they likely have to connect to some type of Wi-Fi or hotspot. These can create additional vulnerabilities. Cyber-criminals can set up fake Wi-Fi networks that look like public ones. The criminals then wait for people to log in to the fake network so they can steal data in transit, place malicious files on the computer to compromise the next network that is accessed, or gain information from the computer. Companies should have policies in place about acceptable Wi-Fi or hotspot use. Such policies can include banning the use of public (hotel, airport, restaurant, etc.) Wi-Fi, requiring the use of a personal, secured network (such as a separate secured home network that is not used for other devices), or using a company issued phone’s (which the company has ensured is properly secured) hotspot capabilities.

Additionally, with more devices connecting to a home network – spouse and child computers and phones, smart TVs, smart thermostats, etc. – there are more access points for criminals to tunnel into a home Wi-Fi and gain access to all of the information on a company computer (and potentially reach the company network). Companies should consider ways they can mitigate these risks as well.

  1. Updates and Patches

While employees are working from home, companies need to ensure that appropriate updates and patches are installed on employee laptops or other technology. Patches and updates that are released are designed to fix problems and gaps in software, operating systems and other functions that can create security problems. With employees working remotely, on-site IT is not available to assist or ensure that employees install these patches. Letting significant time pass without updating can create a security risk. Companies should design policies and procedures to ensure proper maintenance by considering whether (a) to have employees install the updates and patches, (b) to rely on an automatic system for doing so, or (c) to utilize another method.

  1. Encryption

Encryption is also a key component of security. Employees working from home likely have company laptops or mobile devices. If an employee leaves that device at a restaurant, misplaces it, or it is stolen, that can lead to a data breach. However, most laws provide that if data is lost to a third party but the data is encrypted and the encryption key was not lost, no breach has occurred. As a result, the company will not need to comply with the various state laws on data breach notification. Thus, encrypting laptops and the data they hold not only protects company data from misuse, but can also help avoid a data breach.

  1. Reimbursement of Costs

As employees work from home, employers may seek to require them to have certain equipment for security and other purposes. In that case, state laws may require the employer to reimburse the employee. Illinois, for example, recently amended its Wage Payment and Collection Act to require employer reimbursement of “necessary expenditures.”  For more information, you can review our discussion of the amendment in our February 2019 newsletter. Companies are still adjusting to employees working from home. As part of that process, companies should continue to look at training of employees, auditing policies and procedures relating to technology use and security, as well as reviewing technological protections. These steps can help ensure protection from the various risks and other vulnerabilities created from remote work.

Companies are still adjusting to employees working from home. As part of that process, companies should continue to look at training of employees, auditing policies and procedures relating to technology use and security, as well as reviewing technological protections. These steps can help ensure protection from the various risks and other vulnerabilities created from remote work.

In our September 9, 2020, COVID-19 Legal Update email, we mentioned a recent court case that invalidated certain Department of Labor (DOL) regulations for the two new paid leaves available under the Families First Coronavirus Response Act (FFCRA). In response to this decision, the DOL recently issued revised regulations regarding workers’ rights and employers’ responsibilities under FFCRA’s paid leave provisions.

The revised FFCRA regulations went into effect on September 16, 2020. Among other rules, they discuss:

  • The DOL’s original work availability rule: The DOL reaffirmed that an employee may only take FFCRA leave if the employee has actual work from which to take leave. In other words, an employee cannot take FFCRA leave if the employer does not have work available for the employee to perform or the employee is not scheduled to work (such as during furloughs, temporary layoffs, or temporary or permanent business closures). The DOL, however, emphasized that an employer cannot avoid granting FFCRA leave by falsely claiming to lack work for an employee.
  • The DOL’s original employer approval rule for intermittent leave: The DOL reaffirmed that employees must first obtain approval from their employers to take FFCRA leave on an intermittent basis. Intermittent leave is leave taken in separate blocks of time for a single leave-qualifying reason rather than for a continuous period of time. An employee who is teleworking (and not reporting to the worksite), for example, may take intermittent leave for any of the FFCRA qualifying reasons as long as the employer consents. The DOL, however, noted that employer approval does not apply to employees who take FFCRA leave in full-day increments to care for their children whose schools are operating on an alternate day (or other hybrid attendance) basis because this is not considered intermittent leave.
  • A revised definition of “health care provider”: The DOL limited its previously broad definition of “health care providers” that employers may exclude from eligibility for FFCRA paid leaves. The revised definition, however, still includes employees who provide diagnostic, preventive, or treatment services or other services that are integrated with and necessary to the provision of patient care.
  • Clarification that employees must provide required documentation supporting their need for FFCRA leave to their employers “as soon as practicable”: The DOL updated its documentation rule, and employees no longer need to provide supporting documentation prior to taking FFCRA leave. Instead, they may provide it as soon as practicable, which in most cases will be when the employee provides notice of the need for FFCRA leave.
  • Clarification that employees should generally provide notice before taking certain FFCRA leave if the leave is foreseeable: The DOL clarified that employees are required to provide notice of expanded family and medical leave under the FFCRA as soon as practicable and, if the need for leave is foreseeable, that will generally mean providing notice before taking leave. For example, if an employee learns on Monday morning before work that school will close on Tuesday due to COVID-19, the employee should notify the employer as soon as practicable (likely on Monday at work). If the need for leave was not foreseeable (e.g., if the employee learns school is closing on Tuesday after reporting for work that same day), the employee may take leave without giving prior notice but must still give notice as soon as practicable.

The DOL has also updated its FFCRA FAQs in light of the updated regulations. These FAQs are available here. If you have questions or concerns about whether the changes to FFCRA leaves may affect your business, consult your legal counsel.

Thank you to everyone who participated in the FVLD COVID-19 Response Survey. We sincerely appreciate your feedback and the time you took to provide it. Below is an overview of the responses we received followed by a detailed analysis of the responses with graphs and some commentary.

Overview

We saw some interesting patterns emerge from the responses. For example, most respondents indicated they are open for employees to be on premises. Unsurprisingly, respondents who are open for employees to be on premises listed childcare as the primary concern for their employees. We also saw that most respondents whose businesses are open for employees are also open for customers to be on premises as well. Respondents reporting that their premises are not currently open for their employees listed reopening for employees as their primary concern.

Most of the respondents also reported receiving a Paycheck Protection Program (PPP) loan. Respondents who reported receiving a loan listed loan forgiveness and the potential of an audit as their two biggest concerns. As reported in our July 2020 newsletter titled, The SBA Releases Additional Guidance for the Paycheck Protection Program, the Small Business Administration continues to issue guidance on PPP Loans; however, substantial questions remain. Respondents’ two biggest reported legal concerns were customer bankruptcy and employee lawsuits.

While the survey was designed to identify concerns, it also asked several questions about opportunities.  Respondents reported feeling they are handling the pandemic better than their peers are. We encourage everybody to remain proactive in COVID-19 response, which may frequently include working with your counsel on protecting your business and creating new opportunities for the future.

For more detail on the survey results (including graphs) and for additional analysis, please continue reading.

Detailed Analysis

Questions 1 & 2: Is your business open for employees to be on premises? If not, when do you anticipate opening your business for employees to be on premises?

Nearly 70% of respondents said that their businesses are open for employees to be on premises.  Of those respondents whose businesses are not yet open, nearly 45% said that they expect to open for employees by the end of 2020, 20% do not plan to open until there is a vaccine or treatment for COVID-19, and over 35% remain unsure.

Questions 3 & 4:  Is your business open for in-person customer/client sales/services?   If not, when do you anticipate reopening to customers/clients?

Half of the respondents said their businesses were open for in-person customers/clients. Of those respondents who are not yet open, roughly 37% expect to be open by the end of 2020, 26% will not open until there is a vaccine or treatment for COVID-19, and another 37% are unsure.

Question 5: What is the biggest COVID-19 related concern for your business?

Respondents’ two biggest concerns were uncertain revenue streams (over 40%), and re-opening for employees (33%).

Comment:  Any business that is considering opening for employees should be sure it has policies and procedures designed to keep employees safe. Moreover, businesses should communicate those policies and procedures to the employees. For additional information, please see our recent Legal Update, FAQ:  RETURNING TO THE WORKPLACE IN A COVID-19 WORLD. The Illinois Department of Commerce and Economic Opportunity has also published industry-specific guidelines and recommendations for reopening, which are available here.

Questions 6–9: Did you receive a loan through the Paycheck Protection Program (PPP)?  If yes, which covered period will you use, what portion of your loan do you think will be forgiven, and what is your biggest PPP related concern?

65% of respondents said they received PPP loans, approximately 45% of whom used the 8-week covered period versus 35% who used the 24-week covered period. The remaining 20% of PPP loan recipients do not know what period they will use.  Nearly 80% of those who received a PPP loan think at least 75% of their PPP loan will be forgiven, but 15% remain unsure because of the Small Business Administration’s (SBA) unclear guidance on forgiveness. 

Most of the respondents who took a PPP Loan are concerned with loan forgiveness.  The second largest concern among PPP Loan recipients is the potential for an audit of PPP loan spending.

Comment:  Borrowers’ concerns over loan forgiveness and the possibility of an audit are valid.  The guidelines provided by the SBA have caused uncertainty around forgiveness and the risk of an audit.  The concern over an audit is especially valid. The SBA has taken the position that it may audit a PPP loan of any size in its discretion and the government has already begun filing lawsuits and enforcement actions against businesses it believes took PPP loans in violation of the necessity certification.  If you are concerned about forgiveness or the possibility of an audit and how to prepare for one (or if you receive a notice of audit), contact your legal counsel immediately.

 Question 10: Because of COVID my business…

Over 40% of respondents have added or expanded a line of business because of the pandemic, but over 20% have eliminated or reduced a line of business, and 21% may explore restructuring. 45% of respondents’ businesses have not changed.

Comment:  Those businesses who are exploring restructuring should consult with a legal and/or financial expert about what options they may have.  Although restructuring can have a negative stigma, it can be extremely beneficial in the right situation.  Moreover, in stressful times, reinventing one’s business can be viewed as forward thinking and creative. 

Question 11: What business policies or procedures have you changed because of COVID-19?

An overwhelming majority of respondents (77%) have changed their work from home policies.  Other noteworthy policies that respondents have updated include: employee office conduct (29%), cybersecurity (25%); sick time (20%); vacation (18%); Family and Medical Leave Act (“FMLA”) (15%); diversity and inclusion (13%).

Comment:  It is always advisable for employers to review their policies to ensure that they are up to date and comport with applicable law. In the context of the COVID-19 pandemic, it is unwise to believe that current policies will suffice. In addition, new policies will be necessary to deal with the fast-changing dynamics of the pandemic.

For example, a new or updated work from home policy that clearly explains when employees can work from home and when they should be in the office will help avoid future confusion by employees.  Likewise, if more employees will be working from home, a good cybersecurity policy, as well as policies or training about proper technology usage and safety on-line, is essential to protect confidential and client information.  Conversely, if employees will be in your office, then a revised employee office conduct policy is essential to help prevent spreading COVID-19 and limit a business’ potential liability for any employees who contract COVID-19. Employers may also need to update their sick time and FMLA policies to comply with the Families First Coronavirus Response Act (FFCRA). For more information regarding sick leaves required under FFCRA, please see our Legal Update, Breaking News: Families First Coronavirus Response Act.

Question 12: What are your employees’ biggest concerns?

By far the two biggest concerns for employees are childcare and personal health, neither of which is surprising given the current issues brought on by the pandemic.  The next biggest concerns for employees are job security and returning to work.  For both of these concerns, employers might consider better communicating with their employees by keeping them updated on the health of the business as well as the plan to return to the office.  Employees were also concerned with the business strength of their employer and using mass transit. Other notable concerns include employees’ mental health and efficiency.

Two respondents did, perhaps jokingly, admit they do not communicate with their employees.  An open dialogue with employees is important. It may reduce employee anxiety and potential employment litigation risks.  It is advisable for all employers to listen to their employees’ concerns and ideas about ways to address them before they turn into business or legal problems.

Question 13: What is your biggest legal concern for your business in the next year relating to COVID-19?

Respondents’ largest COVID-19 related concern, by far, is the bankruptcy of customers (about 28%). Respondents’ next largest concerns, roughly 16% each, were employment issues and claims filed by employees.  This was followed by compliance issues and lawsuits with customers/clients, each concerning 9% of respondents.

Comment:  If a customer/client does file for bankruptcy, you should contact legal counsel as soon as you receive notice of it. Businesses that are concerned about employment issues and claims by employees may want to review our Legal Updates discussing recent employment law developments:

Question 14:  How do you feel your business is handling COVID-19 related challenges compared to your peers and competitors?

Just under 80% of the respondents felt that they are handling the challenges of the pandemic either better, or much better, than their peers and competitors.  Nearly 20% felt as though they are handling the challenges on par with their peers and competitors, while only one respondent felt his/her business was doing a much worse job.

Question 15: Aside from an end to the pandemic (or effective vaccine or treatment), what would make the biggest positive impact on your business?

We received many thoughtful responses. Generally, people responded that a safe return to “normal” or back to work would be the best thing for their businesses; however, one respondent wishfully stated that “winning the lottery” would really boost his/her business. Wouldn’t that be nice!

Conclusion Thank you again to all who participated in this survey. If you have any questions regarding the survey, please contact Jon Vegosen ([email protected]), Vance L. Liebman ([email protected]), Peter T. Berk ([email protected]), Cecilia M. Suh ([email protected]), or Paul M. King ([email protected]). If we can otherwise be of assistance, please call or write your regular FVLD contact.

Regrettably, workplace violence has reared its ugly head with respect to COVID-19.  Consistent with state laws and guidelines from the Centers for Disease Control and Prevention (“CDC”), as well as the Occupational Safety and Health Act, businesses have wisely put in place COVID-19 prevention policies and practices.  These include mandatory use of masks, social distancing, and limitations on the number of customers allowed at a place of business.  Unfortunately, workers – especially in retail and service businesses – have been threatened, assaulted, and even killed in response to some of these policies and practices.  For example, the media has reported that customers defying requests to wear masks have, among other things, shot and killed an employee, broken an employee’s arm, and coughed or sneezed on employees.  In another incident, a customer reportedly wiped his nose on an employee’s clothing.

Recently, the CDC updated its website to offer “strategies to limit violence towards workers that may occur when businesses put in place policies and practices to help minimize the spread of COVID-19 among employees and customers.”  It includes links to resources and trainings that both employers and employees in retail, services, and other customer-based businesses can use to learn how to prevent and deal with workplace violence.  In addition, it outlines steps that employers can take to prevent workplace violence, including providing employee training about the warning signs of violence and how to respond.  It also contains some basic “dos and don’ts” that employees can use to defuse and help prevent violence in their workplace.  While the recommended measures are not mandatory, they are useful, and employers would be wise to implement them. For more information about the CDC’s guidance, you can visit its website here.  Since the CDC may update its guidance on various subjects periodically, it is advisable to check the CDC COVID-19 website on a regular basis.

Estate planning documents are particularly important during these unprecedented and unpredictable times.  Below, we answer some common questions regarding estate planning in the context of COVID-19 and the upcoming election.  With the continuing escalation of the coronavirus pandemic, and with the 2020 November elections looming, we have found that many of our clients are revisiting and updating their estate plans, and those who have postponed estate planning are now ready to get an estate plan in place. 

Are there any time-sensitive things I need to think about with respect to estate planning?

Yes.  They relate to some important tax planning opportunities that could well evaporate or shrink very soon.  If the assets of you or you and your spouse, including your home and life insurance, are approaching or above the level of the Illinois ($4,000,000) or federal ($11,580,000) tax exemption levels, then you should confer with a professional about options for advanced planning and ways to reduce taxes.  Current conditions may make it an opportune time to consider advanced planning techniques:

  • The Tax Cuts and Jobs Act, enacted in 2017, continues to provide extraordinary opportunities for lifetime, testamentary, and generation-skipping gifts.  The historically high exemption rates are already set to expire in 2025, however, there is much speculation about whether the coronavirus pandemic or the results of the November 2020 elections will result in a change in the law implementing an earlier termination date for the current favorable rates.  Indeed, depending on the results of the election, the exemption rates could be substantially reduced, thereby resulting in estate taxes for significantly smaller estates.  If an individual or couple is in a financial position to make gifts, it would be wise to consider completing them before the November elections, in order to take advantage of the high exemption level before they may be rolled back.  Gifts can be made that will consume the high exemption without depriving the family of the use and control of the money.
  • Interest rates have never been lower.  For certain planning opportunities, low interest rates can result in more efficient wealth transfers for families with taxable estates.
  • Due to favorable laws, planning for the use of life insurance and life insurance trusts can be useful not only to protect your loved ones but also to provide liquidity and reduce or offset taxes.
  • The Coronavirus Aid, Relief, and Economic Security (CARES) Act lifted the requirement for required minimum distributions from qualified retirement accounts for 2020.  For clients contemplating conversion of a traditional IRA or 401(k) to a Roth IRA, there may be an additional benefit of converting more of the account to a Roth IRA in 2020.

What other planning should I be thinking about at this time?

Now is a good time to evaluate your current estate planning documents, both to confirm the individuals named as your executors, trustees, and agents under powers of attorney for health care and property.  You should also review the beneficiaries named to receive your assets upon your death.

How can I sign my documents while practicing social distancing?

Each estate planning document has different requirements for signature, however, most require a notary stamp and one or more witnesses.  Remote signings have been temporarily authorized in Illinois.  Our office can arrange a remote signing with witnesses and a notary. 

How do I make sure I appropriately deal with all of my assets?

Specific asset classes are handled differently in the course of an estate administration.  Real estate, personal belongings, cash and the contents of safety deposit boxes are commonly administered through your will and revocable living trust.  Here are some additional asset classes to which you may want to pay special attention:

  • Beneficiary designations.  Certain assets, including insurance policies and retirement accounts, are transferred after your death according to beneficiary designations that you appoint with the asset administrator.  Now is a good time to make sure that your beneficiary designations are up to date. 
  • Digital assets.  Digital assets include everything from your email and social media accounts, to your online bank accounts, to cryptocurrency.  Some power of attorney forms, wills, and trusts specifically grant the agent the authority to access digital assets.  Even so, it is a good idea to review your digital assets, as well as the passwords used to access those assets, so that your agents will have access to them when necessary.
  • Genetic material.  If you have harvested genetic material and are keeping it in storage, now is a good time to revisit the contract that governs the use and ownership of that material in the event of your disability or death.

