Governor John Bel Edwards has issued another Executive Order suspending legal deadlines as a result of the COVID 19 pandemic.  This order is more comprehensive than prior orders.  In Section 5, he extends deadlines in Title 47 (taxation) until at least April 30 and confirms that administrative agency deadlines are also suspended until April 30.  Read more here.

  1. Calendar Year 2019 Payroll as Basis for Loan Amount (General Rule). If the borrower was in business for all of 2019, it may use the payroll costs for calendar year 2019 or the last 12 months prior to application (e.g., 4/1/19 – 3/31/20). April 6 guidance issued by the SBA provided:

In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019. For seasonal businesses, the applicant may use average monthly payroll for the period between February 15, 2019, or March 1, 2019, and June 30, 2019. An applicant that was not in business from February 15, 2019 to June 30, 2019 may use the average monthly payroll costs for the period January 1, 2020 through February 29, 2020.

Borrowers may use their average employment over the same time periods to determine their number of employees, for the purposes of applying an employee-based size standard. Alternatively, borrowers may elect to use SBA’s usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months).

  1. Calculation of Eligible Payroll Costs. The CARES Act excludes from payroll costs compensation in excess of $100,000 per year, per employee. Many advisors and commentators have interpreted the $100,000 cap to apply strictly to salary and bonuses, but not other related compensation such as health insurance benefits. April 6 guidance issued by the SBA answers this question as follows:

The exclusion of compensation in excess of $100,000 annually applies only to cash compensation, not to non-cash benefits, including:

      • employer contributions to defined-benefit or defined-contribution retirement plans;
      • payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums; and
      • payment of state and local taxes assessed on compensation of employees.
  1. Guidance Provided Re Treatment of Compensation Paid to Independent Contractors.  There has been a question concerning whether a borrower can include in payroll costs compensation paid to individuals who provide services to the borrower but are treated as 1099 independent contractors or as sole proprietors (as opposed to employees). April 6 guidance issued by the SBA answers this question as follows:

Any amounts that an eligible borrower has paid to an independent contractor or sole proprietor should be excluded from the eligible business’s payroll costs. However, an independent contractor or sole proprietor will itself be eligible for a loan under the PPP, if it satisfies the applicable requirements.

It is interesting to note that there was no reference in this answer to self-employed individuals (e.g., partners) that would arguably not fall in the category of a sole proprietor or independent contractor.

  1. Additional Basis for Qualification as a Small Business Concern. Thus far, there has been no specific guidance whether any “alternative size standard” for a small business concern will be applied to PPP eligibility. In addition to the bases for eligibility outlined in our prior guidance, the April 6 guidance issued by the SBA provides as follows:

Additionally, a business can qualify for the Paycheck Protection Program as a small business concern if it met both tests in SBA’s “alternative size standard” as of March 27, 2020: (1) maximum tangible net worth of the business is not more than $15 million; and (2) the average net income after Federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million.

The guidance specifically specifies that the affiliation rules will still apply to this “alternative size standard” test. However, note that the 500 employee threshold does not appear to apply to the above described financial tests, and thus a business (and its affiliates, if applicable) which meets such financial tests will qualify regardless of whether it has more than 500 employees.

  1. Amending Applications. Under the April 6 guidance issued by the SBA, a borrower may amend its previously filed PPP loan application to account for the updated guidance in the April 6 guidance particularly. The April 6 guidance specifically provides as follows:

Borrowers and lenders may rely on the laws, rules, and guidance available at the time of the relevant application. However, borrowers whose previously submitted loan applications have not yet been processed may revise their applications based on clarifications reflected in these FAQ’s.

