Jonathan Walsh

DOL Overtime Law

Consolidated Appropriations Act 2021: What Employers Need to Know

On December 27, 2020, the U.S. government enacted the Consolidated Appropriations Act, 2021, which is the second-largest federal stimulus package after the $2 trillion CARES Act passed back in March. Within the bill is the Coronavirus Response and Relief Supplemental Appropriations Act (the “Act”). The Act was enacted to help relieve the financial stresses businesses are experiencing during this economic downfall. The Act extended the Paycheck Protection Program (the “PPP”), enhanced the Coronavirus Aid, Relief, and Economic Security Act’s (the “CARES Act”) relief, and provided additional relief. Below is a summary of changes to the PPP, tax provisions, business meal deduction, and employment benefits.

Expansion of the Paycheck Protection Program

The Act added an additional $284 billion for forgivable PPP loans and extended the program to March 31, 2021. Small businesses categorized as “hard-hit” businesses that received PPP loans in 2020 will be eligible for a second round of funds. The eligibility requirements for the second round of PPP loans are:

  • Have 300 or fewer employees;
  • Have used or will use the full amount of their first PPP loan; and
  • Show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.

The additional eligibility requirements stated above do not apply to first-time borrowers. The size of a PPP loan is limited as follows:

  • A business may obtain 2.5 times its average monthly payroll; or
  • A business in Accommodation and Food Service (NAICS Code 72) may obtain 3.5 times its average monthly payroll.

The second round of PPP loans are capped at $2 million per borrower; whereas, the first-time borrowers remain capped at $10 million.

Enhancements to the PPP

Expanded forgivable expenses, including:

  • Operational Expenditures: software and cloud computing service payments used to facilitate, without limitation, business operations, service or product delivery, payroll, processing, billing, accounting, inventory, and human resource functions.
  • Supplier Costs: payments to suppliers of goods that are essential to operations at the time made pursuant to an order or contract in effect prior to the covered period.
  • Property Damage: costs related to any public disturbances that occurred in 2020, to the extent not covered by insurance or other compensation.
  • Worker Protection Costs: costs related to compliance with regulations issues by CDC, HHS, OSHA or any state or local government authority after March 1, 2020 and ending on the date when the national emergency declared by the president related to Covid-19 safety measures expires.

Additional Notable Updates

  • Expenses paid with proceeds of PPP loans are deductible for income tax purposes, a change from prior IRS rules. This may be the most significant change for many businesses.
  • Borrowers may self-elect a covered period between 8 and 24 weeks from receipt of the PPP loan.
  • Repealed the requirement that borrowers must deduct the $10,000 Economic Injury Disaster Loan advance amount from the forgivable amount of the PPP loan.
PPP Loan Proceeds

A business whose PPP loan is forgiven is not required to include the amount forgiven in gross income. Also, tax deductions are permitted for otherwise deductible expenses paid using the proceeds of a forgiven PPP loan, and there is no corresponding reduction in the basis of business assets. Therefore any forgiven PPP loan is effectively tax-exempt income.

Other Provisions
  • Employers who deferred withholding of the employee payroll taxes under the presidential memorandum dated August 8, 2020 now have until December 31, 2021 to arrange for withholding from employees and repay the deferred amounts.
  • Businesses that receive CARES Act loan forgiveness are not required to include amounts forgiven in income and are permitted tax deductions for otherwise deductible expenses paid.
  • Employer tax credit for paid family and medical leave extended through 2025.
  • Employer may continue to pay up to $5,250 per employee toward an employee’s “eligible student loan repayments” and the payments will be excluded from employee’s income through 2025.
Business Meal Deduction

The Act increased the limit on deducting business meals, including takeout and delivery meals, provided by restaurants to fully deductible. This rule applies to expenses paid or incurred in 2021 and 2022. All other existing requirements continue to apply when you dine with current or prospective customers, clients, suppliers, employees, partners, and professional advisors. Thus, to be deductible:

  • The food and beverages cannot be lavish or extravagant under the circumstances; and
  • You or one of your employees must be present when the food or beverages are served.

If food or beverages are provided at an entertainment activity, either they must be purchased separately from the entertainment or their cost must be stated on a separate bill, invoice, or receipt. This is required because the entertainment, unlike the food and beverages, is nondeductible.