Is it important to have a business succession plan?

If you own your own business, it is imperative that you establish a business succession plan.  Succession planning involves creating a plan for both management and ownership succession in the event you retire, become disabled, or pass away.  A good succession plan will reduce expenses, and planning ahead can help address family and business needs and meet retirement goals.  Succession planning can also enhance the value of a business by strengthening buyer confidence that the success of the business does not solely rely on the owner for critical management and sales functions.

A family member recently passed away.  What’s next?

While the coronavirus pandemic has forced the administration of estates to be handled remotely, courts are open and hearing cases, and banks and administrators are open and managing account transactions remotely.  If you have recently lost a loved one, either from COVID-19 or from other causes, you may have questions about how to proceed.  It is advisable to contact experienced attorneys promptly to help guide you through the estate administration process, especially because some aspects of estate administration may be time sensitive.  For example, in Illinois, the will of a deceased person must be filed in the county where the person resided within 30 days of the date of death.

What documents do I need for my estate plan?

Anyone 18 or older requires some level of estate planning. As a quick reference, basic documents include a Will, a Power of Attorney for Healthcare, a Power of Attorney for Property, and, in most situations, Revocable Living Trust.  For a more detailed discussion, see our October 2019 newsletter, “Estate and Financial Planning is Not Just for the Rich.”

Conclusion This newsletter does not discuss all of the details and factors that may be important to your estate planning.  If you are beginning your estate planning or considering revisions to your current plan, it is important to consult with legal counsel regarding your own questions and concerns and to tailor a plan that is right for you.

On August 8, 2020, President Trump signed one Executive Order and three Memoranda in response to the ongoing COVID-19 pandemic.  These actions focus on a payroll tax deferral, additional unemployment benefits, renter and homeowner protections from eviction and foreclosure, and student loan payment deferrals.

Memorandum Regarding Payroll Tax

This memorandum instructs the Secretary of the Treasury to delay the withholding, deposit, and payment of the 6.2% social security tax imposed on an employee’s wages and compensation.  The delay runs from September 1, 2020, through December 31, 2020.  Note that this is only a delay in the timing of the payment, not a cancellation of the tax obligation. That said, the memorandum also instructs the Secretary of the Treasury to issue guidance and “explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum”.  Thus, while the memorandum merely defers the payment of some payroll taxes, it leaves open the possibility that the deferred social security tax on employees will be ultimately cancelled through guidance and legislation.  

The deferral applies only to employees who makes less than $4,000 of pre-tax income every two weeks, or roughly $104,000 annually.  Employers who wish to take advantage of the program should wait for further guidance. Moreover, employers who elect to defer the tax should do so cautiously because, under current law, employers will be liable for the full amount deferred in January 2021.

Memorandum Regarding Unemployment Benefits

The President also signed a memorandum providing for $400 per week in additional assistance to certain unemployed individuals (as defined in the memorandum), if a state requests the additional funding. States that do request the additional funding, however, must partially fund the benefit themselves. A number of Governors have questioned whether their States will request the money, in part because they are unsure whether they can afford their share of the program.  The memorandum also provides for termination of the additional benefit provided by the memorandum on the earlier of (a) the Department of Homeland Security’s Disaster Relief Fund (which funds the federal portion of the program) decreasing to $25 billion, or (b) December 6, 2020.  The additional benefit will also terminate if there is legislation enacted providing supplemental unemployment payments.

Executive Order Regarding Renter and Homeowner Assistance

This executive order states a policy “to minimize, to the greatest extent possible, residential evictions and foreclosures during the ongoing COVID-19 national emergency,” and takes the following four actions:

Memorandum on Student Loans

  1. It directs the Secretary of Health and Human Services and the Director of the CDC to “consider whether any measures temporarily halting residential evictions of any tenants for failure to pay rent are reasonably necessary.” The Order does not expand or extend the temporary eviction moratorium under the CARES Act, which expired on July 24, 2020.
  2. It directs the Secretary of the Treasury and the Secretary of Housing and Urban Development to “identify any and all available Federal funds to provide temporary financial assistance to renters and homeowners.”  The Order does not specifically set aside any new cash funds or other immediate financial relief for renters or homeowners facing financial hardship due to COVID-19.
  3. It directs the Secretary of Housing and Urban Development “to promote the ability of renters and homeowners to avoid eviction or foreclosure,” such as “encouraging and providing assistance to public housing authorities, affordable housing owners, landlords, and recipients of Federal grant funds in minimizing evictions and foreclosures.”
  4. It directs the Director of the Federal Housing Finance Agency to “review all existing authorities and resources that may be used to prevent evictions and foreclosures for renters and homeowners resulting from hardships caused by COVID-19.”

The CARES Act provided relief from student loan payments through September 30, 2020.  The third memorandum President Trump signed instructs the Secretary of Education to take action to allow deferments of student loan payments through December 31, 2020. The above are all subject to further actions and guidance by different federal government agencies.  Further, some have questioned the constitutionality of the actions.  Finally, the President has indicated that he may sign additional executive orders and memoranda on various other issues in the near future.  Businesses and individuals should stay informed on these subjects and contact legal counsel with any questions about whether they can take advantage of any provisions of the actions.

The National Labor Relations Board (NLRB) recently determined that Cott Beverages Inc. had legitimate business reasons for restricting employees from accessing their cell phones on the manufacturing floor or at their work stations.  The NLRB allowed the restrictions despite arguments that they inhibited employee discussions of working conditions in violation of the National Labor Relations Act (NLRA) by not allowing employees to take photos and record videos using their phones.

The case originated before COVID-19.  Cott’s defense focused on the prevention of distractions caused by cell phone use, which could result in safety issues, as well as the prevention of food contamination.  Of course, these days, manufacturers and other companies where employees engage in hands-on collaboration might also consider limiting cell phone use for hygienic reasons to avoid spreading the virus.  Some news reports indicate that COVID-19 can live on cell phone screens for up to 96 hours.  Employers may also have concerns about employees capturing and circulating confidential information on their cell phones.

The Cott decision indicates that the NLRB will take into account legitimate employer concerns for restricting cell phone use.  The NLRB reasoned that it was required to balance the rule’s impact on employee rights against Cott’s justification for the rule.  It rejected arguments that Cott was required to draft its restrictions as narrowly as possible to prevent any avoidable infringement on employee rights.

Applying this standard, the NLRB noted that Cott’s restriction was limited to the manufacturing floor and employee workstations.  It found that Cott’s infringement on employee rights was minor compared to employee and customer safety concerns.  

That said, some of the considerations that the NLRB took into account are unique to the food and beverage industry (Cott cited FDA requirements to justify its policies).  The NRLB could reach a different conclusion in a different context (for example, an office setting), so employers should still tread carefully.

Employers considering similar restrictions should properly document their legitimate reasons.  They may also want to include appropriate NLRA-focused exceptions to allow employees to engage in protected activity to the extent possible.  Employers might also consider other common sense exceptions, such as for employee emergencies and employee needs to check in on young children or elderly parents.

Additionally, employers should avoid adopting restrictions under circumstances that might invite scrutiny.  The NLRB might have viewed Cott’s restrictions differently had Cott imposed them soon after an employee made a complaint based on a cell phone recording.

Employers considering the adoption of restrictive cell phone use policies may also want to factor in the potential adverse impact on employee morale.  Many employees are “tied” to their cell phones and view them as an integral part of their day-to-day life.  Employees may well resent an employer’s efforts to constrain use of their cell phones. FVLD has extensive experience advising clients regarding the NLRA and other labor and employment matters, as well as helping clients navigate investigations, and resolve complaints, before the NLRB and other agencies enforcing labor and employment laws.

Recently, the Small Business Administration (“SBA”) released additional guidance regarding the Paycheck Protection Program (“PPP”), which includes changes to several previously released Interim Final Rules and provides two new loan forgiveness applications. This newsletter highlights information from those sources to help borrowers better understand the PPP loan program.

The 60/40 Split

The SBA clarified that a borrower who spends less than 60% of PPP loan proceeds on payroll costs is still eligible for partial loan forgiveness. This is a welcome clarification to the text of the Paycheck Protection Program Flexibility Act, which stated that borrowers who spend less than 60% of loan proceeds on payroll costs are ineligible for forgiveness. Now, borrowers can receive forgiveness for an amount based on the requirement that 60% of the forgivable amount is spent on payroll costs.  For example, if a borrower receives a $100,000 PPP loan and spends $54,000 (or 54%) on payroll costs, the borrower may receive forgiveness for up to $90,000, because the $54,000 in payroll costs is 60% of $90,000.

Expenses Eligible for Forgiveness

The SBA also clarified that the forgiveness is based on amounts spent for:

  1. payroll costs, including salary, wages, and tips (up to $46,154 per employee for a 24-week covered period, or $15,385 per employee for an 8-week covered period), and covered benefits for employees, including healthcare expenses, retirement contributions, and state taxes imposed on employee payroll paid by the employer;
  2. owner compensation (up to $20,844 for a 24-week covered period or $15,385 for an 8-week covered period);
  3. rent payments;
  4. interest payments on mortgage obligations existing before February 15, 2020; and
  5. utility payments.

The EZ Form

The SBA also released Form 3508EZ, a simplified forgiveness application that some borrowers can use to apply for forgiveness. As its name suggests, the form is shorter and easier to complete than the original form. A borrower can use Form 3508EZ if it meets any one of the following three criteria:

  1. The Borrower is self-employed with no employees at the time of application.
  2. During the Covered Period1, the Borrower did not reduce (a) its employees’ hours or wages by more than 25% compared to the period between January 1 and March 31, 2020, and (b) the number of its employees or the average paid hours for employees.
  3. During the Covered Period, the Borrower (a) did not reduce its employees’ hours or wages by more than 25% compared to the period between January 1 and March 31, 2020, and (b) the Borrower was unable to return to its February 15, 2020, level of business activity due to compliance with specific federal agency requirements.

Confusion about the Use of Loan Proceeds

The Coronavirus Aid, Relief, and Economic Security Act lists allowable uses for loan proceeds. Allowable uses include forgivable uses, other enumerated uses like interest on any debt incurred before February 15, 2020, and any use allowed under Section 7(a) of the Small Business Act. In its recent guidance, however, the SBA restricts the allowable uses of loan proceeds to require at least 60% of the loan proceeds be spent on payroll costs. Notably, the SBA’s list of allowable uses does not include a category mentioning the other Section 7(a) uses, creating uncertainty whether those uses are allowed. The SBA’s recent guidance further provides that “if the funds are knowingly used for unauthorized purposes, the Federal Government may hold [borrowers] [] legally liable such as for charges of fraud.” As these rules continue to evolve, a borrower’s potential liability for improper use of loan proceeds is unclear, making it likely that there is more guidance to come. 

Questions Remain

While this guidance provides some clarity, substantial questions still remain.  FVLD will continue to monitor the program for new guidance and other substantial developments.  

For more information, please feel free to contact the authors of this update or your usual FVLD contact.

[1] For borrowers who took a PPP loan before June 5, 2020, the Covered Period is either (a) the 8-week, or (b) the 24-week period beginning with the disbursement of the loan. For borrowers who took a PPP loan after June 5, 2020, the Covered Period is the 24-week period beginning with the disbursement of the loan.

On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act into law. The Flexibility Act, which amends the CARES Act, gives borrowers who took loans under the Paycheck Protection Program (PPP) additional flexibility to achieve loan forgiveness. This breaking news alert highlights important provisions of the Flexibility Act so that businesses can be prepared.

Extended Covered Period

The Flexibility Act allows existing borrowers to extend the Covered Period from 8 weeks to 24 weeks. New PPP borrowers will have a Covered Period of either 24 weeks, or until December 31, 2020, whichever is earlier. This change extends the amount of time that borrowers have to spend their PPP loans to qualify for forgiveness and extends the amount of time that borrowers have to avoid a reduction in loan forgiveness due to a reduction in full-time equivalent (FTE) employees and/or a reduction in employee wages/hours.

Extended Safe Harbor

Under the CARES Act, if a borrower’s average FTE during the Covered Period is less than its average FTE during the Reference Period1, then less of its loan will be forgiven. As originally written, a borrower could avoid a forgiveness reduction if (1) the event that caused the FTE reduction occurred between February 15 and April 26, 2020, and (2) the borrower restored its FTE employees to its February 15, 2020, level by June 30, 2020.

The Flexibility Act extends the safe harbor rehire date from June 30 to December 31, 2020. This gives borrowers that experience a decrease in FTE between February 15 and April 26 more time to qualify for the safe harbor. However, borrowers that experience a decrease in average FTE because of an event that occurs outside the February 15 to April 26 window must qualify for another safe harbor to avoid a reduction in loan forgiveness.

New Safe Harbors

The Flexibility Act adds two additional safe harbors that borrowers can use to avoid a reduction in loan forgiveness. Borrowers who had a reduction in FTE employees can avoid a reduction in loan forgiveness if:

  1. the borrower (a) could not rehire terminated employees that were in its employ on February 15, 2020, and (b) was unable to hire similarly qualified employees to fill positions on or before December 31, 2020; or
  2. the borrower is unable to return to its February 15, 2020, level of business activity due to compliance with certain federal agency requirements that are issued (a) between March 1 and December 31, 2020, and (b) relate to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.

To be eligible for these new safe harbors, the borrower must document, in good faith, that it meets the relevant criteria.

Relaxed Loan Spending Requirements

The Flexibility Act also overrides prior guidance from the SBA regarding the portion of a loan that can be spent on certain non-payroll expenses. Prior SBA guidance had required that at least 75% of the forgivable portion of loan proceeds must be spent on payroll expenses. The Flexibility Act, however, requires borrowers to spend only 60% of the PPP loan on payroll expenses and allows borrowers to spend up to 40% on certain other expenses (namely, interest on covered mortgage obligations, covered rent obligations, and covered utility expenses) to obtain loan forgiveness.

There is an important caveat. If a borrower spends less than 60% of the loan on payroll expenses, loan forgiveness is barred in its entirety. This is a much harsher result than previously existed. Previously, if a borrower spent less than 75% of the loan on payroll expenses, forgiveness was reduced, not barred.

Payroll Tax Deferral

The Flexibility Act allows employers who receive PPP loan forgiveness to take advantage of the CARES Act provision allowing deferral of the employer portion of certain payroll taxes. Previously, if an employer received forgiveness the deferral authorized under the CARES Act was not available.

Conclusion

While the information above does not cover all of the provisions in the new Flexibility Act, it highlights some of the important points. We expect guidance to be issued soon that clarifies some of the changes in the Flexibility Act. For more information, please feel free to contact us.

[1] Borrowers can choose their Reference Period from either (a) February 15 to June 30, 2019, or (b) January 1 to February 29, 2020. Seasonal borrowers can also choose from any 12 week period between May 1, 2019 and September 15, 2019.

Recently, the Small Business Administration released additional information regarding the Payroll Protection Program (“PPP”) including the Interim Final Rules for Loan Forgiveness and the Loan Forgiveness Application.  The U.S. Chamber of Commerce also released “A Guide to PPP Loan Forgiveness.”  This newsletter highlights information from those sources to help borrowers better understand the PPP loan forgiveness requirements.

Clarification of Amount Forgiven for Payroll Expenses

The Forgiveness Application clarifies that the amount forgiven for payroll expenses is based on the amount incurred during the Covered Period (the 8 week period beginning with disbursement of the loan).  While Congressional intent to cover 8 weeks of payroll was clear, the language used in the CARES Act caused some confusion based on the realities of payroll methods.  The Application requires the employer to use the payroll expenses incurred during the Covered Period and recognizes that the last week of accrual will be paid in the first paycheck after the Covered Period.  In addition, the Application allows weekly and bi-weekly employers to begin the 8 week period at the beginning of the next pay period after receipt of the funds instead of the day of receipt (referred to as the Alternative Payroll Covered Period).  This eliminates any proration requirement for those employers for payroll expenses that may have been incurred at one time but paid at another time straddling the beginning or end of the relevant Covered Period. 

Clarification Regarding Full-Time Equivalent Employees

The Application also clarifies how to count a borrower’s full-time equivalent (FTE) employees during the Covered Period and their chosen Reference Period1:

  • The maximum average FTE per employee is 1.  So, employees who averaged 40 or more hours per week during the Covered Period would have an FTE of 1.
  • For employees that worked less than 40 hours per week employers may either:
    • take the average number of paid hours an employee worked per week, divide by 40, then round to the nearest tenth.  Example: an employee who averaged 35 hours of paid time per week during the Covered Period has an FTE of 0.90. (35 / 40 = 0.875, round up to the nearest tenth, 0.9); or
    • assign an FTE value of 0.5 to all employees who averaged under 40 hours.
    • NOTE:  Borrowers must use the same method to measure FTEs in the Covered Period and the Reference Period.

If a borrower’s average FTE during the Covered Period is less than its FTE during the Reference Period, then less of the loan will be forgiven.  However, a borrower can avoid a reduction in its loan forgiveness if it reduced its FTE during the period from February 15 to April 26, 2020, but it restores its FTE to its February 15, 2020, level by June 30, 2020.  The Interim Rules and the Application also allow a borrower to avoid a reduction in its loan forgiveness if either of the following occurs during the Covered Period or the Alternative Payroll Covered Period:

  • The borrower made a good-faith, written offer to rehire an employee (for the same salary/hours) that was then rejected by the employee and the borrower informed the applicable state unemployment insurance office within 30 days of the employee’s rejection; or
  • The borrower fires the employee for cause, the employee voluntarily resigned, or the employee voluntarily requested a reduction in hours.

Questions Remain

While the Application and the Guidance provide much needed answers, many questions remain.  We are hopeful that the SBA will issue additional guidance soon, as there are many situations not specifically addressed.  These include clarifying whether employees that may have voluntarily left or whose employment has been terminated for cause prior to the Covered Period, but not replaced, will impact the forgiveness amount.2

The House recently passed a bill that changes several aspects of PPP loan forgiveness.  For example, the bill allows borrowers to spend 40% of the loan proceeds on expenses other than payroll, and extends the Covered Period from 8 weeks to 24 weeks. The bill now goes before the Senate where it will hopefully be approved, but may be changed. The Senate has been working on a similar bill.

