June 8, 2020
On June 5, 2020, the President signed into law the Paycheck Protection Program Flexibility Act. This new law amends the original Paycheck Protection Program (PPP) that was established as part of the CARES Act at the end of March.
The PPP Flexibility Act makes it easier for recipients of PPP loans to qualify for forgiveness of those loans. Additional PPP applications are also being accepted.
Here are some highlights:
- Extension of Covered Loan Period. The amendment extends the covered period for forgiveness from eight weeks from date of loan disbursement to 24 weeks or December 31, 2020, whichever is earlier. This will allow borrowers more time to spend the loan proceeds which especially helps nonprofits that are still closed or partially closed.
- Extension of Period of Use of the Loan. The amendment extends the period for allowable uses of the loan from June 30, 2020 to December 31, 2020.
- 75% Requirement Becomes the 60% Requirement. The amendment changes the proportion of the loan that must be spent on payroll costs from 75 percent to 60 percent. This will give borrowers more freedom and flexibility to spend the money on non-payroll costs such as mortgage interest, rent and utilities, and not put pressure on borrowers to stretch to meet the 75 percent requirement.
- New Exceptions. The amendment provides exceptions for situations in which borrowers are unable to return to pre-COVID-19 employment levels despite good faith efforts to rehire, or are unable to return to the same level of business activity to comply with requirements established or guidance issued by certain federal agencies related to sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.
- Extension of Maturity Date. The maturity date of the loan has been extended from two years to five years.
- Payroll Tax Deferral Permitted. The amendment now allows for borrowers who applied for PPP forgiveness to take advantage of Section 2302 of the CARES Act, which allows borrowers to delay the payment of payroll taxes.
- New Loan Applications Permitted. The extension of the covered period to December 31 has the effect of allowing eligible nonprofits and other small businesses that have not yet applied for a PPP loan to obtain a loan prior to December 31. Although funding is limited, as per the SBA’s last report of June 1, almost $150 billion remained available for PPP loans.
For more information about the Paycheck Protection Program Flexibility Act, please see this very good summary from Day Pitney.
New Jersey Nonprofits:
New Worker Misclassification Notice Must Be Posted in NJ Workplaces
In January 2020, several new laws were enacted in New Jersey that significantly increased the penalties for employer misclassification of employees as independent contractors. One of the laws imposed an obligation on employers to conspicuously post in the workplace a notice that sets forth an explanation of the prohibition against employers misclassifying their employees; the benefits and protections to which employees are entitled under New Jersey wage, benefit, and tax laws; and the remedies under New Jersey law that employees affected by misclassification might be entitled to.
The New Jersey Department of Labor and Workforce Development (NJDLWD) was tasked with preparing and issuing the required notice. The new notice was posted on the NJDLWD’s website during the last week of May, and can be found here (look for “NJ Law Prohibits Misclassification”). Two versions of the notice are available: one page (suitable for ease of posting) and three pages.
With employees working from home due to COVID-19, in addition to posting the notice in each workplace in New Jersey, employers should either (1) email a copy of the new notice to all New Jersey employees or (2) post a copy of the notice on an intranet and send an email to all New Jersey employees advising that the new notice is available on the intranet (include a link). Employers should retain a copy of the e-mail in order to be able to prove to the NJDLWD during an audit that the notice was provided to all employees.
This document is provided as a general informational service to volunteers, clients, and friends of Pro Bono Partnership. It should not be construed as, and does not constitute, legal advice on any specific matter, nor does distribution of this document create an attorney-client relationship.