Impact on Labor & Employment

Unemployment Benefits

The Act extended existing pandemic unemployment insurance programs under the CARES Act, the Pandemic Unemployment Assistance program, and the Pandemic Emergency Unemployment Compensation program. The Act provided an additional 13 weeks of benefits to those individuals who have exhausted their regular state benefits in addition to a supplemental federal unemployment benefit of $300 per week for up to 10 weeks to March 14, 2021. Additionally, the Act added program integrity provisions that require documentation of earnings and employment and compelled states to have processes for verifying an applicant’s identity to combat fraud and abuse in the unemployment programs.

Paid Sick Leave

The Act provides a tax credit to support employers that offer paid sick leave to employees. The Families First Coronavirus Response Act is no longer required as of December 31, 2020, but if covered employers voluntarily provide these benefits through March 31, 2021, those employers are eligible to take the tax credit for the leave. Also, the Act extended refundable payroll tax credits and employee eligibility for the paid sick and family leave to March 2021.

Next Steps

When it comes to the Coronavirus Response and Relief Supplemental Appropriations Act, there are a lot of changes for employers and business owners to know. It is important to understand all your options and develop a strategy to maximize your benefits. Epiphany Law attorneys will partner with you to create a plan that will help your business efficiently and effectively achieve your desired results. You can contact us here.

Epiphany Law Manufacturing Law

Can You Lose Your Corporate Protection?

What Every Business Owner needs to Know

Ask any business owner why they incorporated their business and one of the reasons they’ll give is “to protect myself from business liabilities.” But incorporating doesn’t mean you can never be held personally liable. Although it’s rare, courts sometimes ignore the legal protection of a corporation to hold an owner personally liable (a process called “piercing the corporate veil”).

The good news is there are steps you can take to avoid having a court pierce the corporate veil. Piercing happens when the court decides that you, as a business owner, haven’t really treated the corporation as a separate entity. In Wisconsin, the same theory applies to LLCs and their members as well. Essentially, the courts are saying that if you want the protection of incorporating, you have to follow corporation rules.

To avoid piercing:

  • Always follow corporate formalities, like holding annual meetings, keeping minutes and filing with the state on time
  • Never mix corporate assets with your personal ones (or those of another corporation or LLC)
  • When setting up your business, make sure it’s adequately funded. Courts are more willing to pierce an “undercapitalized” business
  • Always identify your business as a corporation or LLC so customers and creditors are on notice that your business has limited liability. Also identify your title so they know you’re acting on the business’ behalf
  • Never use your business to engage in illegal, fraudulent or reckless activities

Having a court pierce your business’s veil can be devastating for you as an owner. But by following the rules, you won’t give the courts a reason to pierce. And, always make sure to get the advice of a trusted business attorney if you are unsure about any of the guidelines. That way you and your business can take advantage of the protections offered by corporations and LLCs.

 

Dispute resolution: litigation v. mediation

Litigation vs. Mediation

In business, it’s common for disputes to arise. Developing cost effective strategies for dispute resolution is critical for achieving a healthy bottom line. Because employers and business owners generally seek to avoid litigation (it is time consuming, expensive and emotionally draining), mediation has become more common.  The below summary compares the differences between mediation and litigation and provides insights as to why the popularity of mediation is on the rise.

Employers and Business Owners understand

Litigation – Refers to a formal process that uses either state or federal court to resolve the dispute. To determine the court, you must examine the claim(s) asserted, the amount at issue and where the parties reside. Though you filed your claim with the court, the judge may require the parties attempt to resolve the dispute through mediation.

Mediation – Refers to an informal and confidential process that uses a neutral third-party, the mediator, to help the parties discuss their differences and consider potential solutions to those differences. If the parties cannot reach an agreement “that both parties can live with,” you still have the right to file a claim with the appropriate court to have a judge or jury determine the outcome of your case.

Where is the process held?

Litigation – Hearings are held telephonically or in the court room.

Mediation – You and the other party determine if the mediation is held at your counsel’s office, opposing counsel’s office, the courthouse, the mediator’s office, or even virtually. Depending upon the mediator’s and/or the parties’ preferences, the parties may be placed in the same room or in separate rooms. If in separate rooms, the mediator will walk between the rooms and present each party’s positions, thoughts and arguments to the other party.

Are the conversations confidential?

Litigation – Correspondence is not confidential and can be used as evidence at a hearing unless the correspondence is related to negotiations between both parties’ counsel to resolve the dispute.

Mediation – Correspondence and evidence presented during a mediation session is confidential and cannot be used by the other party as evidence at a hearing.  The mediator cannot be called to testify and will maintain the confidentiality of everything learned through the mediation.