While the information above does not cover all the information released by the SBA and the Chamber of Commerce, we hope this highlights some of the important points.  For more information, please feel free to contact us.

[1]Borrowers can choose their Reference Period from either (a) February 15 to June 30, 2019, or (b) January 1 to February 29, 2020. Seasonal borrowers can also choose from any 12 week period between May 1, 2019 and September 15, 2019

[2] The Guide from the Chamber of Commerce seems to allow for an exemption for employees who voluntarily left or whose employment was terminated for cause prior to the Covered Period; however, the Application and Interim Final Rules presently do not.

INTRODUCTION

As the COVID-19 pandemic evolves, the government and our communities are planning to reopen our society and our workplaces.  This newsletter addresses a number of questions that we are receiving from businesses about reopening.  Because the situation is so fluid, some of these answers may change.1  It is therefore important to keep abreast of the most current guidance from the CDC and other governmental authorities.  We have also put together some helpful links at the end of this newsletter.

REOPENING

  1. When and how should we reopen?

This will depend in large part on government regulation and guidance, especially from the CDC, OSHA, state and local agencies, the EEOC, and the Department of Labor.  It will also depend on the needs of your business and how well it can operate safely.  While employers are eager to “get back to normal,” it is more advisable to take a slow and measured approach to reopening, as safety is important.

  1. How do you recommend we proceed?
    1. Prepare a thoughtful and clear written plan with a strong internal team and capable external advisors.
    2. Review it with executives and key managers so they will be prepared to execute it and will speak with one voice.
    3. Communicate the plan clearly with all employees and be prepared to respond to questions and concerns.
  2. Whom should we bring back to our facility?

Focusing on employees’ knowledge, skill sets, and experience, determine which employees are critical to have working in your facility and who can still contribute remotely.  Look at multiple shifts, rotating schedules, or staggered start times to reduce the number of employees at your facility and to promote safe distancing.  The fewer employees you bring back, the safer they will be.  It is important to remind employees that working at home is a privilege and not a right and they must still meet performance expectations.  If you have a unionized workforce, check labor contracts to verify whether seniority or other issues should factor into your decision-making and whether you need to negotiate over new work rules that may be a part of your plan.  Be sure there are sound reasons for your decisions and actions, and document them.

SAFETY

  1. What are some of the safety considerations for the building in which we are located?

If your business does not own your building, or if you are a tenant in a multi-tenant property, then the owner will make some decisions that can affect safety.  You will want to determine if the property owner is taking appropriate precautions with respect to matters such as:  (a) airflow; (b) building access; (c) elevator usage; and (d) cleaning services if provided by the owner.  You may want to request limits on the number of passengers in an elevator or share other concerns.  If your business does own your facility, consider engaging a contractor with expertise in health and safety requirements.

  1. What kinds of things can we do to make our space safe?

Consistent with CDC and OSHA guidelines, be sure that your space is clean and disinfected not only before it reopens but also on a regular basis after it reopens.  Establish and follow cleaning protocols for equipment, common areas, surfaces, and door handles.  Make sure that masks, gloves, wipes, and sanitizers are readily available for employees.  Assess how your space is currently set up and decide what changes, if any, you can make to separate employees.  Consider installing partitions, especially in open work areas.  Decrease the number of chairs in conference rooms, breakrooms, and other common areas.  Institute protocols to eliminate, minimize, or distance employee interaction with each other as well as non-employees (such as customers, vendors, and delivery personnel) and follow federal, state and local guidelines that may be established.

  1. What are some safety-focused actions we can take with respect to our employees?

Educate employees about the symptoms of COVID-19:  fever; cough; shortness of breath or difficulty breathing; chills; repeated shaking with chills; muscle pain; headache; sore throat; new loss of taste or smell; including the emergency warning signs for COVID-19, such as trouble breathing; persistent pain or pressure in the chest; new confusion or inability to arouse; or bluish lips or face.

Establish written health and safety guidelines and protocols that all employees must follow, including the following:

  1. engage in social distancing, including, whenever possible, staying at least six feet apart from others;
  2. wear a mask or other face covering at work when interacting with others in person;
  3. do not touch others;
  4. cover coughs and sneezes in your sleeve or elbow, and not with your hands;
  5. wash your hands frequently throughout the day using soap and warm water for at least 20 seconds each time, and/or use hand sanitizers;
  6. use a paper towel to dry your hands and then immediately throw it away; and
  7. observe other recommended guidelines and protocols required by applicable law.

Where possible, have employees work remotely.  If they cannot work remotely, consider encouraging them not to take public transportation to and from work or to take it during non-rush hour times.  Also, consider subsidizing the parking fees of employees who drive to and from work.

  1. For their own safety, should we decline to return vulnerable or pregnant workers to the office?

No.  While you will want to accommodate vulnerable and pregnant workers by allowing them to work remotely (if feasible), denying such workers the opportunity to return to work could lead to discrimination claims based on factors such as age, disability, or pregnancy.

COVID-19 INQUIRIES, MEDICAL EXAMS, TESTING, AND CONFIDENTIALITY

  1. What may an employer do to determine if employees physically coming into the workplace have COVID-19 or symptoms associated with the disease?

Employers may ask all employees who will be physically entering the workplace if they have COVID-19, symptoms associated with COVID-19, or been tested for COVID-19.  Employers may exclude those with COVID-19, or symptoms associated with COVID-19, from the workplace because, as the EEOC has stated, their presence would pose a direct threat to health or safety.  Teleworking employees, however, are not physically interacting with coworkers to pose a direct threat to health or safety, and an employer would generally not be permitted to ask these questions of teleworkers.

  1. In order to protect the rest of its workforce during the COVID-19 pandemic, how much information may employers request from an employee who calls in sick?

According to the EEOC, during a pandemic, employers covered by the Americans with Disabilities Act (the “ADA”) may ask employees calling in sick if they are experiencing symptoms of the pandemic virus.

  1. Is it permissible for employers to take employees’ temperatures during the COVID-19 pandemic?

While taking an employee’s temperature would ordinarily be a medical examination restricted by the ADA, because the CDC and state/local health authorities have acknowledged community spread of COVID-19 and issued attendant precautions, employers may take employees’ temperatures.  Some people with COVID-19, however, are asymptomatic and do not have a fever, so taking temperatures is not a panacea for employers.

  1. Does the ADA allow employers to require employees to stay home if they have COVID-19 symptoms?

Yes.  The CDC states that employees who become ill with symptoms of COVID-19 should leave the workplace.  The ADA does not prevent employers from following this guidance.

  1. May employers administer a COVID-19 test before permitting employees to enter the workplace?

The ADA requires that any mandatory medical test of employees be “job related and consistent with business necessity.”  Applying this standard to the current circumstances of the COVID-19 pandemic, employers may take steps to determine if employees entering the workplace have COVID-19 because an individual with the virus will pose a direct threat to the health of others.  Therefore employers may choose to administer COVID-19 testing to employees before they enter the workplace to determine if they have the virus.

Having said the foregoing, if an employer is not a hospital or in the business of administering medical tests, or if it does not have trained personnel to conduct tests, it may want to think long and hard before the employer itself administers COVID-19 testing.  It would be advisable to leave any testing to organizations and facilities that are well equipped to administer them.  Regardless of whether it or a third party administers the test, employers should ensure the test used is approved, safe and accurate under applicable guidelines, and that they understand what the results mean.  Information on testing can be found at the websites for the U.S. Food and Drug Administration, the CDC, and other public health authorities.  These sites should be regularly reviewed for updates.  Employers should bear in mind that even accurate testing may have false positives or negatives, and will only reveal if the virus is currently present.  A negative test does not mean the employee will not acquire the virus later (including between testing and receiving results).

If an employer is going to require COVID-19 testing, it should do so on a consistent basis for all employees to try to prevent discrimination claims.

  1. Suppose a manager learns and confirms that an employee has COVID-19, or has symptoms associated with COVID-19.  The manager knows she must report it but is worried about violating ADA confidentiality.  How does she do so?

Under the ADA, employers must maintain all medical information about an employee as confidential.  Information about whether an employee has symptoms or a diagnosis of COVID-19 is medical information.  That, however, does not prevent the manager from discreetly reporting this information to a small number of appropriate employer officials well versed in ADA confidentiality requirements, so that they can take actions consistent with guidance from the CDC and other public health authorities.  An employer may generally disclose to employees that an employee has contracted or been exposed to COVID-19; however, an employer may not disclose the identity of that employee to employees.

  1. What may an employer do under the ADA if an employee refuses to permit his employer to take his temperature, or refuses to answer questions about whether he has COVID-19 (or symptoms associated with COVID-19) or whether he has been tested for COVID-19?

The ADA allows an employer to bar an employee’s physical presence in the workplace if he refuses to answer questions about whether he has COVID-19, has symptoms associated with COVID-19, or has been tested for COVID-19, as well as the ability to bar this employee’s presence if he refuses to have his temperature taken.  To gain the cooperation of employees, however, employers may wish to ask the reasons for the employee’s refusal.  Employers may be able to provide information or reassurance that they are taking these steps to ensure the safety of everyone in the workplace.  Sometimes, employees are reluctant to provide medical information because they fear an employer may spread personal medical information throughout the workplace.  As noted above, the ADA prohibits such broad disclosures.

  1. May an employer ask only one employee (rather than all employees) questions to determine if the has COVID-19, or require that this employee alone have his temperature taken or take a test?

The ADA requires an employer to have a reasonable belief based on objective evidence that the employee might have COVID-19.  It is important for the employer to consider why it wishes to take these actions regarding a particular employee and document the decision.  For example, if an employer notices an employee has a persistent, hacking cough; it could ask about the cough, whether the employee has been to a doctor, and whether the employee knows if he has or might have COVID-19.  These questions are permissible now because this type of cough is one of the symptoms associated with COVID-19.

  1. When an employee returns to work, may an employer require a doctor’s note certifying fitness for duty?

Yes.  Such inquiries are permitted under the ADA because either they would not be disability-related or, if the pandemic were truly severe, they would be justified under the ADA standards for disability-related inquiries of employees.  As a practical matter, however, doctors and other health care professionals may be too busy during and immediately after a pandemic outbreak to provide fitness-for-duty documentation.  Therefore, new approaches may be necessary, such as reliance on local clinics to provide a form, a stamp, or an e-mail to certify that an individual does not have the pandemic virus or employee self-certification.

POLICY REVIEW AND NEW POLICY IMPLEMENTATION

  1. Why should employers conduct a policy review?

It is always advisable for employers to review their policies and employee handbooks to make sure that they are up to date and comport with applicable law.  In the context of the pandemic crisis, it is unwise to believe that current policies will suffice.  In addition, new policies will be necessary to deal with the fast-changing dynamics of the pandemic.  Situations will arise that managers may not anticipate or will be ill equipped to address without guidance.  Managers may make up or develop policies “on the fly.”  This can result in rogue policies, inconsistent treatment of employees by managers, discrimination, and lowered employee morale.  Before employees return to work, it is far better to review and revise existing policies, prepare new ones, and train managers how to anticipate situations and administer policies.

  1. What kinds of existing policies might employers want to review and possibly revise?
Equal OpportunityADASick LeaveWork from HomeDiscipline/Discharge
Non-DiscriminationLife-Threatening IllnessVacationSafetySeverance
Anti-HarassmentFMLAOther PTOLayoffsReferences
  1. What kinds of new policies might employers want to consider implementing?
Temperature ChecksHand WashingQuarantining / Tracing
COVID-19 TestingMeeting SizeWorking Remotely
Duty to Report COVID-19Staggered Hours / ShiftsAppropriate Attire for Video Meetings
Social DistancingLimitations on VisitorsConfidentiality of Employee Matters
MasksTravel Disclosures & RestrictionsUse & Security of Computer Equipment at Home
  1. Is there anything else an employer can or should do with respect to policies?

Yes.  Document employees’ receipt of them!  It behooves an employer to have all employees complete, date, and sign an acknowledgment form confirming that they have read, understand, and will abide by the employer’s policies.  In this way, an employer (a) can document employee health and safety awareness, and (b) have a written record of answers to certain questions.

This is an opportunity to ask employees if they have COVID-19, have any symptoms of COVID-19, or have been exposed to someone who has COVID-19.  If they answer yes, the form could state that they understand and agree that they will stay home and self-quarantine until after the quarantine period defined under current CDC guidelines has expired.  The form could also state that employees acknowledge that they are under a “continuing duty to report or disclose.”  That is to say, to ensure that safety is a two-way process, employees need to advise their employer if, in the future, they have COVID-19, have any symptoms of COVID-19, or have been exposed to someone who has COVID-19.

DEALING WITH EMPLOYEES, ESPECIALLY OBSTINATE EMPLOYEES

  1. What is one of the best things an employer can do to deal with employees?

To communicate effectively with them.  Many employees likely have tremendous anxiety about COVID-19, their safety and the safety of their loved ones, and their job security.  Effective communication can (a) help reduce their anxiety; (b) make them feel reasonably comfortable about returning to work; (c) help manage their expectations; (d) contribute to a positive working environment that inspires employees to perform their duties effectively; and (e) help mitigate the risks of lawsuits and employer liability.

  1. What seven things can employers do if an employee refuses to return to work?

1.  With sincere empathy, try to find out why the employee is refusing to return to work.  There may be a very good reason, or the employee may have an unfounded fear or concern that you can address.  By communicating, you may be able to resolve the issue or easily accommodate the employee.  2.  Explore whether the employee can carry out his or her duties reasonably effectively by teleworking.  3.  Examine whether the employee has paid time off available or if a leave of absence is appropriate.  4.  Let the employee know that if he or she persists with an unwarranted refusal to return to work, discipline or termination of employment may be the next step.  5.  Absent a legitimate and documentable reason to the contrary, treat employees consistently.  6.  Do not retaliate against employees who express concerns.  7.  Document (a) the employee’s refusal to return to work; (b) the efforts you made to learn the reasons for the refusal; (c) the things you offered to address the employee’s concern; and, (d) if applicable, the consequences that would befall the employee if the employee continued to refuse to return to work.

  1. What can an employer do if employees fail to observe its social distancing policy or fail to wear a mask when required?

The employer needs to hold the employees accountable for violating its policy.  For the first infraction, progressive discipline is likely in order.  If the misconduct is egregious or if it continues, the discipline should be more severe, up to and including termination of employment.  The possibility of these repercussions should also be stated in the employer’s policies.  Whatever the consequences, the employer should properly document the employee’s infractions and its decision.

  1. What can an employer do if an employee who is immunocompromised or otherwise has a greater risk if he contracts COVID-19 returns to work and his performance is deficient?

In most instances, the employer should focus on correcting his performance deficiencies and counsel the employee to make immediate, significant, and sustained improvement, just as it would for any other employee.  If, however, the employee is requesting a reasonable accommodation to be able to perform the essential functions of the job, the employer may need to engage in the ADA interactive dialogue process to explore whether the accommodation is reasonable and does not place an undue burden on the employer.  Whatever course of action the employer takes, the employer should document the situation.

MINIMIZING LEGAL RISKS TO AVOID LAWSUITS AND EMPLOYER LIABILITY

  1. Can you provide a baker’s dozen measures employers can take to reduce the risk of lawsuits?
    1. Stay up to date on recommendations and requirements from federal, state and local governmental entities and agencies.
    2. Prepare a well-conceived, written re-opening plan and train managers to understand and honor it.
    3. Communicate, communicate, communicate.
    4. Put safety first.  Before employees return to work, advise them what safety steps you are taking and invite them to share specific needs, concerns, and priorities.
    5. Make appropriate inquiries about COVID-19, but protect employee confidentiality.
    6. Let employees know that safety is a two-way street – that everyone should endeavor to create and maintain a safe working environment.  Encourage employees to self-report if they have COVID-19.
    7. Review and update existing policies and adopt relevant new policies.
    8. Consider having employees sign an acknowledgment and release form.
    9. Be clear about your performance expectations, but also show employees that you care.
    10. Treat employees fairly, and well document decisions and employee interactions.
    11. Post / display all required employment law posters in the workplace and make them available on the employer intranet.
    12. Speak in terms of endeavoring rather than guaranteeing.  COVID-19 has already taught us that there are no guarantees, so under-promise and over-deliver.
    13. Consult with legal counsel.
  2. What kinds of claims can be brought against an employer reopening after COVID-19, and what can an employer do to mitigate the risk of those claims and minimize liability?

