Restarting the Economy: A Practical Toolkit for Your ......May 21, 2020 · Phase 4: schools, arts,...

Restarting the Economy:

A Practical Toolkit for Your Business in the “New Normal”

Nelson Mullins Riley & Scarborough

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Presenters

Katherine BakerPartner

Rob SheridanPartner

Jim BartlingPartner

Kathleen TurlandGeneral Counsel

Liberty Construction Services

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Contents

I. Reopening Advisory Report and Northeast Coalition Guidance

II. Key Considerations in Developing a Safe Operation and Wellness Plan for Reopening Your Business

III. Litigation Concerns and Avoidance in the Employment Context

IV. COVID-19 and Consumer Debt

V. Understanding the Opportunities (and Challenges) in Borrowing and Deal Making in a COVID-19 World

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Katherine Baker

• Partner, Nelson Mullins Riley & Scarborough, Boston, MA

• Practice Areas:

o Appellate Practice and Legal Strategies

o Commercial Litigation & Business Torts

o Employment & Labor

o Higher Education

o Hospitality, Tourism & Leisure Litigation

o State & Local Government Relations

o Trade Secrets & Employee Mobility

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I. Reopening Advisory Report and Northeast Coalition Guidance

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Reopening Advisory Board

• April 28: Governor Baker announces formation of Reopening Advisory Board

o Co-Chairs: Lt. Governor Karyn Polito and Housing and Economic Development Secretary Mike Kennealy

o Board members: representatives from the business community, public health officials, municipal leaders

o Purpose: to advise the administration on strategies to reopen the economy in phases based on health and safety metrics, meet with key stakeholders, and issue a report by May 18

o April 28-May 18: Heard testimony, accepted public comments, and met remotely with stakeholders

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Reopening Advisory Report

May 18: Governor Baker releases Reopening Advisory Report, COVID-19 Order No. 33, and related guidance materials

• Approach: reopening driven by data trends; weighing public health risk of reopening against economic benefit; significant increase in cases → return to prior phases or closing sectors of economy

• COVID-19 Command Center to provide updates on six key public health indicators (positive test rate, deaths, hospitalization rate, testing capacity, contract tracing)

• Testing strategy: test, trace, isolate, quarantine support

• Phase duration: 3 weeks

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Reopening Advisory Report (cont.)

• Mandatory Safety Standards for All Workplaces

o Social distancing – 6-ft. rule, signage, masks for all employees

o Hygiene protocols – handwashing, regular sanitizing of high touch areas

o Staffing and operations – training on social distancing and hygiene protocols, plans for sick employees and return to work

o Cleaning and disinfecting – business-specific, mandatory after active employee diagnosed with virus, disinfection of common surfaces at appropriate intervals

• Mandatory Sector-specific Safety Protocols and Best Practices: available for certain phase 1 sectors; other guides to be released in advance of future phases after consultation between MA and industries

• Overall Social Guidance: cover your face, wash your hands, socially distance, be vigilant for symptoms, stay home if you feel sick

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In order to reopen, all businesses MUST:

1. Be in full compliance with all workplace safety and sector-specific rules

2. Complete self-certification: develop written COVID-19 Control Plan, which is kept on-site in the event of an inspection

3. Post signs with compliance attestation and describing rules for distancing, hygiene, cleaning

o Essential businesses must comply by May 25

• Enforcement

o By local boards of health, state Dep’t of Public Health and Department of Labor Standards

o Penalties:

▪ First offense: verbal consultation and redirection for a first offense

▪ Second offense: written redirection for a second offense

▪ Fines up to $300 per violation for the three subsequent offenses

▪ May also be enforced by injunction in court

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Phase 1: Start

• High risk encouraged to work from home (unchanged)

• Gatherings: <10 (unchanged) – does not apply to businesses allowed to reopen

• Travel: Safer at Home Advisory replaces Stay at Home Advisory

o Travelers to MA urged to self-quarantine for 14 days (unchanged)

o Lodging restricted to essential workers (unchanged)

• May 18: essential businesses, worship (outdoor services encouraged), firearm retailers, manufacturing, construction businesses open with restrictions; hospitals can provide high priority preventative care, pediatric care and high risk treatment (with prerequisites); child care (only for children of workers with no safe alternative); beaches open for recreation with social distancing