  1. Calendar Year 2019 Payroll as Basis for Loan Amount (General Rule). If the borrower was in business for all of 2019, the PPP loan application form suggests that the borrower must use the payroll costs for calendar year 2019 (even though this appears to conflict with the language in the CARES Act, which provided for the calculation over the 12 month period preceding the loan application, and even though we understand a minority of lenders are following the language in the CARES Act and not utilizing average payroll during calendar year 2019 as called for on the application form).
  2. Apply Now and Choose Time of Funding.   Based solely on what one regional bank is informing its customers, it appears that PPP borrowers can file its application now, but wait to receive the money.  That way, the borrower can pick the 8-week period within which to spend the money (which amounts will therefore be eligible for loan forgiveness).  If the borrower has furloughed or laid off workers and expects to rehire them before June 30, 2020, it may want to wait until it has rehired them to get the loan proceeds. That way, it will be in a better position to spend the loan proceeds on eligible expenditures for periods when employees are actually working (otherwise it may be paying employees who are not actually working).  Although the SBA has not issued guidance on this issue, presumably once approved for the loan, the borrower should not be bumped because too much money has been spent.  All funding must occur before June 30, 2020.
  3. Certain Information Required with Application. There is a supplemental information form that must be completed that requires some basic information (see attached).
  4. Need to Spend 75% of Eligible Expenditures on Payroll Costs Under Forgiveness Formula. Of the amount to be forgiven based on expenditures during the 8-week period after the loan funding, at least 75% must be based on payroll costs during the 8-week period. If a business wishes to consolidate their Economic Injury Disaster Loan (loan made between January 31, 2020 and April 3, 2020) with its PPP Loan, then 75% of the refinanced combined amount of the EIDL loan and PPP Loan must be used for payroll costs during the 8-week period.
  5. Updated Interest Rate Info. The interest rate for the loans, if not forgiven, will be 1% per annum.  The maturity date will be the second anniversary of the loan. Payments are deferred for the first six months.
  6. Calculation of Eligible Payroll Costs. The CARES Act excludes from payroll costs compensation in excess of $100,000 per year, per employee. Many advisors and commentators have interpreted the $100,000 cap to apply strictly to salary and bonuses, but not other related compensation such as health insurance benefits.
  7. No Consensus or Guidance Re Treatment of Compensation Paid to Independent Contractors.  There appears to be no consensus or clear guidance (the guidance that does exist seems to be conflicting) as to whether a borrower can include in payroll costs compensation paid to individuals who provide services to the borrower but are treated as 1099 independent contractors (as opposed to employees). Some borrowers are including such compensation up to $100,000 per year per person cap. Some lenders are requesting information only on persons to whom the borrower issued a 1099-MISC (i.e., not some other 1099).
  8. No Consensus or Guidance Re Partner Compensation. There is no consensus or guidance with respect to whether employers taxed as partnerships may include compensation paid to partners. Some applicants are taking the position that the portion of partner compensation which is “wages” as reflected on 2019 k-1’s are eligible to be included in payroll costs (up to $100,000).
  9. Counting Employees. The SBA’s most recent guidance suggests that for purposes of calculating the number of employees of the borrower, applicants (and the applicant’s affiliated entities) should only count employees who principal place of residence is in the U.S. Under the SBA’s historical rules on affiliation, the size of foreign affiliates will be added to the size of the applicant, but under the new guidance, it appears that applicants should count only employees of foreign affiliates whose principal place of residence is in the U.S.
  10. Sole Proprietorships May Not Apply Until April 10, 2020.   Sole proprietorships are not allowed to submit applications until April 10, 2020. Query whether the SBA or U.S. Treasury will issue guidance with respect to sole proprietorships before April 10, 2020.

Across the United States and the world, business are closing their doors and moving to remote work to help minimize the spread of COVID-19. Many of these closures have been abrupt, unexpected, and, in some cases, chaotic. As famously stated in Sun-Tzu’s The Art of War, “In the midst of chaos, there is also opportunity.” That statement perfectly describes the cybercrime and ransomware community’s response to this pandemic. Emails promising vital information about keeping safe from coronavirus or links to maps of the infection rate instead push malware, steal passwords, or spread disinformation from hackers working for nation-states.[1] More than ever, it is vital that companies work with their now remote employees to ensure that the more relaxed dress code of the home office does not lead to a more relaxed approach to data privacy. In-house counsel should also ensure that the increased security measures and policies responding to the COVID-19 threat will not expose the company to increased legal and regulatory liabilities. Whether you started remote working today or three weeks ago, there are many things companies can do to maintain security while employees work from home.

1. Keep remote work policies up to date. If you do not have a remote work policy, create one.

Remote work policies are policies that establish how employees can work from locations other than the office. They frequently address best practices while telecommuting, required equipment, and the employee’s legal rights. If not adequately addressed by a company’s IT policies, the remote work policy should also cover safe use of electronic devices and whether company equipment will be provided for remote work. If company equipment is not provided and employees will need to use their own computers, the remote work policy should also address policies for accessing company data on the employee’s personal electronic devices (i.e., a “Bring Your Own Device” policy). A remote work policy should be reviewed regularly and kept up to date.

Many companies switching to remote work have never had remote workers before. For those companies, a remote work policy is even more crucial. Employees who have never worked at home before are moving into a working situation that is unfamiliar and distracting. Remote work policies help establish the company’s expectations for employees during remote work and reinforce that work done at home is still work.

2. Invest in IT infrastructure and staff.

With the passage of new benefit laws and decreased revenues, it is tempting to look anywhere and everywhere for places to make cuts. Cuts to IT support and staff should be a last resort. Whether more employees are working remotely than ever before or this is the first time the organization has done remote work, IT resources are more likely to be strained. Reducing staff and other distractions can affect monitoring and response times, which leaves organizations more susceptible to hacking and other attacks. Strained staff may also procrastinate on necessary patching and maintenance, which leave networks open to hackers.

3. Limit access to the company network on a “need to know basis”.

Before immediately putting all employees on the company network, the company should ask whether that employee needs access to do their work from home. If access is not necessary, then that employee should not be given access. For those employees that will be accessing the network, the access should be limited to only the information they need to perform their jobs and that they are accessing the network in a secure manner. Steps employees can take include but are not limited to the following:

    • Employees should be accessing the network only on a secure WiFi connection, meaning that their WiFi should be password protected with a strong password. Public, open-access WiFi networks should be avoided, and the company should consider blocking access when the device is connected to public WiFi.
    • Connection to the network should be done through virtual private networks secured with strong multifactor authentication.
    • If the employee is using their own computer, then the computer should have antivirus software installed and updated frequently.
    • “Remember password” functions should be turned off when employees are logging into company networks from their personal devices.
    • Employees should not download or save company information to their personal devices or cloud services like DropBox. Company information also should not be emailed to personal email addresses.
    • Restrict use of company-owned equipment to the employee only. The computer should not be shared with anyone else in the home, regardless of relationship or age.