While there is no guarantee against lawsuits, if an employer takes the following additional steps, the employer may be able to reduce its exposure to the following claims:

SOME POTENTIAL CLAIMSSOME STEPS TO AVOID OR REDUCE EXPOSURE
Discrimination and harassment claims based on factors such as disability, age, pregnancy, sex, race, color, parental status, marital status, and national origin, especially in connection with a discharge or layoff, or requirements to come to work–Make consistent decisions based on objective factors such as skill set, experience, performance, and economic factors
–When appropriate, engage in the interactive process
–Safeguard employee privacy and confidentiality
–Do not put employees’ medical information in their personnel files
–Thoroughly document decisions and actions in real time to head off pretextual claims
Retaliation and whistleblower claims against an employee for having exercised his or her rights–Do not retaliate against employees for exercising their legal rights, such as leave rights under the Families First Coronavirus Response Act (“FFCRA”), the Family and Medical Leave Act (“FMLA”) or other laws
–Thoroughly document decisions and actions in real time
Unfair labor practice charges under the National Labor Relations Act–Do not retaliate against employees for exercising their legal rights to engage in concerted protected activity (such as complaining about cleanliness or whether the workplace is safe)Thoroughly document performance problems of employees in real time
Wage and hour claims, especially for overtime pay, under the Fair Labor Standards Act and/or applicable state wage and hour laws–Unless it is trivial, screening / testing time is likely working time that must be paid
–Have a policy that non-exempt employees should only work during set hours.  If, for example, employees answer e-mails outside of their set hours, an employer can be liable for overtime pay
–Have a policy against unauthorized overtime, especially for non-exempt employees working remotely.  Overtime should not be permitted unless there is prior written authorization from an employee’s supervisor
–Have a system to verify and record all hours that employees work, especially those still working from home
Claims under the FMLA and state law counterparts–Respond promptly to employee FMLA requests
–Provide eligible employees with notice of rights and responsibilities under the FMLA
–If an employee is not eligible for FMLA leave, provide the employee with the reason and document it in real time
–Honor leave eligible entitlements, benefits, and employee protections, including the right to return to their same or a comparable position
Claims under the FFCRA for paid expanded family and medical leave or emergency paid sick leave–Respond promptly to employee requests
–If an employee is not eligible, provide the employee with the reason and document it in real time
–Honor employee rights under the FFCRA as well as existing company policies
–Make required payments on a timely basis
Employee claims for unemployment compensation benefits when employees feel uncomfortable returning to workUsually, essential employees or those not subject to a stay-at-home order can be required to work and are not eligible for unemployment benefits if they refuse to return to work
–Make sure employees do not have a right to stay home per state law, FMLA, or paid expanded family and medical leave or emergency paid sick leave under the FFCRA
–Make sure employees need not be reasonably accommodated due to factors such as a disability, pregnancy, or religious belief
Employee claims for vacation pay and other paid time off on termination of employment–Check state law and the organization’s employee handbook re: right to vacation pay and other paid time off upon termination of employment
–Some states, including Illinois and California, require employers to pay earned and unused vacation pay.  Make any required payments on a timely basis
–Note that vacation time may have built up during the stay-at-home orders, resulting in higher than usual payments
Employee claims for workers’ compensation benefits–Have strong safety policies in general and for addressing COVID-19 in particular
–Before sending employees to customer or other locations, call to confirm the site’s COVID-19 safety precautions and document the confirmation
–If you become aware that employees have contracted COVID-19 outside of work, be sure to document as much so that you can defend against unwarranted workers’ compensation claims
–Remember, workers’ compensation is far less expensive than the kind of large pain and suffering verdicts that juries have awarded to injured plaintiffs in traditional personal injury litigation
Third party negligence claims from family members of employees or from customers, clients, or vendors who have allegedly been exposed to coronavirus through your business–Have strong safety policies in general and for addressing COVID-19 in particular
–Make sure the workplace is safe
–Follow federal (including CDC, OSHA and other agencies), state, and local rules and guidelines
–Before sending employees to customer or other locations, call to confirm that the site is COVID-19-safe and document the confirmation
–If you become aware that employees have contracted COVID-19 outside of work, be sure to document as much so that you can defend against unwarranted claims
–Institute safety protocols restricting third-party access (e.g., customers, clients, vendors, and delivery personnel) to your premises
–Before engaging with customers, clients, and vendors, have them sign a coronavirus notice, acknowledgment, consent, waiver, and release of liability agreement
Occupational Health and Safety Administrative Claims from OSHA and state counterparts–Have strong safety policies in general and for addressing COVID-19 in particular
–Follow OSHA, CDC, and other guidelines for preventing and dealing with COVID-19
Claims for breach of contract, whether an individual or a union contract–Review contracts prior to taking action to ensure you are not breaching them
–Consult with legal counsel
Claims for failing to comply with plant closing / layoff laws (e.g., the Worker Adjustment & Retraining Notification Act of 1988 (“WARN”) and similar state laws–Review federal and state WARN laws
–Bear in mind that employers may need to aggregate the headcounts of series of layoffs in determining whether WARN laws apply
–Bear in mind that, while there are exceptions to lengthy notice requirements, notice is still required
Layoff and Severance pay issues–Examine how laying off an employee can impact forgiveness of any PPP loan
–Absent an applicable state law or a contractual or policy obligation, severance pay is not required when laying off an employee
–When offering severance for a release to employees 40 or older, be sure to follow the requirements of the Older Workers Benefit Protection Act to obtain a valid age discrimination waiver

SOME ADDITIONAL RESOURCES

CONCLUSION

While this FAQ does not cover every aspect of returning to work, we hope that it will provide you with food for thought and answer many of your questions.  For more information, please feel free to contact us.

[1] Some of the information contained in this Legal Update, especially regarding EEOC matters, has been derived from publications of various government agencies, including EEOC Guidance and webinars, and some of the answers in this FAQ include verbatim or near verbatim statements from these resources.  These sources should be reviewed as the guidance may change.

CORONAVIRUS AID, RELIEF, AND ECONOMIC SECURITY (“CARES”) ACT

SBA PAYCHECK PROTECTION PROGRAM

  1. What businesses are eligible for the program?
    • Businesses with 500 employees or less (certain specific types of businesses may be subject to higher limits), sole proprietors, independent contractors, and self-employed individuals.
  2. What can my business use the Paycheck Protection Program loan for?
    • A business can use the loan for certain expenses incurred between February 15 and June 30, 2020.  Eligible expenses include payroll costs, group health benefit payments, employee salaries, commissions, or similar compensation, interest on mortgages, rent, utilities, interest on debt incurred before February 15, 2020, as well as all other uses already permitted under the SBA’s business loan program.  Payroll costs are capped at $100,000 per year for each employee. 
  3. Where do I apply for the Paycheck Protection Program loan?
    • You can apply for the Paycheck Protection Program Loan at an SBA-approved lender.  
  4. Will using a lender that is an SBA Preferred Lending Partner (“PLP”) be faster?
    • We cannot guarantee that using a PLP will have a significant impact on how quickly a loan is approved.  PLPs, however, have certain authority delegated to them by the SBA that may make the process faster.
  5. When should I apply for the Paycheck Protection Program Loan?
    • While you have until June 30, 2020, it would be advisable to apply as soon as you can.  There is a “cap” on how much the government is making available to eligible borrowers, and loans are going to be made on a first-come / first-serve basis.
    • The government said that loan applications will open on April 3, 2020.  Many lenders, however, have indicated that they are not ready.  You should check with the lender you wish to use.
  6. What information or documents do I need to supply in order to obtain a Paycheck Protection Program Loan?
    • In addition to providing your lender with a completed application, you will need to provide your lender with payroll documentation and various certifications.
  7. What are the terms on a Paycheck Protection Program Loan?
    • Interest is 1% (it was previously set at 0.5% but the government recently increased the rate), no personal guarantees are required, and no collateral is required.
  8. What about repayment of the Paycheck Protection Program Loan?  Is there any forgiveness?
    • A business can have the loan forgiven in an amount equal to the loan amount that is used, during an 8-week period after the loan originated, for payroll costs, payment of interest on any mortgage, payment of rent, and covered utility payments.  Due to likely high subscription, the Treasury Department has indicated that to qualify at least 75% of the forgiven amount must have been used for payroll.
    • BUT, this forgiveness is conditioned on the business retaining its employee and payroll levels between February 15 and June 30, 2020.  Failure to do so will reduce the amount of forgiveness.
  9. What if I already laid off employees and/or reduced wages?
    • There is an exemption for businesses that, by June 30, 2020, eliminate any reduction in employees and payroll that occurred between February 15, 2020 and April 26, 2020. 
  10. Does taking a Paycheck Protection Program loan restrict my ability to take advantage of other programs?
    • Yes.  Businesses that take Paycheck Protection Program Loans cannot take advantage of the Employee Retention Credit (discussed below).  Additionally, businesses cannot utilize the Payroll Tax Deferral (discussed below) and also obtain forgiveness of the Paycheck Protection Program loan.
  11. Has the SBA published any information or guidance about this program?
    • Yes.  The SBA website has more information on the program.  Click here to go to that page.
    • Additionally, the Department of Treasury has published an information sheet for borrowers.  Click here for that information.
    • The borrower application form is available by clicking here

DISASTER LOANS

  1. What is a disaster loan?
    • The SBA provides low-interest federal disaster loans to provide working capital to small businesses suffering as a result of COVID-19, if the business is in an area declared to be an Economic Injury Disaster Loan (“EIDL”) area.
  2. Am I in an area eligible for an EIDL loan?
    • According to the SBA website, “Small business owners in all U.S. states and territories are currently eligible to apply for a low-interest loan due to Coronavirus (COVID-19).”
  3. Where do I apply for a Disaster Loan?
    • You can apply for a Disaster Loan through the SBA.
  4. I heard there was a way to get a $10,000 advance on a Disaster Loan quickly.  How do I apply for that?
    • You can also apply for that loan through the SBA.  Click here to go to the SBA’s website application process.
  5. How soon can I get the $10,000 advance?
    • Within three days of a successful application.
  6. Do I have to pay the advance back?
    • According to the SBA website, “[t]his loan advance will not have to be repaid.” 
  7. Can I get a Disaster Loan or advance and still obtain a Paycheck Protection Program Loan?
    • Yes, but you cannot get them both for the same amount and for the same purpose.  So, taking these loans may limit the amount of the Paycheck Protection Program Loan.

INDIVIDUAL STIMULUS CHECKS

  1. I hear that taxpayers are getting payments from the government. How much are the payments?
    • Eligible individuals that are entitled to a full payment will receive $1,200 (joint filers will receive $2,400) plus $500 for each qualifying child under the age of 17.
  2. Why wouldn’t someone get the full payment?
    • The payment is reduced by $5 for every $100 that one’s adjusted gross income exceeds: (a) $150,000 for joint filers; (b) $112,500 for those filing as head of household; and (c) $75,000 for all other taxpayers.
  3. What tax return will the IRS use to determine my adjusted gross income?
    • For those that have already filed returns for 2019, the IRS will use that information.  For those that have not yet filed, the IRS will use information from their 2018 tax returns.

EMPLOYEE RETENTION CREDIT

  1. What is the Employee Retention Credit?
    • This is a tax credit that provides an employer with a credit against employment taxes equal to 50% of the qualified wages for each employee for each quarter, up to a limit of $10,000 in total wages ($5,000 in credits) for each employee.
  2. Does it restrict my ability to take advantage of other programs?
    • Yes.  You cannot use the Employee Tax Credit and also obtain an SBA Paycheck Protection Program Loan.
  3. Has the IRS provided any additional guidance?
    • Yes.  The IRS published an FAQ on its website.  Click here to go to the FAQ.

PAYROLL TAX DEFERRAL PROGRAM

  1. What is the Payroll Tax Deferral Program?
    • This program allows employers to defer payment of the employer’s share of certain employment taxes during the period from March 27 (when the CARES Act was enacted) until January 1, 2021.
  2. When are the deferred payments due?
    • Half of the deferred taxes are due on December 31, 2021, and the other half are due on December 31, 2022.
  3. Does the Deferral Program restrict my ability to take advantage of other programs?
    • Yes.  Businesses that want to use the payroll tax deferral program cannot also obtain forgiveness of Paycheck Protection Program Loans (or certain other forgiveness available under the CARES Act).

UNEMPLOYMENT EXPANSION

  1. Do independent contractors qualify for the new unemployment benefits?
    • Yes.  The expanded benefits are designed to cover people that would otherwise not be covered.  This includes independent contractors, freelancers, self-employed workers, and “gig” economy workers.  Please check with the unemployment office in your state regarding applying for the expanded benefits.

FAMILIES FIRST CORONAVIRUS RESPONSE ACT

  1. What is the Families First Coronavirus Response Act (“FFCRA”)?
    • It is a piece of legislation designed to provide emergency relief to address the profound impact of the coronavirus (COVID-19) and help to soften its effects on millions of Americans.
    • The FFCRA contains two specific Acts providing employee leave relating to COVID-19: the Emergency Family and Medical Leave Expansion Act (the “Expansion Act”) and the Emergency Sick Leave Act (the “Sick Leave Act”).
  2. Has there been any general guidance regarding FFCRA?
    • Yes.  The Department of Labor (“DOL”) published FAQs regarding (a) the Expansion Act and the Sick Leave Act, and (b) the required Notice poster.  You can find the general FAQ by clicking here.  You can find the FAQ regarding the required Notice poster by clicking here.

EMERGENCY FAMILY AND MEDICAL LEAVE EXPANSION ACT

  1. What businesses does the Expansion Act cover?
    • Businesses with less than 500 employees.  This includes temporary employees and employees on leave, but does not include independent contractors.
  2. Is there an exemption for small businesses?
    • Yes, there is an exemption for businesses with less than 50 employees from providing leave if they meet certain criteria.  Those criteria and how to claim the exemption will be set forth in greater detail in DOL regulations.  The DOL has released a Temporary Rule that is expected to be published on April 6, 2020, and provides guidance regarding various FFCRA requirements.  To read the Temporary Rule, click here.
  3. What if there are a number of businesses, all run separately, but affiliated?  How are their employees counted?
    • It depends.
    • The various establishments of one corporation are generally a single employer (adding all of the employees together).
    • If a corporation owns an interest in another corporation, the two are generally separate employers, but they may be considered a “joint employer” if they meet the test under the Fair Labor Standards Act.
    • Two separate entities may still be a single employer if they meet the integrated employer test under the FMLA.
    • You should consult your legal counsel to determine how to answer this question for your specific entity.
  4. What are the qualifying reasons for leave under the Expansion Act?
    • The only qualifying reason for Expansion Act Leave is if the employee is unable to work (or telework) because the employee needs to care for a child because the child’s school or place of care has been closed, or the child’s child care provider is unavailable due to a declared public health emergency due to COVID-19.
  5. Is this leave paid or unpaid?
    • The first 10 days of leave may be unpaid (unless the employee chooses to use other available paid leave for those 10 days), but the remainder (up to the 12-week ceiling under the FMLA) is paid.
  6. Are there limits on the amount my business has to pay for this leave?
    • Yes, there is a cap of $200 per day and $10,000 in the aggregate per employee for Expansion Act leave.

EMERGENCY SICK LEAVE ACT

  1. What businesses does the Sick Leave Act cover?
    • It is the same as the Expansion Act, i.e.,businesses with less than 500 employees.
  2. Is there an exemption for smaller businesses?
    • Just as in the Expansion Act, there is an exemption for businesses with less than 50 employees if they meet certain criteria.  Those criteria and how to claim the exemption will be set forth in greater detail in DOL regulations.  The DOL has released a Temporary Rule that is expected to be published on April 6, 2020, and provides guidance regarding various FFCRA requirements. To read the Temporary Rule, click here.
  3. What if there are a number of businesses, all run separately, but affiliated?  How are their employees counted?
    • See the answer with respect to the Expansion Act. 
  4. What are the qualifying reasons for leave under the Sick Leave Act?
    • Sick leave is available if the employee cannot work (or telework) because of any of 6 qualifying reasons:
      1. The employee is subject to a quarantine or isolation order relating to COVID-19;
      2. A health-care provider has advised the employee to self-quarantine due to COVID-19;
      3. The employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
      4. The employee is caring for an individual who is subject to a quarantine or isolation order relating to COVID-19, or who has been advised by a health-care provider to self-quarantine due to COVID-19;
      5. The employee is caring for a child whose school or place of care has been closed, or the child’s child care provider is unavailable, due to COVID-19; or
      6. Any other similar condition specified by the Secretary of Health and Human Services.
  5. Is the sick leave paid or unpaid?
    • The Sick Leave Act provides for up to 80 hours of paid leave total for full-time employees for any combination of the qualifying reasons.  Part-time employees are provided paid leave for the average amount of hours they work during a two-week period.
  6. Are there limits on the amount my business has to pay for sick leave?
    • Yes, but it differs based on the reason for the leave.
    • If the leave is due to the employee’s own condition, the payment is the greater of the employee’s regular pay or the applicable minimum wage.  An employer is not required to pay more than $511 per day and $5,110 in the aggregate for each employee.
    • If the leave is due to the employee caring for another, the payment is the greater of 2/3 of the employee’s regular pay or the applicable minimum wage.  An employer is not required to pay more than $200 per day and $2,000 in the aggregate for each employee.
  7. Do employees have to use Sick Leave Act leave before using other leave?
    • They do not, and an employee cannot be required to do so.

FEDERAL ASSISTANCE TO EMPLOYERS

  1. Is the federal government offering any assistance to employers who have to provide paid Expansion Leave or paid Sick Leave?
    • Yes.  Tax credits will be provided to employers and self-employed individuals for amounts paid under the Expansion Leave Act and the Sick Leave Act under various circumstances; however, there will be caps on them. The Secretary of the Treasury will be issuing regulations regarding the credits.  There is also a reimbursement option.
  2. Is there anything else you think I should know?
    • Yes.  Because the COVID-19 pandemic is a fluid and rapidly evolving situation, the laws discussed in this FAQ may be amended or interpreted through regulations or court decisions.  Moreover, Congress will likely pass other laws to provide additional support to employees and businesses affected by the COVID-19 pandemic.

For more details regarding the CARES Act and the FFCRA, please click on the links below to access FVLD’s latest coronavirus (COVID-19) newsletters:

We encourage our readers to stay up to date on legal developments that may affect them.  All of our Legal Update newsletters are available on the FVLD website at: http://www.fvldlaw.com/resources/newsletters.

On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (the “Act”).  It is designed to provide emergency relief to address the profound impact of the coronavirus (COVID-19) and help to soften its effects on millions of Americans.  The Act addresses matters such as emergency family and medical leave, paid sick leave, unemployment insurance, tax credits for employers, free testing, and food assistance programs.  This newsletter highlights some of the ways that the sweeping legislation will affect employers and employees.

EMERGENCY FAMILY AND MEDICAL LEAVE EXPANSION ACT

Overview:  The Emergency Family and Medical Leave Expansion Act (the “Expansion Act”) amends the Family and Medical Leave Act (the “FMLA”).  The Expansion Act provides government employees and employees of companies with fewer than 500 employees with up to 12 weeks of a combination of some unpaid and mostly paid leave from work for a “qualifying need related to a public emergency” with respect to the coronavirus.  The only qualifying need identified is if the employee is unable to work (or telework) because the employee needs to take leave to care for the employee’s son or daughter under 18 years of age if the child’s school or place of care has been closed, or the son or daughter’s child care provider is unavailable due to a declared public health emergency due to COVID-191. The Expansion Act does not change the rules for leave requested for other reasons available under the FMLA.

