Q&A With Attorney Alexander J. Nassar,
Royer Cooper Cohen Braunfeld LLC
With the new normal brought about by COVID-19, solo practitioners and small business practices are facing unprecedented economic challenges. As attorneys routinely counseling small businesses including healthcare providers, these are some of the questions we see routinely as practitioners search for a path forward.
1. As a solo practitioner with no employees, what types of financial relief am I eligible for as part of the coronavirus stimulus package?
Paycheck Protection Program (PPP)
PPP provides funds to the Small Business Administration (SBA) for forgivable loans of up to $10 million. Be advised, however, that funds for these loans are limited and they have been in high demand, so solo practitioners who have not applied already may have difficulty applying at this juncture.
The maximum loan amount is 2.5 times average monthly payroll costs. Additionally, subject to certain limited exceptions, any employee/sole proprietor compensation over $100,000 is excluded from calculating the loan amount and not otherwise forgivable. The PPP is designed primarily to help workers, including solo practitioners, remain employed or bring those who have ceased work back onto their payrolls.
Loans under PPP will be fully forgiven as long as they are used for the following during the 8 week period after the loan is made: at least 75 percent of the loan proceeds must be used for payroll costs. For the remaining up to 25 percent of proceeds to be forgiven, it must be used for qualifying expenses including mortgage interest, rent on existing leases, and/or utility bills. Loan proceeds must be used for qualifying purposes as soon as possible, to maximize forgiveness.
In light of state and local restrictions, solo practitioners may not be actively working, but may still use proceeds from these loans to pay their wages and maximize forgiveness. Solo practitioners should approach SBA approved lenders with whom they have an existing relationship to apply for PPP loans.
Economic Injury Disaster Loan (EIDL)
Until recently, EIDL provided an opportunity for a low-interest loan of up to $2 million for businesses affected by COVID-19 (limited to the economic injury suffered, as determined by the SBA, less other recoveries from, for example, business interruption insurance), as well as the potential for advances under certain circumstances while EIDL loan applications were pending.
Due to overwhelming demand, however, the SBA has slashed loan limits to $150,000 and has deferred considering new applications for any applicants outside of the agricultural industry at the present time.
A significant measure taken by the federal government is to make the self-employed, who would otherwise generally be ineligible for unemployment benefits, eligible under certain circumstances related to the COVID-19 pandemic, through federal Pandemic Unemployment Assistance (“PUA”) - including the potential to receive an extra $600 per week on top of normal unemployment benefits.
A sole proprietor can receive unemployment benefits if he or she self-certifies that he or she is able and available to work within the meaning of applicable state law and is “unemployed, partially unemployed or unable or unavailable to work” because of certain COVID-19–related reasons. Benefits for qualifying individuals under these provisions are calculated the same way as they would be for employees. This means a benefit calculation under state unemployment parameters (different states have different application requirements and benefits calculations and maximums).
Solo practitioners may also receive an additional $600 per week through July 31, 2020, and overall eligibility for unemployment benefits up to 39 weeks through December 31, 2020. States have responded with varying degrees of speed and efficiency to unemployment claims made by sole proprietors (including solo practitioners) because new application procedures are required to accept and process such claims, but the benefits are nevertheless available.
State and Local Programs
State and local loan and incentive programs may also be available to provide relief to solo practitioners as small business owners. Inquire with your local Chamber of Commerce or local representatives.
2. I run a practice where several of my therapists are independent contractors. Can I pay my independent contractors with proceeds from a PPP loan?
No. Independent contractors must apply for their own PPP loans. Payments to independent contractors do not qualify for PPP loan calculation or forgiveness as to the hiring practice.
3. I run a practice with several therapists, including both employees and independent contractors. Their workload is currently a small fraction of what it normally would be.
Are both types of workers eligible for unemployment compensation?
If eligible, would they be better off financially by being laid off, rather than working and getting paid for a fraction of the time.
Under PUA, independent contractors as well as employees are eligible to apply for unemployment benefits. Both employees and independent contractors may be eligible for partial benefits depending on state requirements and applicable work time and compensation thresholds. In other words, employees and independent contractors may work limited time and apply for partial unemployment benefits to make up for the commensurate drop in regular income.
As with the application process for solo practitioners, the application process for independent contractors has been implemented with varying degrees of speed and efficiency depending on the state.
Certain states also offer “work share” programs where the employer and the state unemployment authority share the cost of compensating employees in one or more designated working groups. Requirements and benefits under these programs vary by state.
In light of the fact that workers may receive partial unemployment benefits while still working on a reduced schedule, it is unlikely that fully laying them off would be more favorable for them if they have the opportunity to work part time. This is especially so because even individuals receiving partial unemployment compensation are generally eligible to receive the additional $600 weekly benefit available through federal stimulus. Additionally, depending on state law, states may impose “work search” requirements that preclude workers from receiving unemployment benefits if they are provided an opportunity to work (even part time) and refuse it.
My rent is due. Is there any provision for delay and/or forgiveness of office rent payments or mortgage payments?
States may implement orders staying eviction or foreclosure proceedings due to COVID-19, but in the absence of any such state action, the terms of the lease or mortgage loan documents will control. Dialog with your landlord and/or bank is key so that your specific situation can be addressed. As stated above, mortgage interest qualifies as a forgivable expense under PPP.
Royer Cooper Cohen Braunfeld LLC is a full-service law firm with offices in Pennsylvania and New York. We are privileged to provide this guest post on TPI’s blog. For further guidance on topics of interest to you and/or to address your specific questions, feel free to contact me, Alex Nassar, at firstname.lastname@example.org.
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