4. Update the incident response plan to address remote work.

If a breach would happen, it is critical that there be a plan in for detecting, containing, and recovering from a cybersecurity breach. The incident response plan is that plan, and it helps ensure that the organization responds in an orderly and effective way. Breaches are painful and expensive enough, but companies that do not take the appropriate steps to respond may find themselves open to regulatory penalties, lawsuits from affected persons or shareholders, and denials of coverage by insurance companies.

Not only does the plan identify the steps to be taken, the plan will also identify the team of people responsible for executing the plan. The response team is an interdisciplinary team formed of representatives from several departments including IT, management, public relations, human resources, and legal. With everyone working remotely, it is important that the team is ready to respond should the need arise. The incident response plan should be reviewed carefully to ensure those people are properly identified. Confirm with those individuals that they are aware of the requirements of that role. If your organization does not have an incident response plan, reach out to your privacy counsel to create one.

5. Ensure compliance with applicable laws.

Privacy regulations have not been relaxed during this time. In fact, many privacy law regulators are seeing the increased data collection from employees (e.g., temperature scans to keep out sick employees) as justification for more regulation and enforcement. Despite pleas from industry groups to delay its enforcement, the California Attorney General will not be delaying the enforcement of the California Consumer Privacy Act.[2] The European Data Protection Board released a statement on March 19, 2020 confirming that the EU General Data Protection Regulation does not allow non-compliance for exceptional circumstances.[3] We have previously written about the relaxation of some HIPAA requirements to support increased telehealth,[4] but HIPAA’s other requirements will still apply. Guidance has been released by the Department of Education regarding online teaching while maintaining compliance with the Family Educational Rights and Privacy Act.[5] If a data breach is suffered, data breach notification laws in all 50 states are still effective.

Point being, there has been no change to an organization’s obligations to maintain privacy law compliance, and the new remote work may make that compliance more challenging. Care should be taken to ensure that employees are maintaining any compliance-based measures while they work from home.

6. Remind employees frequently of privacy obligations.

The home can be a more relaxing environment for work. There’s no commute, and bathrobes are acceptable work attire. But the home can also be a more distracting workplace. Children are home from school, parents take on new homeschooling obligations, and those with small apartments and homes may struggle to find a location to work without interruption. Cabin fever and the never-ending news cycle also raise anxiety levels. Distracted and anxious employees working in a more informal atmosphere are more likely to make mistakes that could inadvertently expose data. Human error is the leading cause of data breaches, and the new work from home policies increase that risk.

Even more so than usual, employees should be frequently reminded about their obligations to maintain data privacy and the security of company information. Remind employees of the types of information that they need to safeguard. Typically this includes confidential business information, trade secrets, intellectual property, customer lists and information, privileged documentation, employee information, and other personal information, but each organization should make their own lists. Employees should be sure to only access this information when they can expect it will be kept confidential. They should not print out confidential information and leave it in the house where it can be viewed by other household members or visitors. A screen displaying confidential information should never be left unattended and viewable to others.

Employees must also be on guard against phishing attempts. While exact numbers vary, information security professionals have reported an over 600% increase in phishing emails since the end of February 2020.[6] Many of these emails seek to capitalize on the widespread knowledge of COVID-19, fear and anxiety about the virus, and the willingness of people to try to help the less fortunate. In addition to lures to click links for more information about the pandemic (which instead cause malware to be downloaded), there are also emails advertising cures or face masks, baits to invest in companies working to produce vaccines, or calling for donations to charities supporting victims. Employees are currently at their most vulnerable and are more likely to click on questionable emails when anxious and unfocused. It is not enough for organizations to rely on technology and IT alone to maintain security; training and human awareness of the threat is critical. Organizations should consider doing remote mandatory training sessions on recognizing threats and phishing attempts in addition to frequent reminders.

Remote work is a new experience, which can be exciting, but also present significant challenges. Businesses can keep going during stay at home orders, but a good plan for how that work will be conducted securely is essential to a successful telecommuting workforce.

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[1] Dan Goodin, “The Internet is drowning in COVID-19-related malware and phishing scams”, Ars Technica, Conde Nast (https://arstechnica.com/information-technology/2020/03/the-internet-is-drowning-in-covid-19-related-malware-and-phishing-scams/); Jessica Kim Cohen, “Hackers taking advantage of COVID-19 to spread malware”, Modern Healthcare, Crain Communications, Inc. (https://www.modernhealthcare.com/cybersecurity/hackers-taking-advantage-covid-19-spread-malware).

[2] Natalie A. Prescott, “COVID-19 Will Apparently Not Delay CCPA Enforcement”, The National Law Review, National Law Forum (Mar. 26, 2020) (https://www.natlawreview.com/article/covid-19-will-apparently-not-delay-ccpa-enforcement).