Eligible Employee:  To be eligible for paid leave under the Expansion Act, an employee must have been employed for at least 30 calendar days by the employer from whom leave is requested.  Thus, the FMLA’s more onerous requirements that an employee has been in the employer’s employ for at least 12 months, worked at least 1,250 hours during the 12-month period, and works in a location with 50 or more employees within a 75-mile radius are not applicable to leave under the Expansion Act.

Leave Benefits:

Unpaid Leave:  The first 10 days of leave under the Expansion Act may be unpaid.  An employee may elect to substitute any accrued paid vacation, personal, or medical or sick leave for unpaid leave under the Expansion Act in accordance with Section 102(d)(2)(B) of the FMLA (the provision dealing with substitution of paid leave for a serious health condition).

Paid Leave for Subsequent Days:  The remaining time off under the Expansion Act, up to the 12-week ceiling of FMLA leave, will be paid leave.

Amount / Calculation of Paid Leave:  The paid leave shall be at least two thirds (2/3) of an employee’s regular rate of pay multiplied by the number of hours the employee would be normally scheduled to work.  If an employee’s schedule varies from week to week such that an employer is unable to determine with certainty the number of hours the employee would have worked if the employee had not taken Expansion Act leave, the employer shall use the following:

  • Subject to item (ii) below, a number equal to the average number of hours that the employee was scheduled per day over the six-month period ending on the date on which the employee takes such leave, including hours for which the employee took leave of any type.
  • If the employee did not work throughout that prior six-month period, the reasonable expectation of the employee at the time of hiring of the average number of hours per day that the employee would normally be scheduled to work.

Cap on Paid Leave:  The amount an employer is to pay an employee on leave is capped at $200 per day and $10,000 in the aggregate.

Notice:  In any case where the leave allowed under the Expansion Act is foreseeable, the employee is required to notify the employer as soon as practicable.

Restoration:  The FMLA provides that an employee on FMLA leave shall be restored to the position of employment he or she held when the leave commenced or be restored to an equivalent position with equivalent employment benefits, pay, and other terms and conditions of employment.  Under the Expansion Act, these FMLA provisions will not apply to an employer who employs fewer than 25 employees if all of the following conditions are met:

  • The employee takes leave under the Expansion Act.
  • The position held by the employee when the leave commenced does not exist at the end of the leave due to economic conditions or other changes in the employer’s operating conditions that (i) affect employment and (ii) are caused by a public health emergency during the leave period.
  • The employer makes reasonable efforts to restore the employee to a position equivalent to the position the employee held when the leave commenced, with equivalent benefits, pay, and other terms and conditions of employment.
  • If the employer’s reasonable efforts under item (C) above fail, the employer makes reasonable efforts during the “Contact Period” (defined below) to contact the employee if an equivalent position described in item (C) above becomes available.

“Contact Period” means the one-year period beginning on the earlier of the date on which the qualifying need for leave related to a public health emergency concludes, or the date that is 12 weeks after the date on which the employee’s leave under the Expansion Act commences.

Multi-employer Collective Bargaining Agreements: 

Employers who have multi-employer collective bargaining agreements (“CBA”) may comply with the Expansion Act by (a) complying with the existing CBA; (b) complying with the applicable bargaining obligations under the CBA; (c) contributing to a multiemployer fund, plan, or program based on the paid leave of each employee; and (d) having the multiemployer fund pay the employee for leave in accordance with the Expansion Act.

Potential Regulatory Exceptions:  The Secretary of Labor has the authority to issue regulations for good cause:

(a)        to exclude certain health care providers and emergency providers from the definition of eligible employee, and

(b)       to exempt small businesses with fewer than 50 employees from the requirements of the Expansion Act when such requirements would jeopardize the viability of the business as a going concern.

Healthcare Providers and Emergency Responders Excluded:  If the employee is a health care provider or emergency responder, the employer may elect to exclude that employee from the Expansion Act.

Effective Date and Sunset:  According to the Department of Labor, the Expansion Act will take effect on April 1, 2020.  The Expansion Act will expire on December 31, 2020.

EMERGENCY PAID SICK LEAVE ACT

Covered Employer Obligation:  The Emergency Paid Sick Leave Act (the “Sick Leave Act”) requires, among other things, individuals and private entities with fewer than 500 employees to provide each employee paid sick time to the extent that the employee is unable to work (or telework) due to the following reasons for leave related to coronavirus (“Permitted Uses”):

  1. The employee is subject to a quarantine or isolation order related to COVID-19.
  2. A health care provider has advised the employee to self-quarantine due to concerns related to COVID-19.
  3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
  4. The employee is caring for an individual who is subject to a quarantine or isolation order or who has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
  5. The employee is caring for the employee’s child if the child’s school or place of care has been closed, or the child’s child care provider is unavailable, due to COVID-19 precautions.
  6. The employee is experiencing any other substantially similar condition that may be specified by the Secretary of Health and Human Services.

Exceptions:  The Sick Leave Act allows employers of employees who are health care providers or emergency responders to opt out and exclude such employees from leave under the Sick Leave Act (additionally, the Secretary of Labor can issue regulations to this effect). The Sick Leave Act also grants the Secretary of Labor the authority to issue regulations for good cause to exempt small businesses with fewer than 50 employees from providing Sick Leave Act leave due to having to care for an employee’s child if this would jeopardize the viability of the business as a going concern.

Duration of Paid Sick Time:  Full-time employees are eligible to take up to 80 hours of paid sick time under the Sick Leave Act.  Part-time employees are eligible to take up to the number of hours that are equal to the number of hours that such employees work, on average, over a two-week period.

Payment of Paid Sick Time:  The Sick Leave Act defines “paid sick time” and how to calculate the required compensation for paid sick time.  The paid leave for absences due to an employee’s own condition generally is the greater of an employee’s regular rate of pay or the applicable minimum wage, but is limited to no more than $511 per day and $5,110 in the aggregate.  The paid leave for absences due to caring for others generally is the greater of two-thirds (2/3) of the employee’s regular rate of pay or the applicable minimum wage, and is limited to no more than $200 per day and $2,000 in the aggregate.  The Secretary of Labor will issue guidelines in the near future to assist employers in calculating proper payment of paid sick time.  If an employee’s schedule varies from week to week such that an employer is unable to determine with certainty the number of hours the employee would have worked, the employer uses the same calculation as in the Expansion Act.

No Carryover:  Paid sick time under the Sick Leave Act does not carry over from one year to the next.

Termination of Paid Sick Time:  Paid sick time ceases beginning with the employee’s next scheduled work shift immediately following the termination of the need for sick time.

Prohibition:  An employer may not require, as a condition of providing paid sick time under the Sick Leave Act, that an employee search for or find a replacement employee to cover the employee’s missed hours during the employee’s sick time.

Immediate Use of Sick Time:  Paid sick time shall be available for an employee’s immediate use for Permitted Uses (described above) regardless of how long the employee has been employed.  An employee may use the paid sick time for Permitted Uses before using any other type of leave, and an employer may not require an employee to use other paid leave using paid sick time for Permitted Uses.

Notice Requirements:  Each employer is required to post, in conspicuous places where notices to employees are customarily posted, a notice about the Sick Leave Act approved by the Secretary of Labor, and the Secretary will make a model notice available no later than seven days after the enactment of the Sick Leave Act (which will be March 25, 2020).

No Discrimination or Retaliation:  Employers may not discriminate or retaliate against employees for taking leave under the Sick Leave Act or registering complaints, filing proceedings, or testifying under or related to the Sick Leave Act.

Multiemployer Collective Bargaining Agreements:  Employers who have multi-employer collective bargaining agreements may comply with the Sick Leave Act if they perform in a manner similar to that required for the Expansion Act.  See above.

Rules of Construction:  The Sick Leave Act does not require an employer to provide financial or other reimbursement to an employee upon the employee’s separation from employment for unused Sick Leave Act leave.  Nothing in the Sick Leave Act, however, diminishes the rights or benefits an employee is entitled to under any other law, collective bargaining agreement, or employer policy (even if the other rights are used due to the coronavirus).  For example:

  • The Illinois Employee Sick Leave Act applies to all Illinois employers who provide paid or unpaid personal sick leave benefits (i.e., time off due to personal illness, injury, or medical appointments).  This law requires employers to allow employees to use such personal sick leave for absences due to the illness, injury, or medical appointment of an employee’s family member—on the same terms that the employee is allowed to use sick leave for their own illness or injury.
  • The Cook County Earned Sick Leave Ordinance requires Cook County, Illinois employers to allow eligible employees to accrue up to 40 hours of paid sick leave in each 12-month period of their employment—unless the employer sets a higher limit, among other requirements.
  • The City of Chicago Paid Sick Leave Ordinance requires covered employees who work in Chicago to accrue up to 40 hours of paid sick leave in each 12-month period of employment—unless the employer sets a higher limit, among other requirements.

Effective Date and Sunset:  The United States Department of Labor has stated that the Sick Leave Act and its requirements will take effect on April 1, 2020.  The Sick Leave Act expires on December 31, 2020.

Reasonable Notice by Employees:  After the first workday or portion thereof that an employee receives paid sick time under the Sick Leave Act, an employer may require the employee to follow reasonable notice procedures in order to continue receiving such paid time.

TAX CREDITS FOR PAID SICK AND PAID FAMILY AND MEDICAL LEAVE

Employers are responsible for paying for the Expansion Act and Sick Leave Act benefits.  Tax credits will be provided to employers and self-employed individuals for amounts paid under these acts under various circumstances; however, there will be caps on them.  As the Secretary of the Treasury needs to issue regulations regarding the credits, and subsequent laws may still alter these provisions, we suggest that you contact your accountant or other tax professional for more information on the availability of these tax credits and how to properly claim them.

EMERGENCY UNEMPLOYMENT STABILIZATION AND ACCESS ACT OF 2020

Under the Emergency Unemployment Stabilization and Access Act 2020, states will be provided with a billion dollars of emergency grants for unemployment insurance to support employees who are off work for certain reasons pertaining to COVID-19.  Assuming a State meets certain requirements for notification regarding unemployment benefits, it will receive half of its portion of the emergency grant amount.  A State will receive the other half if its unemployment claims have increased by at least 10% over the same quarter from the prior year and the State meets certain other requirements regarding (a) maintaining access to the unemployment compensation system, and (b) easing eligibility requirements and access to unemployment compensation, including waiving requirements for work search and waiting periods, and non-charging employers for those impacted by COVID-19. 

CONCLUSION

At this point, the Families First Coronavirus Response Act does not apply to employers with 500 or more employees; however, this could change.  There may well be other laws passed and regulations made, as COVID 19 is a fluid and rapidly evolving situation.  We encourage you to reach out to us or your other professionals with any questions about the Act or any new developments and how they impact you, your business, and your families.

[1] Prior versions of the proposed legislation had a broader definition of “qualifying need.” It remains to be seen if subsequent legislation will expand the current definition.

The coronavirus, which, in less than two months, has reportedly infected more than 81,000 people (the vast majority in mainland China) and caused more than 2,700 deaths worldwide, continues to dramatically impact global markets and economies. The threat of a pandemic has been serious enough for the U.S. State Department and U.S. Center for Disease Control and Prevention (“CDC”) to issue serious advisories and warnings against travelling to China and other affected areas. The CDC has also stated that the spread of the coronavirus in the U.S. is inevitable. In response to the “public health emergency,” the White House has even imposed mandatory quarantines on citizens returning to the United States from infected areas. Unsurprisingly, the effects of the coronavirus are being felt in a number of legal contexts as well. Some examples are discussed below, however, further issues are sure to arise as the crisis continues to unfold.

What is the coronavirus?

The coronavirus (officially named COVID-19 by the World Health Organization known as WHO) is a previously unidentified virus that usually manifests in respiratory illness (fever, cough, difficulty breathing) but can be deadly in severe cases, resulting in pneumonia, kidney failure and other potentially fatal conditions. The CDC has confirmed that the coronavirus, believed to have an incubation period of between 2 and 14 days, can be spread from person to person contact.

Employment law implications.

The coronavirus outbreak has significant workplace implications, considering the need for employers to balance their obligation to ensure a safe and healthy working environment with the many privacy and antidiscrimination obligations they owe their employees under applicable state and federal laws.

Section 5 of the federal Occupational Safety and Health Act (“OSHA”), known as the “General Duty Clause,” obligates employers to assure their employees a workplace free from recognized hazards likely to cause serious physical harm or death. OSHA also requires employers to protect employees of other businesses who visit the employer’s worksite against exposure to danger. The nature of each particular workplace generally determines the level of response that an employer should undertake to reasonably protect its employees against threats. 

Given the geographic concentration of documented infections, and consistent with the guidance offered by the State Department and the CDC, employers that ordinarily require employees to travel internationally—especially to and from areas where authorities have confirmed COVID-19 infections—are advised to review and/or establish policies and procedures to address the current environment. For example, employees who have recently travelled to China or who demonstrate symptoms of respiratory illness might be instructed to work from home for up to 14 days. If assigning such employees to work remotely is not possible or practical, employers may consider providing the employees with paid leave during the period of incubation.

Employers must still be careful, however, to avoid adopting policies and procedures that might violate the Americans with Disabilities Act (“ADA”). While the coronavirus might not be considered a “disability” under the ADA, due to its temporary nature, an employer can still violate the ADA by treating an employee with no disability as though he/she is “disabled.” Accordingly, employers should refrain from “overreacting” to the threat by, for example, subjecting the entire workforce to unnecessary quarantine. Instead, assessing risk to employees on a case by case basis is recommended.

Along similar lines, employers should think twice before requiring their employees to undergo medical examinations—even if the employees in question recently returned from China or another area with known infections. The ADA prohibits employers from requiring medical examinations unless they are job-related and “necessary” to the employer’s business. Because of the precautions already being undertaken at the government level to restrict travel to and from China, requiring employees (especially those who are asymptomatic) to undertake medical exams to screen for the coronavirus could be deemed “unnecessary” and potentially discriminatory.  Employers should consult with legal advisors when considering implementing workplace policies in response to the coronavirus.

Contractual performance implications.

As a result of the emergency travel restrictions imposed by numerous governments, international trade and commerce has slowed considerably. In many cases, products and materials have no commercially reasonable way of reaching their intended destination. Accordingly, businesses may experience difficulty performing certain contractual obligations such as delivering products and materials to a particular place at a particular time. While such failures might usually result in liability for breach of contract, the governmental restrictions on travel could give rise to special contract defenses.

Commercial contracts frequently contain provisions, called “force majeure” clauses, which allow a party to avoid performance as a result of certain extreme circumstances beyond their control. These clauses generally list the circumstances that qualify and commonly include floods, earthquakes and other “acts of God,” as well as “man-made” obstacles such as war, terrorism, and governmental or regulatory action. Because global health emergencies are not commonly listed as circumstances allowing a party to avoid performance, businesses should be careful before using these clauses to justify non-performance, as doing so could backfire and might result in liability. During the current crisis, businesses may want to consider adding appropriate language to their contracts to cover a health crisis such as the coronavirus.

If contracts do not have a clause covering a health crisis or the related unavailability of parts and materials, other defenses may be available depending on the applicable state law. For example, some states recognize the doctrines of commercial frustration or legal impossibility to excuse contractual performance. These defenses may come into play when unforeseen circumstances undermine the very purpose of the agreement. However, these doctrines are reserved for the most exceptional of circumstances.

Conclusion

The coronavirus threat to public health does not seem likely to dissipate in the immediate future and may be on the brink of being declared a global pandemic. Businesses must be prepared to adapt their strategies and practices in a manner consistent with the emerging threat. Your regular FVLD contact can discuss with you the latest developments that may be affecting your business.

We wish our clients and friends a healthy, happy, and prosperous 2020. Our January Legal Update highlights new laws and amendments that may be of interest to Illinois businesses and individuals. We encourage all those potentially affected by these developments to consult with legal counsel to ensure they are in compliance with, or consider taking advantage of, new provisions in these laws.

New Laws and Amendments Effective January 1, 2020

Illinois Cannabis Regulation and Tax Act (CRTA)

The CRTA legalizes cannabis in Illinois. The CRTA also prevents employers from terminating or disciplining an employee for the employee’s lawful use of cannabis. As a result, employers must re-examine their drug-free workplace policies to avoid violating the new law as well as to help limit an employer’s liability due to an employee’s use of cannabis. Fortunately, the CRTA allows employers to enact a reasonable drug-free workplace policy that prohibits the use and possession of cannabis in the workplace. Employers may also prohibit an employee from being impaired or under the influence of cannabis while at work or while performing his or her job duties; however, testing and making that determination are more complicated by virtue of the CRTA. It is therefore advisable for employers to train managers and supervisors how not to run afoul of the CRTA. For more information, see our July 2019 Legal Update.

Illinois Workplace Transparency Act (WTA)

As discussed in our August 2019 Legal Update, Governor Pritzker signed sweeping legislation intended to address workplace harassment in response to the #MeToo movement. The WTA generally prohibits employers from using agreements that restrict certain employee rights in connection with discrimination, harassment, or retaliation claims, including the employee’s ability to report allegations of unlawful conduct (such as clauses or agreements that contain non-disclosure, confidentiality, or non-disparagement provisions), with certain exceptions. Employers may need to update their standard confidentiality, termination, arbitration, and other employment agreements based on the WTA.  Additionally, employers still remain subject to the federal Tax Cuts and Jobs Act of 2017 regarding tax deductions for certain types of settlements of certain harassment and discrimination claims.

Amendments to the Illinois Human Rights Act (IHRA)

Our August 2019 Legal Update also provided an overview of the new responsibilities for employers and other developments under the recently expanded IHRA. Beginning this year, all employers with any employees who work in Illinois must provide sexual harassment prevention training to employees at least once a year or face civil penalties of up to $5,000, depending on the employer’s history of offenses and size. Beginning July 1, 2020, employers must also comply with new reporting requirements and submit annual disclosures about adverse judgments or administrative rulings against them for unlawful employment practices. For a compliance checklist for Illinois employers, see our November 2019 Legal Update.

Amendments to the Illinois Victims’ Economic and Security Act (VESSA)

As discussed in our August 2019 Legal Update, VESSA now also provides employees with certain leave rights due to gender violence (in addition to domestic and sexual violence). All Illinois employers must comply with VESSA, which generally allows employees to take unpaid, job-protected leave from work if an employee, or employee’s family/household member, is a victim of domestic, sexual, or gender violence and is experiencing an incident of such violence or needs to address such violence (e.g., to seek medical attention, obtain counseling, participate in legal proceedings, etc.).