• May 25: labs, office space outside Boston (<25% capacity), hair salons, pet grooming, car washes, retail (curbside pick-up/delivery), beaches, parks, drive-in theaters, some athletic fields/courts, many outdoor adventure activities, most fishing, hunting boating, outdoor gardens, zoos can open with guidelines; additional healthcare providers can provide same services ashospitals above (with prerequisites)

• June 1: Boston offices (<25% capacity)

• *Reopening not mandatory – consult sector-specific protocols, self-certification

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Phase 2: Cautious

• High risk encouraged to work from home (unchanged)

• Gatherings: TBD

• Travel:

o Travelers to MA urged to self-quarantine for 14 days (unchanged)

o Business and recreational travel discouraged

o Lodging open with restrictions

• Worship: open with new guidelines (outdoor services encouraged)

• Business: retail, restaurants, lodging, additional personal services open with restrictions and some capacity limitations

• Health/Human Services: expanded ambulatory in-person routine care (e.g. dental cleanings, some elective procedures), childcare phased reopening of day camps

• Recreation/Outdoor: campgrounds, playgrounds, pools, all athletic fields/courts, youth sports can open with guidelines

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Phase 3: Vigilant

• High risk should work from home if possible (could be adjusted pending epidemiological evidence)

• Gatherings: TBD

• Travel: TBD

• Worship: open with new guidelines (outdoor services encouraged)

• Business: bars, arts and entertainment (casinos, gyms, museums), all other business activities except nightclubs/large venues open with restrictions and some capacity limitations

• Health/Human Services: same as Phase 2

• Recreation/Outdoor: additional activities/services, youth sports with games and tournaments (limited crowd size) open with guidelines

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Phase 4: New Normal

• Resume public interactions with physical distancing

• Gatherings: TBD

• Travel resumes with social guidance

• Worship, Business, Health/Human Services, Recreation/Outdoor: full resumption of activity

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• Public Transit

o Service will be limited until Phase 3

o Must wear masks on MBTA

o Employers should stagger schedules and have a work from home policy to minimize traffic

o MBTA will frequently disinfect and clean vehicles/stations and provide PPE to workers

• Hygienic and Protective Supplies

o Guide for business owners on what supplies to stock in the workplace

▪ Face coverings

▪ How to wash hands

▪ Cleaning/disinfecting guidance

o Portal to connect businesses to manufacturers and distributors for appropriate supplies

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• K-12 Schools

o Remain closed through end of 2019-2020 school year with remote learning in place

o Schools to continue offering essential non-educational services (take-out and food delivery to students/families)

o Summer programs TBD

• Higher Education

o Institutions to develop customized reopening plans

o Key principles for reopening campus: protect health and safety, enable progress towards educational goals, contribute to research and innovation, minimize economic impact on families, employees, MA economy

o All phases: safety guidelines/health monitoring

o Phase 1: may repopulate research labs, medical, dental, veterinary, clinical education and services, restart functions to prepare to reopen with social distancing

o Phases 2 and 3: develop plans for course delivery following public health guidance

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Northeast Coalition Guidance

• April 13: Governors of Connecticut, Delaware, Massachusetts, New Jersey, New York, Pennsylvania and Rhode Island form regional advisory council to coordinate reopening strategies

o Studying available COVID data and research and the experience of other countries, coordinating with a health expert, an economic development expert and each state’s chief of staff to develop a regional reopening plan

o No formal guidance has been issued to date

o Governor Baker’s view is that each state is operating on its own timeline based on its particular experience with the virus (rate of new infections and rate of spread)

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Status of Reopening in Other Northeastern States

• New York

o 10 regions of state began to reopen in four-phase process beginning May 15

▪ Requirements for hospitalization and death rates, healthcare system capacity and test-and-trace capacity and also strict cleaning and sanitation standards, social-distancing, mandatory masks, reporting of COVID cases

▪ Phase 1: construction, manufacturing, wholesale supply chain businesses and some retailers for curbside pickup allowed to reopen

▪ Phase 2: wider range of businesses may reopen, e.g. storefront retailers and professional services, finance and insurance, administrative support, real estate and rental leasing industries

o advancement to this phase depends on outcomes after two weeks in Phase 1

▪ Phase 3: hospitality industry may reopen, e.g., restaurant and food service businesses may reopen for dine-in services, hotels can reopen dine-in restaurants, spas, gyms

▪ Phase 4: schools, arts, entertainment, recreation business may reopen, e.g., theaters, movie theaters, museums; however, schools will remain closed in New York for the remainder of the current academic year

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Status of Reopening in Other Northeastern States (cont.)