[3] “Statement on the processing of personal data in the context of the COVID-19 outbreak”, European Data Protection Board (Mar. 19, 2020) (available at https://edpb.europa.eu/sites/edpb/files/files/file1/edpb_statement_2020_processingpersonaldataandcovid-19_en.pdf).

[4] Jessica Engler & Jennifer Jones Thomas, “HIPAA Privacy Rule Regulatory Response to COVID-19”, Louisiana Law Blog, Kean Miller (Mar. 22, 2020) (https://www.louisianalawblog.com/covid-19/hipaa-privacy-rule-regulatory-response-to-covid-19/).

[5] “Resources”, U.S. Department of Education, StudentPrivacy.ed.gov (last accessed Apr. 2, 2020) (https://studentprivacy.ed.gov/resources).

[6] Phil Muncaster, “#COVID19 Drives Phishing Emails Up by 667% Under a Month”, InfoSecurity Magazine, Reed Exhibitions Ltd. (Mar. 26, 2020) (https://www.infosecurity-magazine.com/news/covid19-drive-phishing-emails-667/).

The coronavirus continues to adversely impact so many, and the court systems across the country are adapting in kind. On April 2, 2020, Louisiana’s Governor in Proclamation JBE 2020-41 suspended all legal deadlines at least until April 30, 2020. Further, the Louisiana Supreme Court has issued orders over the last few weeks to help the court system navigate through these challenging times of our increasingly disrupted world. Below is a digest of the most up-to-date information regarding courts in Louisiana as of the time of this posting.

As of March 20, 2020, the Louisiana Supreme Court continued all jury trials, both civil and criminal, civil bench trials, hearings, and court appearances scheduled to commence in any Louisiana state court before April 13, 2020, to be reset by local order for a later date.

However, hearings related to civil protective orders, child in need of care proceedings, emergency child custody matters, proceedings for children removed from their home by emergency court order, proceedings related to emergency interdictions and mental health orders, matters of public health related to this crisis and other emergency matters necessary to protect the health, safety and liberty of individuals as determined by each court are considered essential civil matters that should be conducted via video and/or telephone conferencing.

Moreover, all matters that are resolved by agreement of the parties and with the approval of the court that do not involve any appearance at the court may proceed.

Please see below for additional court-specific information.