Amendments to the Illinois Equitable Restrooms Act

Illinois now requires every single-occupancy restroom in a place of public accommodation or public building to be identified as all-gender by exterior signage that must not indicate any specific gender. For example, instead of “male” or “female,” the signage should say “all-gender,” “gender neutral,” or something similar. The amendments apply to any existing or future places of public accommodation or public buildings.

New Minimum Salary Requirements for Exempt Employees

The federal Department of Labor (DOL)’s final overtime rule increases the minimum salary thresholds necessary for executive, administrative, or professional (EAP) employees to be exempt from federal minimum wage and overtime pay requirements. The new minimum standard salary level is now $684 per week (or $35,568 per year) for exempt EAP employees, and the new annual compensation level for highly compensated employees has increased from $100,000 to $107,432 per year. The new final rule allows employers to apply nondiscretionary bonus, commission, and incentive payments towards satisfying up to 10% of the new standard salary level. The DOL estimates that an additional 1.2 million workers will now be entitled to minimum wage and overtime pay as a result of its rule. Employers still remain subject to state laws that may impose more stringent overtime requirements (e.g., California).

Wage Amendments to the Illinois Minimum Wage Law

Illinois has increased the statewide minimum wage to $9.25 per hour. Illinois last increased its minimum wage, to $8.25 per hour, in 2010. The state minimum wage will increase again to $10.00 per hour on July 1, 2020, and will further increase by an additional $1.00 per hour every year until it reaches $15.00 per hour in 2025. The Illinois Department of Labor has published a yearly state minimum wage chart, which is available here. Small employers may be eligible for a new minimum wage tax credit to offset some of the cost of the wage increases. Notably, the minimum wage in Cook County is already $12.00 per hour, and the minimum wage in the City of Chicago is currently $13.00 per hour. Cook County and Chicago will each increase their minimum wages by $1.00 per hour effective July 1, 2020.

Gratuities Amendment to the Illinois Wage Payment and Collection Act

The Illinois Wage Payment and Collection Act now prohibits employers from keeping employees’ gratuities and requires employers to promptly pay gratuities owed to employees within 13 days after the end of the pay period in which such gratuities are earned. Employers may still withhold, up to a certain extent, a proportionate amount of any credit card processing fees from gratuities paid by credit card, and the amended Act does not prohibit tip pooling as permitted by law.

Illinois Artificial Intelligence Video Interview Act

This act regulates employers’ use of artificial intelligence (AI) interviewing in the recruiting process. It applies to applicants for positions based in Illinois and requires employers that ask job applicants to record video interviews and use AI analysis of the videos to: (1) provide notice to each applicant that AI may be used to analyze the interview and consider the applicant’s fitness for the position, (2) provide information explaining how the AI works and what general types of characteristics it uses to evaluate applicants, and (3) obtain the applicant’s consent to be evaluated by AI. The Act also prohibits employers from using AI to evaluate an applicant without consent and from sharing an applicant’s video except with those whose expertise or technology is necessary to evaluate the applicant’s fitness for a position. Finally, the Act requires employers to delete an applicant’s video interview, including any copies, within 30 days of an applicant’s request.

Amendments to the Illinois Personal Information Protection Act

Illinois has a new reporting requirement for companies that are victims of a data breach. In addition to other existing requirements, the new law requires companies to notify the Illinois attorney general of a data breach if the breach affects 500 or more Illinois residents. The notice must contain (a) a description of the breach, (b) the number of Illinois residents affected and when the company provided them notice, and (c) the steps the company plans to take relating to the incident. The Illinois Personal Information Protection Act applies to any business that collects the personal information of Illinois residents.

Illinois Limited Worker Cooperative Association Act (LWCAA)

Illinois now recognizes a new type of business entity called a “limited worker cooperative association.” The LWCAA recognizes worker cooperatives as a legitimate form of business entity for the first time in Illinois. A worker cooperative is a business organized and run by those who provide services to the business and is popular for individuals engaged in skilled trades. Under the LWCAA, a worker cooperative must have at least one class of members that perform labor for the cooperative. Moreover, the LWCAA requires at least three members for a limited worker cooperative association to begin business. The LWCAA provides additional rules on formation, articles of organization, bylaws, members, community investors, voting, and more for the worker cooperative.

Illinois Trust Code

The Illinois Trust Code (ITC) replaces the Illinois Trust and Trustees Act (ITTA) and codifies Illinois trust law. Previously, Illinois trust law was largely contained in case law, which caused inconsistent interpretation of trust law across Illinois. The ITC contains several new features not found in the ITTA. For example, the ITC allows for the creation of a silent trust by allowing a settlor to waive the duty to account to certain beneficiaries for a period of time, during which the trustee need not disclose the existence, terms, or assets of a trust to the beneficiaries. Moreover, the ITC allows a trustee to consider whether a certain trust asset has a special relationship to one or more of the beneficiaries when considering whether to dispose of or retain the asset.

Setting Every Community Up for Retirement Enhancement Act (SECURE) Act

The federal SECURE Act makes some big changes to retirement planning.  Some are taxpayer friendly while others may disadvantage taxpayers. For example, for those born after June 30, 1949, the SECURE Act increases the age that a person must take required minimum distributions from an IRA or an employer sponsored retirement plan, from 70.5 to 72. The SECURE Act also allows individuals over 70.5 to contribute to an IRA in place of the rule that workers over 70.5 could not contribute to a tax-deductible IRA. Moreover, the SECURE Act makes it easier for small businesses to set up retirement accounts by teaming up with other small businesses to offer what are called multiple employer plans (this section of the SECURE Act does not go into effect until next year). One significant downside to the SECURE Act is that it changes the life expectancy payout of inherited IRAs to a ten-year payout for all categories of a designated beneficiary, except for a surviving spouse and certain other beneficiaries.  The act effectively kills the popular estate planning technique of using a trust as a beneficiary for IRA proceeds.

Change in Estate and Gift Tax Exclusion

The Internal Revenue Service has increased the estate and gift tax exclusion in 2020 from $11.40 million to $11.58 million, representing an increase of $180,000 per person.  The annual gift tax exclusion ($15,000) remains unchanged. For more information on estate planning in general, see our October 2019 Legal Update.

New Laws and Amendments Effective Later This Year

Illinois Hotel and Casino Employee Safety Act

As discussed in our August 2019 Legal Update, beginning July 1, 2020, the new Hotel and Casino Employee Safety Act will require hotel and casino employers to protect employees against sexual assault and harassment by guests by providing “panic buttons” and written anti-sexual harassment policies in English and Spanish, among other requirements.

Amendments to Illinois School Visitation Rights Act

Effective August 1, 2020, the amended School Visitation Rights Act expands employees’ school conference and activity leave rights to grant employees leave to attend behavioral or academic meetings related to their children. This act generally provides a leave entitlement of up to eight hours per school year (but no more than four hours per day) for employees who need to attend their children’s school conferences, behavioral meetings, or academic meetings when they cannot be scheduled during non-work hours. The amended Act will also prohibit employers from terminating an employee’s employment for an absence from work if the absence is due solely to the employee’s attendance at a school conference, behavioral meeting, or academic meeting related to the employee’s child.

Chicago Fair Workweek Ordinance

Effective July 1, 2020, large employers (i.e., those with more than a total of 100 employees and at least 50 “covered employees”) in the building services, healthcare, hotel, manufacturing, restaurant, retail and warehouse services industries will need to comply with new work schedule requirements. Employees who work in Chicago and earn less than $26 per hour ($50,000 per year) are generally considered “covered employees.” With certain exceptions, employers covered by this ordinance must provide these “covered employees” with ten days’ advance written notice of work schedules, predictability pay for shift changes, and a good faith written estimate of the projected work for new employees, among other requirements. The ordinance is currently being challenged by the Building Owners & Managers Association of Chicago, which has filed a federal lawsuit alleging that the ordinance is unconstitutional.

Amendments and New Laws Effective Since the Last FVLD Annual Update

Other Amendments to the Illinois Minimum Wage Law (IMWL)

As of February 19, 2019, the amended IMWL now authorizes the Illinois Department of Labor (IDOL) to conduct random audits of employers to determine compliance with the IMWL. The amended IMWL increases the penalties that the IDOL may recover from employers for various violations (including penalties of $100 per employee for failures to keep proper payroll records), and severely increases the amount of money that employees may recover from their employers for violations of the IMWL, including up to triple the amount of any underpayments that an employee may be owed. Employers may want to consider conducting an audit of their wage-and-hour practices and payroll records for compliance with the IMWL amendments.

Amendments to the Illinois Equal Pay Act

As of September 29, 2019, Illinois joined a number of other states and amended the Equal Pay Act to prohibit employers from inquiring about a job applicant’s wage or salary history, including benefits or other compensation. Employers also generally may not seek such information from the job applicant’s current or former employers. Employers may need to update their reference and interviewing policies to provide that only position(s) held and dates of employment—and not wage, salary, benefit, or other compensation information—will be provided or sought in connection with interviews, reference checks or requests. Employers may still engage in discussions with an applicant regarding the applicant’s expectations with respect to wages or salary, benefits, or other compensation and provide information about the compensation and benefits offered in relation to a position. The Illinois Department of Labor has released a FAQ regarding the salary history ban, which is available here.

Please note that this Legal Update discusses only a small sample of new Illinois and federal laws, provides an overview for informational purposes only, and is general in nature. It is not intended to take into account all of the exceptions, exemptions, and nuances that may apply to you or your business, and it does not constitute legal advice. Certain laws that we do not mention, including laws in other states, may nonetheless affect you or your business.  You should consult with your legal and other advisors about the entire legal landscape impacting you or your business.

As discussed in our August 2019 newsletter, Illinois’ new #MeToo laws place a number of new requirements on employers as well as expand the scope of employers that must comply.  Below is a helpful checklist of items and actions that employers with employees in Illinois should review with their counsel to help ensure compliance:

  1. Annual Training:  Conduct a harassment prevention training program at least once a year that equals or exceeds Illinois’ minimum standards.  The Illinois Department of Human Rights (the “IDHR”) will be crafting and announcing the minimum standards that should be used in training programs.  Failure to comply can result in a fine of up to $5,000.
  2. Handbook Policies:  Update employee handbook policies for compliance with SB 75, including the following:
    1. Anti-Harassment and Anti-Discrimination Policies:
      • Does your policy include protection against harassment or discrimination based on “perceived” protected characteristics?
      • Does your policy include protection for harassment of non-employees (e.g., independent contractors and consultants who are directly performing services for the employer)?
      • Does your policy’s definition or discussion of the “working environment” or workplace acknowledge that this environment is not limited to a physical location where an employee is assigned?
    2. Victims’ Economic Security and Safety Act (“VESSA”) Policy:
      • Does your policy include gender violence as one of the qualifying reasons for an employee to take job-protected leave under VESSA?
  3. Annual Reporting (beginning July 1, 2020):  Certain disclosures must be made to the IDHR every July, including the number of adverse judgments or rulings against an employer in any discrimination cases.
  4. Offer Letters and Employment Agreements:  Audit current offer letter and employment agreement forms for compliance with SB 75 (including discrimination and harassment-related confidentiality rules). Update forms to ensure that confidentiality or non-disparagement provisions comply with the requirements of SB 75.
  5. Separation and Settlement Agreements: Audit current separation and settlement agreement forms for compliance with SB 75 (including discrimination and harassment-related confidentiality rules).  Make sure that any confidential settlements comply with the requirements of SB 75.
  6. Arbitration Agreements:  Audit agreements or other documents with mandatory arbitration provisions for compliance with SB 75.
  7. Special Requirements for Certain Situations:
    1. Restaurants and Bars: There are additional annual harassment prevention training and handbook policy requirements for restaurant and bar employers, including the requirement to provide a written harassment policy in English and Spanish.
    2. Hotels and Casinos (beginning July 1, 2020):
      • Employees who are assigned to work alone must be provided free “panic buttons” to summon help.
      • The anti-harassment policy must be provided in English and Spanish and be designed to protect employees against sexual assault and sexual harassment by guests.
    3. Unions:  Union representatives can no longer dually represent both the victim and the alleged perpetrator of sexual harassment when they are members of the same union.

While this is not an exhaustive checklist of every requirement for every employer, and the IDHR is set to provide further guidance, it is a good start.  Because the laws take effect on January 1, 2020, employers are well advised to begin their compliance efforts now.

Because federal tax law now allows individuals to make gifts of $11.4 million tax-free over their lifetime, some people are relegating their estate and financial planning to the bottom of their “to do” lists.  People with fewer or even modest assets may assume that estate planning is either unnecessary or it should be a low priority.  There are several reasons, however, to prioritize estate planning.

First, the Illinois estate tax applies to individuals with estates larger than $4,000,000.  Second, the federal lifetime exemption amount is only a temporary measure.  Unless Congress acts to extend the Tax Cuts and Jobs Act of 2017, the exemption could drop back to the five million dollar range at the conclusion of 2025.  Moreover, if Congress changes in the 2020 elections, it could significantly reduce the lifetime exclusion amount.  Third, irrespective of the size of one’s estate, there are many compelling reasons and benefits to engaging in estate and financial planning, including the following:

  • Comprehensive Personal Plan:  It is important to develop a thoughtful and cohesive plan that factors in your health, life, and disability insurance, investments, retirement accounts (and who the designated beneficiaries are), 529 education plans for your children, special needs of certain family members, and emergency resources.  These are not only for your benefit while you are alive, but also for the benefit of your spouse, heirs, and charitable causes to which you want to leave bequests.  If you are contemplating marriage, you may also want to consider whether you need a premarital agreement between you and your fiancé, especially if you are getting remarried and have children by a prior marriage.  In addition, income tax planning is now a vital aspect of estate planning.  You need the right professional guidance to capitalize on these opportunities.
  • Business Succession Plan:  Another issue to consider is what will happen to your business if you were to die prematurely.  We recommend including provisions in your estate planning documents with a memo or letter that is cross-referenced setting forth your wishes.  The memo or letter could identify, among other things, who you would want to lead the business and what you would like done with the business (for example, carry on the business for a period of time and then put it up for sale).  Of course, whomever you designate to carry out your wishes would need to spend considerable time and energy to accomplish your goals.  In fairness, that person should be compensated for his/her efforts.  We usually recommend that such compensation also be provided for in the memo or letter.  Using a memo or letter allows you to alter your plan as circumstances change without the formality of amending your will or trust.
  • Will:  It is critical to have, at the very least, a will.  In this way, you – rather than the law – get to decide who will inherit your assets and who will administer your estate.  Moreover, if you have minor children, it is important to designate your children’s guardians in your will.  If something happens to you and your spouse, you do not want to leave the raising of your children to individuals who do not align with your values and goals.
  • Trust:  You may also want to create a revocable living trust.  Through such a document, during your life, your assets would be placed into a trust for your benefit, allowing you as the trustee to do what you want with them.  In addition, you can change the terms of your trust whenever you want.  When you pass away, the assets in your trust would be transferred to beneficiaries that you have designated in the trust, and the successor trustee you name in your trust will administer the trust.  Among the advantages of a living trust are that:
    • the expense of probating your will can be avoided in the place where you reside;
    • if a trust owns real estate in another jurisdiction than the one where you reside, a probate estate will not need to be opened in the jurisdiction where the real estate is located; and
    • unlike wills (which must be publicly filed with the court in the county in which one passes away), trusts are private documents and not filed or made publicly available.
  • Powers of Attorney for Property and for Health:  No one can predict whether or when an accident will occur or a serious health condition will arise.  The reason to have a power of attorney is in case something happens to you and, either temporarily or permanently, you are unable to make decisions for yourself.  Under a power of attorney for property, you can designate a person to make decisions on your behalf with regard to assets and financial matters.  Under a power of attorney for health care, you can designate someone to be your “health care agent” to make health care decisions on your behalf.  People often designate their spouse, a parent, a child, a sibling, a trusted friend or advisor, or someone else that they know will carry out their wishes.  Of course, you will want to make sure that the individuals you designate are willing to serve and that they understand and will respect your wishes.  You can also provide burial instructions for your remains or for other contingencies.
  • Road Map”:  If you want to make things easy on your loved ones in case of your disability or demise, you may want to leave a sealed envelope or a box that contains important information and documents.  This could include your bank accounts, credit card information, tax returns, financial statements, copies of your passport and birth certificate, a list of your trusted advisors (e.g., attorney, accountant, financial planner, or wealth manager), a list of your service contracts, a list of your digital assets and passwords, mileage or other point reward information, and other valuable information.  Your family members will be most grateful, and you will save them considerable time, effort, and angst.

Conclusion If you have been putting your estate and financial planning on the back burner, irrespective of your net worth, there is no time like the present to give it the attention it deserves.

A surge in copyright litigation is targeting websites that contain third party images, such as freelance photographs and artwork. Now a recent Federal Court of Claims decision may extend the deadline for filing such copyright infringement cases indefinitely. 

Infringement lawsuits against musicians (Katy Perry, Taylor Swift, Robin Thicke and Pharrell Williams, Led Zeppelin) grab headlines, but hundreds of more mundane cases involving images downloaded from the internet without authorization from the copyright owner also are working their way through federal courts. Many of these images were repurposed for marketing or illustration in the mistaken belief that works posted on the internet without obvious copyright protection are fair game, particularly if uncredited.

The Copyright Act imposes a three-year limitations period for filing infringement actions, but the recent APL Microscopic v. United States case recognized two loopholes that might extend that deadline for copyrighted work transmitted from, or merely viewed on, a website. In that case, the plaintiff sued NASA in 2018 for $150,000 in statutory damages, alleging the agency infringed the plaintiff’s copyrighted photograph (the “Work”), by posting it on a NASA website in 2004. The court agreed with NASA’s argument that the three-year deadline for reproduction infringement started to run when the Work was first uploaded onto the server – 14 years before the case was filed. The Court found, however, that the plaintiff’s claims for infringing its rights to control distribution and display of the Work were not time-barred. It explained, “the act of transmitting the webpage — and the Work therein — to a user would infringe” on the owner’s right of distribution. Moreover, “each unauthorized showing of a Work through a computer infringes on the owners right of public display.” Essentially, each “hit” from a user viewing the web page with the Work may activate another three-year term in which to sue for infringement. The case affords a foothold for bringing older infringement claims, especially by specialist law firms that sift the internet on behalf of artists or licensees for potentially unauthorized copies to issue demand letters for statutory penalties and attorney fees. Because crediting the source (as NASA did) does not insulate one from liability and proving a “fair use” defense is a complex, multi-factored process, after APL Microscopic, any third party work accessible on a web site should be evaluated carefully for potential infringement liability.