What is the length of the process?

Litigation – The litigation process typically takes 2-3 years to reach a court judgment. The case may extend beyond 3 years if multiple motions are filed and depending on how complicated the claims are.

Mediation – The mediation process typically takes less than a year, and can sometimes be resolved within weeks. It often depends on the mediator chosen and schedules of all involved. Sometimes, you may attend multiple mediation sessions if both parties are continuing to progress towards a resolution.

Who determines the outcome?

Litigation – Judge or Jury. Besides presenting your case, the outcome is completely out of your hands and in the hands of the judge or jury.

Mediation – You. The mediator does not tell you who is right or wrong. The mediator does not render a decision. The Mediator is there to guide the conversation between you and the other party. Ultimately, you are the one presenting, crafting and responding to potential solutions. You are the one making the decision to accept or decline a solution. The outcome of the mediation is in your hands.

What is the potential outcome?

Litigation – The judge or jury determines a winner and a loser. The judge or jury determines the damages owed to the winner based on claims presented, case law and statutes.

Mediation – Both parties are winners. The parties, of their own accord, mutually decide to end the dispute and accept an outcome that both can live with at the end of the day.

What will the process cost?

Litigation – Below are conservative estimates of costs expected to reach a court judgment in Wisconsin courts. The costs will vary depending on the complexity of your claims and/or the dispute itself. For instance, if your case requires expert witnesses, you will pay more than the estimated costs. Also, the opposing party and/or counsel may cause your counsel to have to submit motions and briefs, which will increase your costs above the estimated costs. Remember, though, that you and the opposing party may settle the dispute prior to receiving a court judgment.

Court Filed in Represented by Counsel Costs
Small Claims Yes Filing Fees plus $5,000
Small Claims No Filing Fees
Large Claims Yes Filing Fees plus $25,000 – $50,000
Large Claims No Filing Fees
Federal Claims Yes Filing Fees plus $30,000 – $60,000

**Wisconsin and Federal Courts require companies be represented by counsel in Large Claims.

Mediation – Mediators usually charge between $250 – $350 per hour. If your case requires knowledge of a unique field or industry, the mediator may charge more than $350 per hour.

What about receiving my legal fees?

Litigation – Whether you receive legal fees depends on statutes, contract language and the discretion of the judge. If statutory or contract language allows the winning party to receive legal fees, the judge will determine the reasonable legal fees that the losing party will pay. The table below shows what you will receive if the judge awards legal fees.

Court Filed in Legal Fees
Small Claims $150 if judgment in favor; $300 if represented at trial and judgment in favor
Large Claims Reasonable fees – depends on contract and/or statutory language
Federal Claims Reasonable fees – depends on contract and/or statutory language

Mediation – Whether you receive legal fees depends on the other party’s willingness to agree to pay your legal fees. Most likely, the other party will not explicitly agree to pay your legal fees.

How do I locate a mediator?

The state bar association has a list of mediators who can be contacted for an appointment. However, it is advisable to work with your attorney first to determine if mediation is right for your case.  Your attorney will spend time investigating and selecting the right mediator for your case.

Would you like to learn more about mediation? Contact us here. Epiphany Law Partner Heather Macklin is an accredited mediator with over 20 years of litigation and dispute resolution experience.

Real Estate Law

COVID-19 and the Effects on Real Estate

 

On April 25, 2020, the Wisconsin Department of Agriculture, Trade, and Consumer Protection (the “DATCP”) enacted a new temporary law in response to Governor’s Emergency Order #72, the Health Emergency Order.  The new temporary law prevents residential landlords from enforcing or seeking late fees or penalties for nonpayment or late payment of rent against their residential tenants. This rule will be enforced from April 25 until the earlier of September 22, 2020, which is when the new temporary law expires, or 90 days after Governor’s Emergency Order #72 expires.

Because the DATCP did not enact the rule until April 25, residential landlords may charge their residential tenants late fees or penalties for nonpayment or late payment of rent for those days prior to April 25th.

In addition to the implementation of the new temporary rule, the courts themselves are beginning to adjust their processes to Covid-19. For example, the Outagamie County Courthouse released a statement that small claims plaintiffs, not the defendants, including landlord-tenant disputes, should not appear for the initial hearing. So, pay attention to your court’s local rules to determine how to proceed with your case.

If you have a question regarding landlord-tenant law, please contact Epiphany Law, LLC at 920-996-0000 and I am happy to answer your question.