  1. Louisiana Supreme Court: All filings which were or are due to the Court between March 12, 2020 through, April 13, 2020 shall be considered timely if filed no later than April 14, 2020.
  2. First Circuit Court of Appeal: The court is closed until April 13, 2020 unless extended by further order. The court will still handle administration of emergency matters. All oral arguments are continued without date and will be scheduled to take place as soon as possible after May 1, 2020. The court will accept filings via U.S. Mail and e-filing.
  3. Second Circuit Court of Appeal: All parties must submit filings via e-filing, mail or fax (fax filings are allowed only with prior notification and authorization from the Clerk of Court during normal court business hours). Payments for fax or e-filing fees must be mailed. No in-person filings will be accepted. The entire April docket has been re-set for May 18, 2020.
  4. Third Circuit Court of Appeal: All oral arguments scheduled to take place through April 30, 2020 and May 31, 2020 will be submitted on briefs. All filings must be submitted by email, U.S. mail, or fax filing.
  5. Fourth Circuit Court of Appeal: All oral arguments scheduled to take place through April 30, 2020 are continued unless parties notify the court to have their matters submitted on briefs. All filings must be submitted via e-filing. The court will send all notices by electronic means.
  6. Fifth Circuit Court of Appeal: The court is closed, but court operations are occurring remotely. All deadlines for the court will be suspended until at least April 30, 2020. For purposes of computing the timeliness of filings, this period of suspension shall be considered a legal holiday; and therefore, pleadings otherwise due in this court during this legal holiday shall be deemed timely if filed on or before April 30, 2020. The court will accept e-filings and emergency fax filings while closed. Filings by mail will be processed as circumstances allow.       No in-person filings are allowed.
  7. United States Court of Appeals for the Fifth Circuit: In-person oral arguments scheduled in New Orleans for April are cancelled. Parties are advised that the court has suspended until further notice the requirement to file paper copies of electronically filed pleadings and documents. The Clerk’s Office remains open for telephonic, electronic, and mail operations. The Clerk of the Court may direct the parties or counsel to provide paper copies of filings on a case-by-case basis, and at a future date, parties or counsel may be directed to provide paper copies of filings previously submitted electronically. All current deadlines for attorney filers remain in effect, except for those regarding production of paper copies. Extensions with justification may be requested from the Clerk’s Office following normal procedures and rules.
  8. United States District Court, Eastern District of Louisiana: The court is closed. All civil and criminal bench and jury trials, hearings, proceedings and conferences scheduled before or on May 1, 2020 are continued to a date to be reset by each presiding judge. Those continuances do not continue any pending deadlines other than the trial dates. Attorneys should contact the presiding judges in their continued cases if they seek to modify such other deadlines. Litigants may file documents electronically, by U.S. mail, or by facsimile. Due to concerns regarding COVID-19, until May 1, 2020, the Clerk’s Office for the Eastern District of Louisiana will not accept sealed documents on paper for filing. Sealed documents should be submitted by email to the Court.
  9. United States District Court, Middle District of Louisiana: All civil and criminal (bench and jury) trials are postponed to a date to be determined by the presiding judge on or after May 1, 2020. This postponement does not affect any other pending deadlines other than the pre-trial conference and trial dates. Parties seeking to modify other deadlines must do so by written motion. All civil evidentiary hearings and other in-court hearings and proceedings requiring personal appearances, on the dockets of the United States District Court and the United States Bankruptcy Court, set before April 10, 2020 are hereby postponed, to be reset by, and at the discretion of, the presiding judge. Prescriptive, peremptive and statute of limitation deadlines are hereby suspended until April 13, 2020. No in-person filings will be accepted through April 13, 2020 or until further order of this Court. Filings in sealed matters which are required to be filed conventionally (in-person) pursuant to administrative procedures shall be filed by facsimile. Electronic filing via the CM/ECF system will be fully functional and help desk support will be available.
  10. United States District Court, Western District of Louisiana: All civil and criminal jury trials scheduled to begin on any date from now through May 1, 2020, are continued, to a date to be reset by each presiding judge. All other hearings, conferences and/or proceedings are subject to the discretion of the individual judge presiding over the proceeding. Any court filings or correspondence may be time-stamped and placed in the drop box located in each division. Any and all payments made to the Clerk, U. S. District Court for the payment of fines, fees, criminal debt or restitution must be made online via www.pay.gov or paid via money order or check and mailed to any divisional office.
  11. Civil District Court for the Parish of Orleans: On March 19, 2020, the court issued an order closing Civil District Court for the Parish of Orleans, First City Court, Second City Court, and the Clerk of Civil District Court’s Office until further notice. With respect to the Civil Division of the Civil District Court for the Parish of Orleans, you can continue to electronically file (e-file) documents and can fax file documents. Additionally, the Clerk of Civil District Court has offered free subscriptions to the Remote Access system, including civil records and land records, to ensure public access.       Existing subscriptions are being extended. For more information, please visit the Civil District Court for the Parish of Orleans’ website or the Clerk of Civil District Court for the Parish of Orleans’ website
  12. 19th Judicial District Court for the Parish of East Baton Rouge: The 19th Judicial District Court for the Parish of East Baton Rouge is closed until Monday, April 13, 2020, and those with pending criminal cases and civil matters set during this closure will be notified of a new court date. Moreover, all jury trials are cancelled until Friday, April 17, 2020. However, emergency and time-sensitive matters as determined by the court may be held by teleconference or video conference. The Court’s order expressly does not prohibit any court proceedings by telephone, video conferencing, or any other means. The East Baton Rouge Parish Clerk of Court’s Office will be closed during this same time period, except that it will be open only for emergency filings between the hours of 8:00 AM to 12:00 PM Monday thru Friday. During this period of closure, e-filing through Clerk Connect and fax filing will be accepted. For more information, please visit either the 19th Judicial District Court’s website or the East Baton Rouge Clerk of Court’s website.
  13. 15th Judicial District Court for the Parishes of Acadia, Lafayette and Vermilion: In all parishes, the courthouses shall be closed to the public except to provide services in the following categories: (1) civil domestic protective orders under title 46:2131 (domestic violence), 46:2181 (post-separation family violence), and 9:361 (sexual abuse); (2) emergency child custody matters pursuant to La. C.C.P. article 3945; (3) proceedings for children removed from their home by emergency court order; and (4) emergency interdiction/commitment matters. In Lafayette Parish, the public is instructed to call the Clerk’s Office between the hours of 10:00 AM to 2:00 PM Monday thru Friday for all other business. And in Acadia Parish, the public is instructed to call the Clerk’s Office between the hours of 8:30 AM to 4:00 PM Monday thru Friday for emergencies or questions until further notice. For more information, please visit the 15th Judicial District Court’s website, the Acadia Parish Clerk of Court’s website, the Lafayette Parish Clerk of Court’s website, or the Vermilion Parish Clerk of Court’s website.
  14. 1st Judicial District Court for the Parish of Caddo: The Court’s website advises that you should not come to the courthouse unless absolutely necessary, and you will only be allowed in the courthouse if necessary. Through May 1, 2020, all civil and domestic trials, hearings and court appearances are hereby continued, to be reset by order with the following exceptions: (1) civil protective orders; (2) emergency child custody matters pursuant to La. C.C.P. article 3945; (3) emergency interdictions; (4) public health matters related to the current health emergency; (5) civil commitments where the party is in continued involuntary custody; and (6) any matter in which a rule to show cause is granted after the moving party sets forth written grounds why the matter should proceed despite the concerns surrounding the coronavirus and that rule is set for hearing by the court. The Clerk’s Office will be open from 8:30 AM to 1:00 PM Monday thru Friday until further notice. A small staff will be on hand until 4:30 PM Monday thru Friday to answer phones and to complete filings and e-recordings. For more information, please visit the Caddo Parish Clerk of Court’s website.
  15. 14th Judicial District Court for the Parish of Calcasieu: All civil hearings and court appearances set for any date between March 23, 2020 and April 13, 2020, are hereby continued to a date to be reset by the appropriate judge, except for the following: (1) civil protective orders; (2) emergency child custody matters; (3) matters of public health; and (4) matters deemed necessary by the Duty Judge as provided by the Louisiana Supreme Court Order. A judge will be available at the courthouse between 8:30 AM to 4:30 PM Monday thru Friday to handle such matters. The Clerk’s Office has no public access and has reduced hours from 8:30 AM to 12:30 PM Monday thru Friday. For more information, please visit the Calcasieu Parish Clerk of Court’s website.