On August 9, 2019, Governor J.B. Pritzker signed sweeping anti-harassment legislation, known as SB 75. SB 75 enacts new laws and amends existing laws seeking to address harassment, discrimination, and transparency in the workplace. Illinois has joined several other states, including California and New York, which have passed employment laws in response to the #MeToo movement.

The new laws impose additional requirements and restrictions on all Illinois employers beginning next year. At a minimum, employers with employees who work in Illinois will be required to provide employees with sexual harassment prevention training at least once a year—or risk penalties of up to $5,000. Employers may also need to update their handbooks, employment and separation agreements, confidentiality or nondisclosure agreements, and other related policies and documents to comply with the new laws.

The following summary of these laws is not intended to be an exhaustive listing of the many changes affecting employers next year. Employers should consult with counsel regarding the implications of the new laws for their individual businesses.

Limits on Employee Agreements under the Workplace Transparency Act effective January 1, 2020

The Workplace Transparency Act (“WTA”) applies to employment agreements entered into, modified, or extended on or after January 1, 2020. The WTA limits the use of agreements with current, prospective, or former employees that contain restrictive terms relating to unlawful discrimination, harassment, or retaliation claims (e.g., offer letters, employment agreements, settlement, separation, or termination agreements, confidentiality/non-disclosure agreements). It generally places certain limits, depending on whether the agreement is with a prospective, current or former employee, on an employer’s ability to include a non-disclosure or non-disparagement clause that would prohibit truthful statements or disclosures about allegedly unlawful employment practices involving discrimination, harassment, or retaliation. The WTA also limits agreements requiring prospective or current employees to arbitrate claims for unlawful employment practices under Illinois or federal law, unless specific requirements are met.  The WTA recognizes that there are certain exceptions where employers may require confidentiality.  For example, employees or others that (a) receive complaints or investigate claims of harassment or discrimination, (b) receive privileged communications regarding lawsuits involving discrimination or harassment, or (c) have access to confidential personnel files can bound by confidentiality.

Moreover, the WTA imposes new obligations on employers who wish to use confidential settlement or separation agreements to resolve alleged unlawful unemployment practices involving discrimination, harassment, or retaliation. Such agreements are valid and enforceable only if the prospective, current or former employee:

(1)        prefers, as shown in writing, confidentiality and the confidentiality is mutually beneficial;

(2)       is notified by the employer, in writing, of the employee’s right to have an attorney or representative of his or her choice review the agreement before it is signed;

(3)        receives valid, bargained for consideration in exchange for the  confidentiality;

(4)        is not, in the agreement, waiving any claims of unlawful employment practices that accrue after the agreement is signed;

(5)        receives the agreement in writing and is given a period of 21 calendar days to consider the agreement before signing, during which the employee may sign the agreement at any time, knowingly and voluntarily waiving any further time for consideration; and

(6)        is given seven calendar days following the execution of the agreement to revoke the agreement, and the agreement is not effective or enforceable until the revocation period has expired, unless the employee knowingly and voluntarily waives such right.

Employers should be aware that employees who successfully challenge the validity and enforceability of a contract (whether an employment agreement, settlement agreement, separation agreement or other agreement) for violating the WTA will be entitled to receive their attorneys’ fees and costs.  Employers should also be aware that the federal Tax Cuts and Jobs Act of 2017 is not affected by the WTA.  Under that federal tax law, there is no employer tax deduction for “any settlement or payment related to sexual harassment or sexual abuse if it is subject to a nondisclosure agreement.”  This includes no deduction by an employer for attorneys’ fees in connection with such a settlement.

New Employer Responsibilities under the Illinois Human Rights Act effective January 1, 2020

Illinois has also amended the Illinois Human Rights Act (“IHRA”) to expand the coverage of the IHRA and the responsibilities of employers under it. As mentioned above, starting next year, all employers with employees who work in Illinois will be required to provide sexual harassment prevention training at least annually to employees. The required annual training must meet certain minimum standards that the Illinois Department of Human Rights (“IDHR”) will set when it creates a “model program”. It is not clear when the IDHR will announce these standards or release the model program. Employers who fail to comply with the new annual training requirements may face civil penalties of up to $5,000, based on the number of offenses and the employer’s size. Employers who operate restaurants and bars must also: (1) provide a written sexual harassment policy, in English and Spanish, to their employees during their first calendar week of employment, and (2) provide supplemental training (meeting or exceeding additional standards to be developed by the IDHR) specifically aimed at the prevention of sexual harassment in the restaurant/bar industry (including specific conduct, activities, or videos related to the industry) in addition to the general annual harassment training requirement.

The amended IHRA prohibits discrimination and harassment not just based on an individual’s actual protected characteristic (e.g., an individual’s sex, disability, or race), but also an individual’s perceived characteristic. In other words, discrimination or harassment based on a perception that the individual is a member of a protected group (e.g., an individual’s perceived sexual orientation) can expose an employer to liability—even if the individual does not have that characteristic. Moreover, employers now will be responsible under the IHRA for sexual and other harassment of their non-employees (i.e., independent contractors and consultants who are directly performing services for the employer) (a) committed by managerial or supervisory employees, or (b) if the employer becomes aware of harassing conduct by non-managerial or nonsupervisory employees and fails to take reasonable corrective measures. (The IHRA already imposes responsibility on employers for sexual harassment of employees by non-employees.) The amendment also expands the definition of “working environment,” so that it is no longer limited to a physical location where an employee is assigned to perform his or her duties.

Beginning July 1, 2020, the IHRA will impose new reporting requirements on all employers with one or more Illinois employees. Employers must submit annual reports to the IDHR disclosing, among other information, adverse judgments or administrative rulings against the employer for sexual harassment or unlawful discrimination. Failure to do so may result in fines of up to $5,000. The IDHR will also have the authority, when investigating a claim under the IHRA, to require an employer to disclose the number of settlements that the employer entered into during the preceding five years, or less at the IDHR’s request, relating to any alleged act of sexual harassment or unlawful discrimination.

Expanded Rights under the Victims’ Economic Security and Safety Act effective January 1, 2020

The Victims’ Economic Security and Safety Act (“VESSA”) was originally passed to protect victims of domestic and sexual violence and requires Illinois employers to provide leave to support those victims while they obtain assistance and recover.  SB 75 expands the coverage of VESSA to provide employees with leave rights due to gender violence (in addition to domestic and sexual violence), irrespective of whether the violence has any relationship to an employee’s employer or place of work. Gender violence includes acts of violence or aggression based on a person’s actual or perceived sex or gender, physical intrusions or invasions of a sexual nature under coercive conditions, and related threats. VESSA applies to all Illinois employers. It requires employers to provide at least four, and up to 12 (depending on the number of employees the employer has), weeks of unpaid leave due to domestic, sexual, or gender violence and prohibits employment discrimination based on domestic, sexual, or gender violence.

Sexual Harassment Victim Representation Act effective January 1, 2020

This new act prohibits a union representative from providing dual representation in any proceeding to both the victim and the alleged perpetrator of sexual harassment when they are members of the same union. Instead, unions must appoint separate union representatives to represent the parties.

Hotel and Casino Employee Safety Act effective July 1, 2020 This new act seeks to protect hotel and casino employees from sexual assault and harassment by guests. Hotel and casino employers will be required to provide employees with free notification or safety devices (i.e., “panic buttons”) if they are assigned to work alone, or with no other employee in the area, in a guest room, restroom, or on the casino floor. Employees may use the panic buttons to summon help if they reasonably believe that a crime, sexual harassment, sexual assault, or other emergency is occurring. Hotel and casino employers must also adopt, post and provide to employees an anti-sexual harassment policy in English and Spanish designed to protect employees against sexual assault and harassment by guests. The City of Chicago already requires hotel employers to provide portable “panic buttons” to certain employees under the Chicago “Hands Off Pants On” ordinance.

Introduction

As companies move into their budgeting and planning processes for 2020 and continue to implement their 2019 plans, it is timely to start evaluating expansion plans and compliance of existing Illinois operations.  While all operations are different, a common theme amongst the overwhelming majority is employment and retention of contractors in Illinois.

One sector of many we expect to expand in Illinois is the solar and clean energy sector.  Illinois is home to a range of exciting business opportunities for the solar developer community, especially with the Adjustable Block Program and other solar incentives in the process of being rolled out.  In addition to understanding the state’s complex energy regulatory structures, developers need to be attentive to Illinois laws designed to protect employees.  If your company has recently opened an office or facility in Illinois, is planning on doing so, or is planning on employing or engaging Illinoisans to work for or with it, below is a sample of requirements under Illinois law potentially applicable to a wide range of market entrants.  If your company has been doing business in Illinois for some time, it still can be useful to review the requirements.

  1. Non-Competition / Non-Solicitation

Unlike some jurisdictions, properly prepared non-competition and non-solicitation of customer clauses may be enforceable under Illinois law.  There are, however, important limits to consider in preparing such clauses.  Here are two of them.

In a 2013 decision, Fifield v. Premier Dealer Services, Inc., the Illinois appellate court for the First District (i.e., Cook County) held that “there must be at least two years or more of continued employment to constitute adequate consideration in support of a restrictive covenant” where the employment is at-will.  The Fifield court ruled that the non-solicitation and non-competition provisions in a confidentiality agreement were unenforceable against an at-will employee who left his new employer after three months.  The court stated that this principle applies even if an employee signs his or her employment agreement prior to or at the commencement of employment (as opposed to after having begun employment), and even if the employee voluntarily resigns prior to the expiration of the two-year period.  There are some ways to avoid the two-year period requirement, but they require careful drafting.

Moreover, the Illinois Freedom to Work Act prohibits non-competition agreements with “low wage” employees, i.e., employees earning no more than the greater of (i) the applicable federal, state, or local hourly minimum wage, or (ii) $13 per hour.  For example, the City of Chicago’s minimum wage is currently $12 per hour.

  1. The Illinois Human Rights Act

The Illinois Human Rights Act (the “IHRA”) is a major Illinois law that protects employees against discrimination on a variety of bases.

  • Broad Coverage

Illinois provides broader and different protections than a number of other states and federal law.  For example, with only limited exceptions, the IHRA prohibits discrimination in employment due to the arrest of an employee or applicant.  The IHRA also prohibits discrimination in employment based on an employee’s marital status, sexual orientation, and gender identity.

Currently, the definition of the term “employer” under the IHRA includes any person employing 15 or more employees within Illinois during 20 or more calendar weeks within the calendar year of or preceding the alleged violation.  An “employer,” however, can also be any person employing one or more employees when an individual lodges a complaint of unlawful discrimination related to disability, pregnancy, or sexual harassment.  Employers should be aware and plan ahead that, effective July 1, 2020, the definition of “employer” will be revised so that the minimum number of employees is reduced from 15 to one.

  • Harassment Policy Requirements for Employers Who Are a Party to a Public Contract or an Eligible Bidder

Under the IHRA, if an employer is a “party to a public contract” or an “eligible bidder,” then it must have a written sexual harassment policy that includes, at a minimum, the following information:

(i)         the illegality of sexual harassment;

(ii)        the definition of sexual harassment under State law;

(iii)       a description of sexual harassment with examples;

(iv)       the vendor’s internal complaint process and penalties;

(v)        the legal recourse, investigative, and complaint process available through the Department of Human Rights and the Human Rights Commission;

(vi)       directions on how to contact the Department and Commission; and

(vii)      protections against retaliation as provided in Section 6-101 of the IHRA.

The IHRA defines a “public contract” to include “every contract to which the State, any of its political subdivisions, or any municipal corporation is a party.”  The Act defines an “eligible bidder” as:

[A] person who, prior to contract award or prior to bid opening for State contracts for construction or construction-related services, has filed with the Department a properly completed, sworn and currently valid employer report form, pursuant to the Department’s regulations. The provisions of this Article relating to eligible bidders apply only to bids on contracts with the State and its departments, agencies, boards, and commissions, and the provisions do not apply to bids on contracts with units of local government or school districts.

Civil rights violations by an employer who holds a public contract may result in the employer being debarred from participating in public contracts for up to three years.

  • Strict Liability for Hostile Working Environment by Supervisors

Under federal law, an employer may defend against a harassment claim that alleges a supervisor created a hostile work environment if (i) the employee unreasonably failed to take advantage of preventive or corrective opportunities offered by the employer, or (ii) the employer exercised reasonable care to prevent and promptly correct sexually harassing behavior.

The foregoing defense is not available under Illinois State law if the alleged harassment comes from a supervisory employee — even a supervisor who has no authority over the complaining employee.  Illinois law, however, does provide that an employer is responsible for sexual harassment of its employees by non-employees or non-managerial and non-supervisory employees only if the employer becomes aware of the conduct and fails to take reasonable corrective measures.

  1. Mothers Who Are Nursing

Under the Nursing Mothers in the Workplace Act, Illinois employers who have more than five employees must provide reasonable break time to an employee to express breast milk for her child for one year after the child’s birth, unless doing so would be prohibitively expensive or disruptive.  Such employers also must make reasonable efforts to provide a private room or other location (other than a toilet stall) for an employee to express milk.  In addition, this law prohibits employers from reducing an employee’s compensation for time spent breastfeeding a baby or expressing milk, although the time may run concurrently with any break time already provided to the employee.

  1. Illinois Wage Payment and Collection Act

There are several provisions under the Illinois Wage Payment and Collection Act (the “IWPCA”) that regulate how and when employers should pay employees.  Here are just a few:

a.         Vacation Pay

Under Illinois law, employers need not offer employees paid vacation.  If, however, an employer chooses to do so, unless otherwise provided in a collective bargaining agreement, vacation pay for unused vacation time must be compensated at the time of separation  The IWPCA requires employers to pay employees the monetary equivalent of all earned and unused vacation as part of their final compensation at their final rate of pay.  Moreover, “no employment contract or employment policy shall provide for forfeiture of earned vacation time upon separation.”  Notably, the Illinois Department of Labor has taken the position that if an employer has an unlimited vacation policy that does not provide for a specific number of vacation days, the employer is obligated to pay a separated employee “a monetary equivalent equal to the amount of vacation pay to which the employee would otherwise have been allowed to take during that year but had not taken.”

  • Deductions from Pay

The IWPCA restricts an employer’s ability to withhold wages—even when an employer suspects that an employee has diverted, stolen, or misappropriated funds from the employer.  Employer deductions from wages or final compensation are prohibited unless such deductions are “(1) required by law; (2) to the benefit of the employee; (3) in response to a valid wage assignment or wage deduction order; (4) made with the express written consent of the employee, given freely at the time the deduction is made.”

  • Expense Reimbursement

Under recently effective changes to the IWCPA, Illinois employers are required, with certain exceptions, to reimburse employees for authorized expenses or losses that employees incur as part of their jobs.  Illinois law also (i) provides that if an employee does not follow the employer’s written reimbursement policy, an employer is not required to reimburse the employee, and (ii) allows employers to place certain limits on the amounts of the reimbursement through a written policy.

  • Employee vs. Independent Contractor

Employers face the choice of classifying those engaged to work for them as employees or independent contractors.  Similar to the federal context, in Illinois, whether someone is considered an employee or an independent contractor may depend on which particular Illinois law is at issue, be it the tax laws, the IWPCA, the IHRA, or laws concerning matters such as workers’ compensation or unemployment compensation.  Under the IWPCA, a business must meet a three-part test to establish that an individual is an independent contractor as opposed to an employee.  The business must demonstrate that the individual:

  1. is free from control over the performance of his/her work, both under his/her contract of service and in fact;
    1. performs work which is either outside the employer’s usual course of business or is performed outside all the business places of the employer, unless the employer is in the business of employee placement services; and;
    1. is in an independently established trade, occupation, profession, or business.
  1. Opportunities for Rest

Under the One Day Rest in Seven Act, with certain exceptions, employers must allow every employee at least 24 consecutive hours of rest in every calendar week, in addition to the regular period of rest allowed at the close of each working day.  The law allows employers to obtain permits from the Illinois Department of Labor for employees to work on a seventh day provided the employees have voluntarily elected to work.

Except for certain specified employees, employers must permit employees who are to work for seven and a half continuous hours—or longer—at least 20 minutes for a meal period beginning no later than five hours after the start of the work period.

  1. Employee Privacy

With only a few exceptions, under the Right to Privacy in the Workplace Act, Illinois employers may not prohibit employees from using lawful products when off duty—including not prohibiting smoking off the job.  In addition, Illinois is a two-party consent state to recording conversations: under an eavesdropping law, a private conversation may not be recorded in a surreptitious manner without the consent of all parties to the conversation.  The Illinois Personnel Record Review Act requires employers with five or more employees to allow employees to inspect their personnel files.  With limited exceptions, personnel record information not included in the personnel record, but which should have been as required by this law, may not be used by an employer in a judicial or quasi-judicial proceeding.

  1. Commission Payments to Sales Reps

Under the Illinois Sales Representative Act, a business, including an individual, that fails to timely pay a sales representative, may be liable to the sales representative for exemplary damages of up to three times the amount of the unpaid commissions.  Additionally, the principal may have to pay the attorney’s fees and court costs of the sales representative.

Additional Changes on the Horizon

Current and future Illinois employers should also remain apprised of proposed new laws and amendments that are pending in the Illinois legislature or awaiting the governor’s signature.  We strive to assist our clients to be prepared for upcoming changes, including by publishing newsletters regarding some more significant changes to Illinois, and other, laws.

Conclusion            

As your business establishes a long-term foothold in Illinois and expands its presence, it is natural to focus primarily on the available business opportunities.  It is important, however, to make sure your expanding Illinois presence takes into account the many different laws applicable to companies and organizations doing business in Illinois.  As businesses that develop projects the right way, we are here to support developing your Illinois presence the right way as well.