• Rhode Island

o Phase I: May 9

▪ Open with new workplace guidelines: non-critical retail with capacity limits, critical retail (DBR guidelines still apply), restaurants (no dine-in, but outdoor dining allowed with restrictions), manufacturing, construction, service-based businesses, childcare (limited availability), healthcare (telehealth encouraged, elective procedures resume)

▪ Religious ceremonies limited to 5 or fewer, funerals 10 or fewer

▪ All employees who can work form home should continue

▪ Gatherings limited to 5 or fewer

▪ Office-based businesses may begin to allow limited on-site visits for staff who have been working remotely

▪ Close-contact business, personal services, gyms, recreation and entertainment businesses currently closed, no large gatherings or events

o Phase II: more businesses reopening and restrictions relaxed but social distancing, masks and sanitation measures remain in place

o Phase III: schools and most businesses open with new guidelines, but social distancing, masks and sanitation measures still in place

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Status of Reopening in Other Northeastern States (cont.)

• New Hampshire

o “Stay-At-Home 2.0”: May 4-31

▪ May 4: Hospitals allowed to perform time-sensitive elective procedures; campgrounds/state parks open

▪ May 11: Golf courses (NH residents/members only), hair salons (with masks), retail (including malls) at 50% capacity, and drive-in theaters open with restrictions

▪ May 18: restaurants may open outdoor seating areas with distancing and limit of 6 people per table; employees to wear masks while interacting with customers

▪ May 22 reopening target for lodging (hotels at half capacity)

▪ Beaches remain closed – wait-and-see approach

▪ Universal guidelines include requiring unwell employees to stay at home, requiring businesses to develop an employee coronavirus screening process, requiring businesses to implement enhanced cleaning and hygiene and requiring all employees to wear face masks at work and in public

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II. Key Considerations in Developing a Safe Operation and Wellness Plan for Reopening your Business

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Blueprint to Reopen Operations

Overview

Physical Operations and Access

Employee Screening and Testing

Cleaning and Disinfection Protocols

Working Conditions (Onsite and Remote)

Personal Protective Equipment

Employee Communications and Training

Managing Employee Leaves of Absences

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Physical Operations and Access

• Employee access

o Advance communications to prepare employees

o Testing and screening (confidentiality)

o Information gathering

o Reporting illness prior to workday

o Entrance to facility/workplace

• Visitors and the general public/customers access

• Third party vendors access

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Employee Screening and Testing and Handling Illness

Prompt identification and isolation of potentially infectious individuals is a critical step in protecting workers, customers, visitors, and others at the worksite.

• Confidentiality obligations of employer

• Temperature checks

• Permitted questions asked by a designated management employee (current symptoms, exposure)

• Record-keeping

• Remedies: prohibit entry, work remotely, monitor temperature and give daily report, isolation area

Develop a physical location and plan for an employee who reports symptoms at work.

• Isolation facility

• Supplies for isolation room

• Protocol to assist sick employee

• Dedicated person(s) to deal with sick employee

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Sanitation Protocols

Education, planning and supplies/equipment for cleaning and disinfection is imperative to mitigate risks.

• Follow CDC Guidelines and OSHA Standards

• Task Force “Slow the Spread” Guidelines

• Training for all staff (regarding new guidelines)

• Proactive and increased scheduled sanitation/disinfection

• “Social Distancing” protocols

• Limited use of shared equipment

• Deep cleaning preparation if employee test positive

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Working Conditions (Onsite and Remote)

Develop and maintain a virus-avoidant workspace.