For more information about state district courts, parish and city courts not mentioned here, visit the Louisiana Supreme Court website for frequently updated court information.

Companies that rely upon trade secret information must remain diligent with their rights at all time – one inadvertent disclosure could, in theory, kill trade secret protection. As such, companies will need to adapt and revamp their security measures to account for the mass adoption of teleworking in response to the COVID-19 pandemic. The Uniform Trade Secrets Act[1] protects certain information that “[i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Unfortunately, the applicable statutes do not offer guidance on pandemics, and Courts have not yet had the opportunity to weigh in on what is considered reasonable under these circumstances. Nevertheless, although there is no “one size fits all” approach to protecting trade secrets, here are some practical and simple solutions that may help limit exposure and demonstrate reasonable measures to protect information under the current circumstances:

1. Non-disclosure and confidentiality agreements remain key. It is more important now than ever to clearly delineate how trade secret information will be protected at the front end of a relationship. Trade secret cases often turn on the existence of written confidentiality agreements. COVID-19 is not going to change this. But, it is clear that many companies are making broader and faster concessions to secure work than they otherwise may have in the past. Companies cannot overlook the important protections afforded by simple confidentiality agreements and the confidentiality clauses in contracts.

2. Security measures need to be maintained and/or adapted. As always, access to trade secret information should be limited to those on a need to know basis. Companies often limit access to certain network drives or physical files containing sensitive information. But, this may become difficult to monitor when the majority of employees are working remotely.

Policies should be written, and instructions should be given on how employees are to secure information they access from home. In more sophisticated companies, this may be provided in a specified telework agreement; others may rely on published policies and e-mails that specify how this information should be accessed and used. Common examples of security measures include prohibiting the viewing of information on non-work computers; requiring employees use secured internet connections, such as password protected WiFi and LAN lines to access information on the company network; limiting what documents can be viewed or printed in physical form (and by whom); and instructing employees on how to safeguard information in their possession. Beyond the initial access point, information sent to others should ideally be encrypted and password protected, and companies should continue to monitor the network to ensure that only authorized users have access.

Even if employees are teleworking, closed offices remain a security concern. Lawful access to the office may be prohibited, but that will not stop a determined thief. Traditional security measures (locks, alarms, etc.) should continue to be used to secure offices and access to data.

3. Important information should be marked appropriately. Appropriately designating documents as having confidential or proprietary information is one of the simplest measures a company can take to put both its own employees and all third parties (vendors, customers, etc.) on notice of what the company deems protectable confidential information. A good confidentiality agreement will not require information to be marked as “confidential” to invoke protection, but this does not negate the importance of this step. Likewise, merely marking a document as “Confidential” does not make it so; Companies still need to take other measures to affirmatively protect the information. Notices can be as simple as marking a page “Confidential and Proprietary” to an affirmative statement: “This Document contains confidential and proprietary information belonging to [Company]. This document and its contents shall not be used or disseminated in whole or in part without [Company]’s express written permission.”

4. Limit information provided in sales pitches. A delicate balance must be struck between securing work and securing your trade secrets. Defendants in trade secret litigation always look at sales pitches for leaks in trade secret information. While current conditions may prevent the all-disclosing trade show pitch (my favorite), an improperly trained sales staff is still likely to give away secrets from home. Companies should scrub their marketing materials or any confidential or proprietary information and train their sales staff on what not to say when pitching for work.

Even in this crisis, companies must continue to take measures today to protect their trade secrets for tomorrow.  A failure to do so may cause the company to irreparably lose its rights. This article provides some simple, practical measures that can assist a company in safeguarding its rights during this crisis and beyond. But, circumstances are different for every company and for every trade secret (e.g., software, manufacturing processes, and chemical formulae are protected in different manners). As such, this article cannot take the place of specific advice from competent counsel.

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[1] The Uniform Trade Secrets Act has been adopted by over 47 states and the District of Columbia, and was adapted in creating the Federal Defend Trade Secrets Act.

On Wednesday, April 1, 2020, Governor Edwards announced the availability of a new state-led loan program to provide loans to Louisiana small businesses in response to COVID-19. The Louisiana Loan Portfolio Guaranty Program (“LPGP”) is a partnership of the Louisiana Economic Development (“LED”), the Louisiana Bankers Association (“LBA”) and the Louisiana Public Facilities Authority (“LPFA”).

The LPGP currently has a total loan pool of $50 million, and through the LED, the state is providing a loan guaranty fund of $10 million to guaranty a portion of each participating bank’s loans. Members of the LBA will provide the loans and the LPFA will administer the program. Under the LPGP, loans of up to $100,000 are available to small businesses with fewer than 100 employees that are impacted by the COVID-19 crisis. The loan term is from 1 to 5 years; no payment is required for the first 180 days; and the loans will carry interest rates of no more than 3.5 percent. Currently, the deadline to apply for an LPGP loan is April 30, 2020. The LPGP is intended to complement to the federal stimulus programs.