Effective January 1, 2020, recreational cannabis use will be legal in Illinois. The Cannabis Regulation and Tax Act (the “Act”) prevents employers from disciplining or terminating an employee for their lawful use of cannabis outside the workplace. As such, employers may be concerned about the impact that the Act may have inside the workplace. Fortunately, the Act provides safeguards that allow employers to adopt and enforce reasonable zero-tolerance or drug-free workplace policies.

For example, the Act allows employers to prohibit the use and/or possession of cannabis inside the workplace. Further, the Act allows employers to prohibit employees from being impaired or under the influence of cannabis while at work or while performing his or her job duties. This includes employees who use cannabis outside the office, but whose outside use caused them to be impaired or under the influence of cannabis at work or while performing his or her job duties. In that case, the employer may terminate or discipline the employee if the employer has a good faith belief that the employee was either impaired by or under the influence of cannabis while at work or while performing his or her job duties.

The Act contains a non-exhaustive list of symptoms that the employer may use to determine if an employee is impaired, or under the influence of cannabis, including: impaired speech; decreased physical dexterity; lack of coordination; changes in demeanor; irrational or unusual behavior; and the employee’s involvement in an accident. To enforce a drug-free workplace policy, employers should consider training managers to spot these symptoms. If an employer does terminate or discipline an employee, they must allow him or her a reasonable opportunity to contest the basis for the employer’s determination that the employee was impaired or under the influence of cannabis.

Finally, the Act allows employers to implement reasonable drug and alcohol testing policies for employees and applicants. Such policies must be drafted with care. Otherwise, the employer could be subject to a discrimination claim, a claim under the Americans with Disabilities Act, or other state or federal law claims. Under Federal law, the recreational use of cannabis remains illegal. Thus, employers must maintain a drug-free workplace if they are in an industry regulated by the federal government (e.g., trucking, aviation, mass transit, etc.), or are involved in federal contracting. Employers not subject to federal regulation may still want to adopt drug-free workplace policies in response to the Act. Such policies may help employers avoid liability for the actions of an impaired employee. If an employer intends to amend or adopt a drug-free workplace policy in Illinois, it would be advisable to first consult legal counsel.

The California Consumer Privacy Act (“CCPA”) will become effective on January 1, 2020.  Any entity that has personal information about California consumers – i.e. if your business has California customers, employees, or contacts – may be covered by this law.  Now is the time to investigate whether the law applies to your business and, if it does, what to do to prepare.

The CCPA creates a number of disclosure requirements.  For example, the CCPA requires businesses to disclose all of the types of personal information they collect and the purposes for which it will be used.  Businesses must also notify consumers about their rights under the CCPA and provide at least two methods for consumers to exercise those rights, one of which must be a toll-free number.

The CCPA provides California consumers with certain rights with respect to their personal information.  These include, among others, the right to (a) obtain a copy of the specific personal information collected about them for free, (b) find out what categories of personal information the business sells or discloses to others, and (c) require that the business delete all of their personal information.  The CCPA also gives consumers the right to direct a business not to sell their information.  To comply, a business is required to place a “conspicuous” link on its homepage titled “Do Not Sell My Personal Information” that links to a webpage enabling consumers to opt out of the sale of their information.

While the CCPA provides no private right of action for violation of its own terms, it empowers the California Attorney General to enforce the Act, after providing notice of a violation and an opportunity for the business to fix any violations. Currently, there are a number of proposed amendments pending in the California legislature that, if adopted, could significantly change the CCPA.  These include limiting the businesses to which it applies, clarifying various requirements, and changing other portions of the law.  FVLD attorneys are watching these amendments closely.  Businesses should consult their legal counsel to determine if CCPA applies to them, and what actions they need to take before January 1, 2020 so that they can avoid unnecessary legal problems.

Federal regulations require financial institutions to provide customers with a written disclosure of the institution’s privacy policy at the time a relationship is established and annually thereafter. This requirement has often been criticized as a nuisance for businesses with no meaningful benefit for consumers.

Effective May 28, 2019, the Commodity Futures Trading Commission (CFTC) is amending its rules to provide an exception from the requirement to distribute annual privacy policy notices. This amendment will eliminate an annual burden for many futures commission merchants, retail foreign exchange dealers, commodity trading advisors, commodity pool operators, introducing brokers, major swap participants, and swap dealers that are subject to the jurisdiction of the CFTC. Generally speaking, the exception applies as long as the registrant meets two requirements:

  • First, with certain exceptions, the registrant must not share its customers’ nonpublic personal information with nonaffiliated third parties.
  • Second, the registrant must not have changed its policies and practices regarding disclosing customer nonpublic personal information since its last disclosure to the customer.

In developing the new rule, the CFTC consulted and coordinated with the Bureau of Consumer Financial Protection (which adopted a similar rule in August 2018), the Securities and Exchange Commission, the Federal Trade Commission, and the National Association of Insurance Commissioners.

For many CFTC registrants, the annual privacy notice distribution requirement has been a trap for the unwary, resulting in adverse findings in National Futures Association or CME Group compliance examinations. For those registrants that qualify for the exception, the CFTC’s privacy regulation amendments are welcome relief. You should consult with an attorney to determine whether you or your business qualify for an exception from federal privacy notice requirements.  Also, businesses should regularly review and, if necessary, update their privacy policies, based on changes in operations as well as new applicable laws and regulations.

A recent appellate decision may signal a narrowing of the scope of the federal law that online platforms have invoked for over 20 years to avoid liability for content third parties create. The case is noteworthy not only for digital media companies but also for any business that hosts user-generated content online.

Section 230 of the Communications Decency Act protects owners of websites and apps from liability for content generated by others (with some exceptions). Section 230 provides “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” Congress enacted the statute in the Internet’s early days to encourage the growth of the Internet without fear of liability for failing to police users’ postings.

In HomeAway.com v. City of Santa Monica, Airbnb and HomeAway challenged an ordinance prohibiting them from completing bookings for properties not registered with the City of Santa Monica. The court held that the ordinance complied with Section 230 because it did not focus on what users posted, but only on financial transactions.  In other words, the platforms still could host users’ listings of unregistered properties as long as they did not allow bookings of those properties. Thus, the court found the ordinance only limited internal bookings, and not the public-facing content with which Section 230 is concerned.

The court also rejected the platforms’ argument that the ordinance effectively compelled them to remove unregistered listings since the alternative would be listing properties that users could not book (which would surely frustrate users and render the platforms’ services inefficient, if not useless). The court made a technical distinction that the ordinance did not actually require the platforms to remove unregistered listings, regardless of whether removal might be the most practical means of compliance. The court declined to consider whether alternatives to removal were viable or made business sense.

The court’s narrow construction of Section 230 immunity departs from past expansive interpretations that took into account the broader policies behind the Section 230 – i.e., ensuring that online intermediaries are not liable for content that users can generate in volumes and at speeds that make it impossible (or at least prohibitively expensive) to keep up. Regardless of technicalities, the ordinance shifts the burden of compliance with City registration requirements for rental properties from the property owners themselves to platforms like HomeAway and Airbnb.

Further, contrary to Section 230’s goal of incentivizing innovation, the ruling appears to disfavor services offering “one-stop shops” for browsing listings and booking rentals in favor of sites with reduced functionality (e.g. Craigslist) where users would need to transact directly with owners of listed properties. One can imagine the potential consequences if other courts follow suit.  To provide one example, could a service allowing users to book restaurant reservations online be required to make sure the restaurant’s liquor license is in order before each booking?

Other appellate courts, however, continue to interpret Section 230 broadly. In Herrick v. Grindr LLC, for example, the court dismissed claims against the owner of a dating app for failing to remove fake profiles posted by the plaintiff’s ex-boyfriend impersonating the plaintiff. Unlike HomeAway.com, the court did not concern itself with whether, despite not being required to monitor for false profiles at the posting stage, Grindr could be required to act at some later time – i.e., when someone uses the app’s internal features to express interest in the imposter. The court also rejected misrepresentation claims against Grindr for allegedly implying it would remove illicit posts. Although a site might be held liable notwithstanding Section 230 if it represents to users that it will monitor or remove third party content, the court noted that the app’s terms of service disclaimed any obligation to remove content. Commentators have speculated that courts or Congress may roll back Section 230’s protections now that some online platforms arguably have the resources and technology to screen user-generated content. Headlines regarding, for example, cyber-bullying and “fake news” have led some to opine that it is time to stop “coddling” online platforms as compared to their non-digital counterparts. Time will tell whether HomeAway.com foreshadows such a trend.In any event, businesses would be wise to consult with counsel regarding how to structure their platforms, and draft terms of service, to retain Section 230’s protection in the face of increased scrutiny.

Introduction

As discussed in our January 2019 Legal Update, an amendment to the Illinois Wage Payment and Collection Act effective as of January 1, 2019 (the “Amendment”) requires employers to reimburse employees for all “necessary expenditures” (i.e., expenses or losses) that are within their scope of employment and directly related to services they have performed for the employer. Although the exact requirements of the Amendment are difficult to summarize until the law concerning the Amendment develops, this newsletter endeavors to provide insights on some of the most frequently asked questions about the Amendment.

What expenses do employers have to reimburse under the Amendment?

Illinois employers have to reimburse employees for expenses that are (a) within the scope of an employee’s employment, (b) related to services the employee performs, (c) for the primary benefit of the employer, and (d) required or authorized by the employer for the employee to incur. Whether an expense is reimbursable under Illinois law will likely depend on each individual situation. Analysis of a similar California law by California courts may provide guidance for how various types of expenses will be treated under Illinois law. For example, California courts have determined that many types of employee expenses may be reimbursable, such as the cost of training sessions, uniforms, and even some magazine subscriptions. In addition, California courts have held that a portion of a monthly cell phone bill may constitute a reimbursable expense. In contrast, some California courts have decided that a flight attendant was not required to be reimbursed for the cost of a passport and that a waitress was not required to be reimbursed for the cost of non-slip shoes.

Does an employer have to reimburse an employee for cell phone expenses?

The Amendment does not specifically mention cell phone expenses, but such expenses could conceivably be reimbursable under the Amendment. If an employer can show that an employee is neither required nor expected to use his or her cell phone for work, then the employer should have a good argument that the employee’s cell phone expenses are not reimbursable.  If, however, an employee is required to use his or her cell phone for work, or if an employer allows such use,the employer will likely be required to reimburse the employee for the portion of the cell phone bill that is work related.  This could be the case even if the employee incurs no increase in his or her cell phone bill as a result of such work-related use, and even if someone other than the employee pays the employee’s cell phone bill. Unfortunately, there is little guidance as to what portion of a cell phone bill an employer should reimburse an employee.

What employee expenses or losses are employers not required to reimburse?

Employers do not have to reimburse employees for expenses or losses that are for an employee’s personal use or benefit, due to an employee’s own negligence, due to normal wear and tear, or due to theft (unless the theft was a result of the employer’s negligence). Examples of non-reimbursable expenses may include entertainment expenses, fines for automobile violations, or other penalties/fees.

Are there circumstances where an employer does not have to reimburse an employee for business expenses?

Yes.  If any of the following apply, an employer need not reimburse an employee under the Amendment:

  1. the employer has a written expense reimbursement policy with which the employee failed to comply;
  2. the employer did not require or authorize the employee to incur the expense; or
  3. the expense exceeds the guidelines set forth in the employer’s reimbursement policy, provided that the policy does not provide for no reimbursement at all or only nominal reimbursement.

What can employers do to avoid fraudulent costs and minimize the likelihood of litigation?

Employers should adopt a written expense reimbursement policy. A well-crafted reimbursement policy can help (1) reduce the risk of liability for violating the Amendment, and (2) avoid the risk that an employer reimburses an employee for a non-business expense or an expense that the employee did not actually incur. The more detailed the policy, the better. The policy should at least outline the type of information an employee must submit before reimbursement from the employer and should cap the total amount that is reimbursable on certain expenses, but it should not limit reimbursement to unrealistically small amounts.

The importance of a carefully written expense reimbursement policy cannot be overstated. A good policy can both help ensure compliance with the Amendment and save an employer money.

What are the consequences of employers not reimbursing employees?

Employers that do not reimburse employees in accordance with the terms of the Amendment risk costly lawsuits and potentially even class action litigation by employees. In addition, corporate officers, decision-makers, or other agents of an employer who knowingly permit an employer to violate the Illinois Wage Payment and Collection Act may be held individually liable.

Conclusion

The above FAQs are based on both language in the Amendment and the statutes and interpretations of similar laws in other states.  One must bear in mind, however, that the language of similar laws in other states is not identical to the language of the Amendment. Therefore, interpretations and results with respect to the Amendment may differ from those under laws of other states. As developments with respect to the Amendment unfold, the answers above may become clearer or need to be refined.  With the current uncertainty, the best way for an employer to comply with the Amendment is to contact an attorney for advice about a particular situation or expense and to prepare a reimbursement policy.

We wish our clients and friends a healthy, happy, and prosperous 2019. Our January Legal Update highlights new laws and amendments that may be of interest to Illinois businesses and individuals. We encourage all those potentially affected by these developments to consult with legal counsel to ensure they are in compliance with, or consider taking advantage of, new provisions in these laws.

Amendments and New Laws Effective January 1, 2019

Expense Reimbursement Amendment to the Illinois Wage Payment and Collection Act

Illinois employers are now required, with certain exceptions, to reimburse employees for authorized expenses or losses that are incurred as part of their jobs. The law also (a) provides that if an employee does not follow the employer’s written reimbursement policy, the employer is not required to reimburse the employee, and (b) allows employers to place certain limits on the amounts of the reimbursement through a written policy. Illinois employers should strongly consider adopting or updating their written policies governing expense reimbursements.  Our February, 2019 newsletter will focus on this amendment and provide additional details.

Amendments to the Illinois Procurement Code Requiring Sexual Harassment Policies

Anyone who submits a bid for a State contract must now have a written sexual harassment policy in place that complies with numerous requirements, including (a) a description and examples of sexual harassment, (b) details on the bidder’s complaint process, and (c) directions on how to contact the Illinois Department of Human Rights and the Illinois Human Rights Commission.

Amendments to Continuing Education Requirements for Illinois Professional License Renewal

The Illinois Department of Financial & Professional Regulation (IDFPR) has added a new requirement for licensed professionals that have continuing education obligations. License renewals through IDFPR on or after January 1, 2020 will require professionals to spend at least one of their continuing education hours on sexual harassment prevention training.

Expired Mechanics’ Lien Pilot Program

Illinois has created a pilot program designed to address the problem of expired mechanics’ liens on residential properties. If the county participates in the pilot program, the county recorder can establish a mechanics’ lien demand and referral process, which allows an administrative law judge to remove an expired lien from a residential property.

Illinois Health Care Violence Prevention Act

Health care providers must comply with new workplace violence training and related safety requirements, such as adoption of a workplace violence prevention program that complies with federal and Illinois guidelines and posting of notices stating that verbal aggression will not be tolerated and that physical assault will be reported to law enforcement. The statute also provides whistleblower protections for those who report violations of the Act.

Illinois Service Member Employment and Reemployment Rights Act

The new Illinois Service Member Employment and Reemployment Rights Act (ISERRA), which applies to most Illinois employers, consolidates various job-related protections for military service members under existing federal and Illinois laws. Among other duties, ISERRA requires posting a notice of employee rights and prohibits employers from discriminating against service members or restricting a service member employee’s military leave.

Amendments and New Laws Effective Since the Last FVLD Annual Update

Illinois Entity Omnibus Act

As discussed in our January 2018 Legal Update, the Illinois Entity Omnibus Act amended various Illinois business statutes effective July 1, 2018. The Act made it easier for Illinois businesses to convert into other entity forms (e.g., a corporation into a limited liability company) and to domesticate to another state. The Act also allows foreign entities to convert to Illinois entities and domesticate to Illinois. Prior to making any changes, however, businesses should consider the other effects of conversion and domestication, such as federal or state franchise tax or liability exposure.

Amendments to the Illinois Securities Law of 1953

The Illinois Securities Law generally requires securities and investment fund shares to be registered with the Illinois Secretary of State unless the securities are exempt from registration. As of June 1, 2018, among other changes, agents or affiliates of title insurance companies, registered broker-dealers, and law firms can act as “qualified escrowees” for certain sales that are exempt from registration. The amendments also removed the requirement, with respect to certain exempt transactions, that a dealer must be organized under Illinois law and authorizes the payment of finder’s fees and other payments.

Amendments to the Nursing Mothers in the Workplace Act

As of July 1, 2018, Illinois employers with more than 5 employees must provide reasonable break time to an employee to express breast milk for her child for one year after the child’s birth. Employers must provide break time as needed unless doing so would be prohibitively expensive or disruptive. Moreover, the amendment prohibits Illinois employers from reducing an employee’s compensation for time spent breastfeeding a baby or expressing milk (but this time may run concurrently with any break time already provided to the employee).

Amendments to the Day and Temporary Labor Services Act

As of July 1, 2018, day and temporary labor service agencies must comply with new requirements, including to furnish transportation in certain circumstances and to inform laborers of the equipment, protective clothing, and training required for a task at the time of dispatch. Day and temporary labor service agencies are now prohibited from charging laborers for the expense of conducting any consumer reports, drug tests, or criminal background checks. Agencies must also attempt to place temporary laborers in permanent positions and comply with new Illinois Department of Labor reporting requirements.

Illinois Pollinator Friendly Solar Site Act

As of August 21, 2018, the Pollinator Friendly Solar Site Act encourages solar developers to create habitats for bees and other pollinators within their solar sites. The Act creates a scorecard that sets minimum standards that solar developers must fulfill if they want to claim that their projects are “pollinator-friendly.” Please note that this Legal Update discusses only a small sample of new Illinois laws, provides an overview for informational purposes only and is general in nature. It is not intended to take into account all exceptions, exemptions, and nuances that may apply to you or your business. Certain laws that we do not mention, including new Federal laws and laws in other States, may nonetheless affect you or your business.  You should consult with your legal and other advisors about the entire legal landscape impacting you or your business.

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