• Physical setup of workspace

o Separate offices (where possible)

o Socially-distanced (6 feet rule) workspace in open floor plan

• Infrastructure

• Staggered schedules or days (where appropriate)

• Continued telecommuting/remote working (depending upon business and safety interest)

• Visitors (limited where possible)

• Third party vendors (limited direct contact)

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Employer-provided and/or approved PPE (gloves, goggles, face shields, face masks, respiratory protection) will be required (at least for the foreseeable future).

• All types of PPE must be:

o Selected based upon the potential hazard to the worker/job specific

o Properly fitted and periodically refitted, as applicable (e.g., respirators)

o Consistently and properly worn when required

o Regularly inspected, maintained, and replaced (as necessary)

o Properly removed, cleaned, and stored or disposed of, as applicable, to avoid contamination of self, others, or the environment

Personal Protective Equipment (PPE)

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Training for Employees

Pre-reopening and ongoing education are key to smooth implementation and compliance.

• Inform all employees prior to or upon return to work of new operating procedures

• Required attendance/participation (consider video training via email or teleconference)

• Topics:

o New guidelines

o Risks

o Remedies

o Emergency procedures

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Leave Management for Employee Illness

• Employees may seek leaves for illness related to COVID-19 and incidental reasons

o PTO

o FMLA

o FFCRA (employers under 500 employees)

o Workers’ compensation

o State leave laws

• Follow employer non-discrimination and non-retaliation policies

• Follow complaint procedures in employee handbook

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Rob Sheridan


• Experience:

o Counsels employers of all sizes of employee secrets, wage and hour, and benefit employment policies.

• Practice Areas:

o Employment & Labor

o Trade Secrets & Employee Mobility Commercial Litigation & Business Torts

o Employee Benefits

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III. Litigation Concerns and Avoidance in the Employment Context

At least 1000 cases have already been filed across the country relating to COVID-19

1. Discrimination

2. OSHA

3. Wage and Hour

4. Terminations

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Return to Work Discrimination/Harassment Avoidance

• Protected Classifications

o Ensure rehiring does not violate state or federal discrimination laws

• Medical testing under the ADA and state law

o Pre-Employment Screening

o GINA

o Ensure Employee Privacy under the ADA and HIPAA

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Ensure the Workplace Meets CDC and State Guidance

• OSHA Violations

• General employer obligations to safeguard employees

o PPE and Changes to the Workplace

• Obligations when on notice of safety risks

o Potential liability if an employee contracts COVID-19 (Evans v. Walmart Inc. –Illinois)

• Workers’ Compensation/ General Liability

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Wage and Hour Implications

• Reduction in hours

• Working from home for non-exempt

• Time during pre-employment screenings

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Terminations

• Involuntary furloughs

o Compensation Issues

o Access to facilities

o Technology considerations

• Layoffs and plant closings

o WARN and state mass layoff laws

o Unemployment compensation

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IV. COVID-19 and Consumer Debt

1. Student Loan Debt

2. Consumer Reporting

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CARES Act and Student Loan Changes

• The CARES Act suspended payments through September 30, 2020 for federally-held student loans

• Interest on such loans will not accrue during the suspension period

• Involuntary collections of federally-held student loan debt, including wage garnishments, Social Security garnishments and tax refund offsets, are suspended through September 30, 2020

• Suspended payments on such debt will be reported to the national credit bureaus as though they were on-time payments.

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State Changes to Student Loan Payment

• CARES Act did not address private student loans, but CA, CO, CT, IL, MA, NY, NJ, VT, VA, and WA have entered into agreements with private student loan services to provide relief resulting from COVID-19 including:

o Providing forbearance of payments for a minimum of 90 days

o Waiving any applicable late payment fees

o Agreeing to not report derogatory information (e.g., late payments) to consumer reporting agencies, although reporting forbearances is permitted

o Ceasing debt collection lawsuits for 90 days

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Changes to the FCRA

• New reporting requirements on institutions that furnish credit information to credit reporting agencies

• An institution that makes an “accommodation” because of the COVID-19 pandemic – and the consumer makes the payments or is not required to pursuant to the accommodation - must report such obligation or account as “current” or as the status reported prior to the accommodation