For more information on loan assistance available through the LPGP, click here. For more information on benefits available through the federal CARES Act, click here.

Under Louisiana law, one can provide specific directions or the designation of a specific person to control the internment of that person’s remains. The directions must be in the form of a notarial testament or a written and notarized declaration. In the absence of specific directions, the law creates a priority of persons to make decisions.  The person designated to control the disposition of remains in the form of a notarial testament or a written and notarized declaration is given priority. This person is followed by the surviving spouse (if no divorce is pending), a majority of the surviving adult children of the deceased, a majority of the surviving adult grandchildren of the deceased , the surviving parents of the deceased, a majority of the surviving adult siblings of the deceased, and finally a majority of the surviving adult persons having a degree of kinship as provided by law.

Clearly, a single person or persons in second marriages should consider burial instructions. Military personnel are subject to provisions under forms they have executed under federal law.

In providing the methodologies for leaving instructions, Louisiana law provides that such instructions can be given “in the form of a notarial testament”.  A notarial testament involves among other requirements that the testament be signed in the presence of a notary and two witnesses. Well, it looks like this means that one cannot use a handwritten or olograhic will to dispose of remains because such does not meet the form requirements. A lot of times we see burial instructions in wills, but is this the best place to include such provisions. Such wills may be in a safety deposit box or safely concealed in the home waiting to be found. The better practice would be to do a separate document that meets the requirements and put it in the hands of the person one has designated to handle the disposition.

The second methodology for leaving instructions, “a written and notarized declaration”. The statute does not indicate whether an “affidavit” format can be used wherein the “affiant” simply appears or an “authentic act” requiring, among other things, the presence of a notary and two witnesses. When in doubt use the authentic act.

Other matters to consider in burial instructions may include: type of religious service or lack thereof, burial place, disposition of ashes, pallbearers and contents of an obituary.

For more information, contact Kevin C. Curry at 225.382.3484.

On April 1, the paid leave requirements of the Families First Coronavirus Response Act took effect.

Prior to April 1, the DOL issued both a required employer notice and a series of questions and answers related to the required employer notice under the Act: https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf and https://www.dol.gov/agencies/whd/pandemic/ffcra-poster-questions.  The IRS also issued a series of FAQs outlining required employer documentation of the need for leave https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs (see FAQ 44 – 46).  As the DOL worked on its regulations under the Act, it issued a series of expanding (and sometimes edited and updated) questions and answers https://www.dol.gov/agencies/whd/pandemic/ffcra-questions related to the Act.  In fact, some of those edits were significant and substantive.

Finally, on Wednesday afternoon, April 1, the DOL rolled out its much-anticipated regulations related to the Act https://www.dol.gov/sites/dolgov/files/WHD/Pandemic/FFCRA.pdf.  The regulations generally track the FAQs.  Notably, however, the DOL changed course on an issue that the DOL previously (but indirectly) addressed.  Specifically, in the regulations, the DOL expanded what qualifies as a “quarantine” or “isolation” order for leave purposes under the Act and made it clear that the “[q]uarantine or isolation orders include a broad range of governmental orders, including orders that advise some or all citizens to shelter in place, stay-at-home, quarantine, or otherwise restrict their own mobility.”  The regulations also detail the employee’s right to substitute employer-provided paid leave for unpaid leave under the Act, and also address the employer’s right to require the substitution of employer-provided paid leave for unpaid leave under the Act.  In addition, the regulations described the documentation required to demonstrate the need for leave under the Act.  The DOL had previously edited its FAQs related to documentation of the need for leave, and it is still unclear if an employee is required to provide documentation from his or her health care provider to support the need for leave, or if the employee is merely required to certify the need for leave.

As the DOL (and IRS) field questions related to documentation of the need for leave, these issues may be addressed.  Suffice it to say, issues related to the leave Act are evolving at a breakneck pace.

If you have questions, please contact Kean Miller labor and employment attorneys, Brian R. Carnie (318.562.2652), Chelsea G. Caswell (225.382.3405), A. Edward Hardin, Jr. (225.382.3458), Scott D. Huffstetler (225.389.3747), Michael D. Lowe (318.562.2653), Zoë W. Vermeulen (504.620.3367), and David M. Whitaker (504.620.3358).

On March 27, 2020, President Trump signed H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act (Public Law No: 116-136, the “CARES Act” or the “Act”).  Title I of the CARES Act creates the Paycheck Protection Program (discussed in more detail here).  Generally speaking, the Paycheck Protection Program permits certain small businesses to apply for a small business loan which may be forgiven, in whole or in part, if the loan proceeds are used to pay for certain eligible expenses, e.g., the payment of certain payroll costs, interest on a covered mortgage obligation, payments under a covered rent obligation, and the payment of certain utilities.

This blog post summarizes significant uncertainties created by tax and accounting issues related to the Paycheck Protection Program.  A separate blog post containing a more detailed review of the tax changes contained in the Act is available here.  Additional details regarding the employment and employee benefits changes is available here.  Additional guidance related to the CARES Act is forthcoming.  All of Kean Miller’s guidance related to the coronavirus pandemic is located here.

