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April 14, 2020

COVID-19 UPDATE: SBA Approves Fintech Firms To Rollout PPP Loans

We continue our efforts to keep you informed of key legal developments relating to COVID-19. Today, we provide a few updates on financial assistance under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), as well as employment-related matters. For our previous updates, please see HERE.

PAYCHECK PROTECTION PROGRAM

SBA Authorizes Fintech Companies to Process Loans. In our update last Friday, we noted that certain online loan intermediaries (i.e. kabbage.com and lendio.com) had begun accepting SBA Payment Protection Program (“PPP”) applications that they seemed to be processing through their network of SBA authorized lenders. At that time, we did not have enough information to recommend such facilitators – who had not yet been authorized by the SBA – as a suitable way of accessing the program. This week, we can report that the SBA has begun authorizing fintech companies – including PayPal, Intuit and Square – to process PPP loans.

That being said, we note that – as explained in the newly published FAQ #22 on the PPP by the U.S. Department of the Treasury (the “Treasury”) – non-bank and non-insured depository institution lenders must be approved by the Treasury and SBA to process, close, disburse and service PPP loans. Recently added FAQs #23 and #24 provide further guidance for franchises and hotel and food industry businesses with a NAICS Code of 72 (see all FAQs HERE).

Beginning on April 10th, self-employed individuals and 1099 independent contractors became eligible – according to guidance published by the Treasury – to apply for loans under the PPP established by the CARES Act. However, many traditional SBA-approved lenders have not modified their procedures to accommodate these categories of applicants.

Lessons from the Initial Rollout. In the first 10-days of the PPP, we have seen an uneven rollout of the program based on various factors, including the category of the applicant and the lending institution.

  • We are encouraging our clients to be persistent with their lenders to ensure that their online application has been received, is complete and is being submitted to the SBA for processing. Funds are required to be disbursed within 10 days of SBA approval.
  • We highlight that not-for-profits, including faith-based organizations, may apply for PPP loans. Faith-based organizations are exempt from the affiliation rules.

AIR CARRIER PAYROLL SUPPORT

Waiver for Awards of up to $100 Million. The CARES Act provided direct payroll support for passenger air carriers ($25 billion), cargo carriers ($4 billion) and air service-related contractors ($3 billion) that met certain criteria. Last Friday, the Treasury reported that “Secretary Mnuchin has determined that as a result of benefits to the public—including but not limited to maintaining needed air service, refraining from involuntary furloughs, and limiting share buyback and executive compensation—Treasury will not require passenger air carriers that will receive $100 million of payroll assistance or less to provide financial instruments as appropriate compensation. As such, for passenger air carriers with payroll support payments up to $100 million, funds will be available promptly upon approval of their applications.” See full press release HERE.

Agreement in Principle with Large Airlines. As of this writing, press reports indicate that larger passenger carriers have also reached an agreement in principle with the Treasury to access the $25 billion in funding for payroll support under the CARES Act. See Treasury’s press release of today HERE. We will provide more details as they become available.

WORKPLACE SAFETY

Illinois Workers’ Compensation

This week, the Illinois Workers’ Compensation Commission amended Section 9030.70 of the rules of evidence in compensation hearings before the Commission. Under the amendment, if a COVID-19 “First Responder” or “Front-Line Worker” is injured or incapacitated as a result of exposure to the COVID-19 virus during a COVID-19-related state of emergency, the exposure will be rebuttably presumed to have arisen out of and in the course of employment; furthermore, the injury will be rebuttably presumed to be causally connected to the hazards or exposures of COVID-19 of the worker’s employment. To see the full amendment and list of covered workers click HERE.

The change – which many business associations protested – is more significant than it may first appear.

  • First, the term “COVID-19 First Responder or Front-Line Worker” is broadly defined to include the extensive list of crucial personnel under Section 1 Part 12 of the Governor’s Executive Order 2020-10 dated March 20, 2020. The list includes, among others: “Food, beverage, and cannabis production and agriculture”; “Financial institutions”; “Critical trades”; “Educational institutions”; “Supplies for Essential Businesses and Operations”; “Transportation”; “Professional services”; and “Manufacture, distribution, and supply chain for critical products and industries.”
  • Second, the amendment, though an evidentiary rule, expands workers’ compensation coverage, and eases the burden of obtaining a recovery under the program, for Illinois COVID-19 First Responders and Front-Line Workers affected by COVID-19 related illness.
  • Third, as currently amended, the evidentiary presumptions apply to claims by workers in the specific categories of crucial personnel identified in the Amendment (that refers back to the Governor’s March 20th Stay-At-Home Executive Order (the “Order”)). It does not apply to other workers, who may be continuing to work, but whose employers are not essential businesses under the Order. It is yet to be seen whether the Amendment may be expanded to include this group of workers as the Order is gradually lifted.
  • Fourth, the increase in claims could increase an employer’s workers compensation premiums.

This rule change will not directly impact an employer’s potential exposure to tort or other statutory actions like the one brought last week against Walmart in the Circuit Court of Cook County.

Federal Guidance

Federal agencies continue to update their guidance for employers on issues related to workplace safety during the COVID-19 pandemic. Key examples are provided below.

  • Since Friday, OSHA has issued additional guidance relating to emergency response plans and recording of cases of COVID-19 in the workplace. See HERE.
  • The EEOC has updated its guidance on how COVID-19 has affected requirements regarding the ADA, Rehabilitation Act and other EEO laws. See HERE.
  • The CDC has issued specific safety guidelines for several categories of employers and employees, including critical infrastructure workers. See HERE.

We will continue to send periodic updates on topics that may be helpful to your businesses. If you have a particular issue that you’d like us to address or if you’d like to be removed from the distribution list, please let us know.

Feel free to contact us with any questions.

Sincerely,
Gery Chico, Jon Leach, and Alpita Shah

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