• Section 4021 of the CARES Act defines “accommodation” as “an agreement to defer one or more payments, make partial payments, forbear any delinquent amounts, modify a loan or contract, or any other assistance or relief granted to a consumer who is affected by the coronavirus disease 2019 (COVID-19) pandemic”

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Massachusetts Changes and Litigation

• In response to the COVID-19 emergency, the Massachusetts Attorney General’s Office (“AGO”) issued a set of emergency regulations relating to debt collection

• AGO prohibited: initiating debt collection calls or lawsuits, during the pendency of the COVID-19 emergency

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Massachusetts Changes and Litigation

• On May 6, 2020, U.S. District Judge Richard Stearns enjoined the AGO’s enforcement of those regulations as an unconstitutional restraint on commercial free speech. (ACA International v. Healey, Case No. 1:20-cv-107670RGS (D. Mass. May 6, 2020)

• The court found that the AGO’s broad prohibitions violated the constitutional rights of creditors and debt collectors in Massachusetts without providing any meaningful protections to consumers greater than those afforded by existing state and federal consumer protection laws

• Judge Stearns’s order thus, in effect, invalidated the majority of the emergency regulations

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Jim Bartling


• Practice Areas:

o Alternative Lending & Other Non-Bank Financial Services

o Banking & Financial Services

o Commercial & Syndicated Lending

o Real Estate

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V. Understanding the Opportunities (and Challenges) in Borrowing and Deal Making in a COVID-19 World

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Immediate Impact of COVID-19

• Before COVID-19, the banking and M&A industries had generally experienced a prolonged period of growth and prosperity

• Unprecedented market shock resulting in a drastic, near universal reduction of transactional volume

o Discretionary spending at a near complete halt

o Disruption of core work processes on levels unseen before

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Immediate Impact of COVID-19

• Reaffirmation that Black Swan events do indeed occur

• Market for leverage debt financing came to a near close and most private equity firms went pencils down on current investments

• Although federal interest rates remain low, margins on debt have increased across the board

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Implementing Countermeasures

• Borrowers rushed to build liquidity war chests through debt facility draws, extension on payment terms for debt service, rent abatements, extension on trade payable terms and other expense reduction measures

• Forced acceptance and implementation of remote employment platforms

• Some borrowers were able to obtain a measure of immediately economic relief through CARES Act financing, including Paycheck Protection Program Loans and Economic Injury Disaster Loans, and payroll tax relief

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Planning for the Future

• No precedent crisis makes forecasting post-COVID-19 very difficult, it is not possible to completely assess the magnitude of the effects on either a macroeconomic or an industry level

• However, elements for a bullish rebound of M&A activity do exist:

o Levels of dry power are at record highs, with private investors amassing $1.5 trillion in cash at the close of 2019 according to Prequin, that money needs to be deployed

o Robust and healthy economy leading into crisis

o Likely decrease in recent record high valuations

o Low interest rate environment likely to continue

o Access to financing (both from banks and private credit providers) remains plentiful, in additional to traditional financing there have been a significant number of distressed and special situation funds raised over the past few years in anticipation of a downturn

o Recent focus on digital innovation and technology disruption have prepared dealmakers well for current environment

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Impact on Future Transactions

• Material Adverse Change (MAC) Clauses, which give buyers an ability to walk away from a transaction before closing, likely to be significantly reshaped to include specific references to COVID-19, epidemics and pandemics depending on leverage of the parties involved

• Buyer and lender due diligence on target companies going forward will likely include:

o more detailed analysis of the geographical scope and dependencies of a target's operations

o a focus on supply-chain reliance and resilience

o review of force majeure provisions in key commercial contracts

o employee access to healthcare services

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Impact on Future Transactions

• Transaction timelines will inevitably lengthen given the need for increased diligence and potentially longer lead times for government agency consents

• Valuations of target business may be more difficult leading to challenges in structuring non-cash consideration such as earn-outs, stock consideration and seller notes

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Thank you!

Katherine BakerPartner

[email protected]

Rob SheridanPartner

[email protected]

Jim BartlingPartner

[email protected]

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Restarting the Economy: A Practical Toolkit for Your ......May 21, 2020 · Phase 4: schools, arts,...

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