Tax and Accounting Issues Raised by the Paycheck Protection Program

Determination of Expenses Eligible for Forgiveness – While the preliminary hurdle for any taxpayer will be the amount of the loan that they are eligible for, it is just a loan unless eligible for forgiveness.  Therefore, of greater importance will be the manner and time within which the loaned funds must be spent to be forgiven.  Otherwise, it is simply a loan that must be repaid.  Section 1106 of the CARES Act defines the expenses that, if paid with the loan proceeds, are eligible for forgiveness.  Payments of eligible expenses related to covered mortgage or rent obligations and covered utility payments must relate to mortgage or lease obligations incurred or in force before February 15, 2020 and utility payments for which service began before February 15, 2020.  The amount eligible for forgiveness is calculated with reference to costs incurred and payments made related to an eligible expense during the 8-week period beginning on the date of the origination of the covered loan.  By computing the amount eligible for forgiveness based on both costs incurred and payments actually made the Act appears to create a hybrid-accounting accrual/cash method of accounting rule for the determination of eligible expenses.

The hybrid accounting method appears to indicate that certain costs, notably payroll costs related to eligible self-employed individuals, need not be actually paid during the covered period.  This may also make sense because it is possible that the date payroll checks are issued for services performed during a portion of the 8-week covered period could fall outside of the 8-week period.  For example, if the 8-week period ends on a Wednesday and the payroll for the week is paid on the following Friday, it appears the Act permits the portion of payroll costs incurred for services performed Monday through Wednesday to be eligible for forgiveness.

Because the amount of the loan is computed with reference to actual payroll costs, it is likely the majority of forgivable expenses paid will relate to payroll actually paid but based on the statutory language as written, it also appears that it may be possible to pre-pay certain eligible expenses.  While unlikely, this situation could arise if, for some reason, a borrower’s covered expenses did not equal or exceed the amount borrowed.  Absent additional guidance, in that situation, a borrower might read the statute to permit the borrower to pre-pay a covered expense.  At this time, it is not clear whether additional guidance will be issued to clarify or impose additional limitations on the calculation of the amount of covered expenses that are eligible for forgiveness.  One practical step a borrower should consider is timing the origination of the loan to coincide with payroll dates to avoid the potential payroll issue discussed above.

Uncertainty Regarding How Certain Business Concerns Should Apply for Relief – The CARES Act should be clarified, ideally by swift legislative action, to make it clear that partners and partnerships are not excluded from the relief provisions.  The Act contains a poorly worded definition of payroll costs that could be read so as to defeat the purpose of the statute.  Specifically, the Act refers only to the net self-employment earnings of a sole proprietor or an independent contractor in the definition of payroll costs, which language may be read to exclude the self-employment of partners in a partnership.  That is, as written the Act does not clearly specify that the net self-employment earnings of certain eligible self-employed individuals, such as partners, should be included in the definition of payroll costs, thereby, creating uncertainty as to the availability of loans to these otherwise eligible individuals and creating uncertainty as to the computation of the amount of loans available to these particular business organizations which constitute a significant part of the United States economy.

As a result of what appears to be at worst, a drafting error, the Act could be read to suggest that a partnership that is a small business concern could not include the net earnings from self-employment of its partners in its payroll costs.  Thus, if the partnership had no employees, under this interpretation, its payroll costs would be zero, and the applicant would effectively be ineligible for relief under the Paycheck Protection Program.  In contrast, if that partnership was structured as an S corporation for tax purposes and its owners received a combination of W-2 wages (included in payroll costs) and dividends (likely excluded from payroll costs) it would be eligible for a higher loan amount since the wages would be considered payroll costs.

The “payroll costs” of an owner of  a single member limited liability company on the other hand, is more clearly covered by the statute even if the limited liability company has no employees and thus no “payroll costs.”  This type of eligible small business concern and is no different in practice than a sole proprietorship operated by an individual in their individual capacity and for tax purposes, assuming no elections are made for an alternative tax treatment, they are indistinguishable.  A limited liability company with a single member is simply “disregarded”.  Nevertheless, while the “payroll costs” of such a limited liability company would not ordinarily include net self-employment income, the Act itself defines “payroll costs” as “the sum of payments of … income of a sole proprietor or independent contractor that is … net earnings from self-employment,…”  In contrast, if that individual did business as a sole proprietor (without the interposition of a limited liability company) his or her  net earnings from self-employment would be included in payroll costs and would more clearly be eligible for relief.

Some of the confusion in the Act is caused by the loose use of terms that have more specific meanings for tax purposes.  While the term “sole proprietor” has a unique meaning for income tax purposes, the term “independent contractor” is not an income tax classification for income tax imposition purposes.  The latter term relates more generally to whether or not a payor is required to withhold the recipient’s income taxes from payments to the recipient and also to whether the payor has to chip in for payroll tax purposes.  It is not an income tax classification like sole proprietor.

Additional confusion results because the Act does not make it clear as to who among possible applicants, in certain circumstances, is entitled to apply for a loan or whether all possible applicants may file.  That is, the Act is drafted in a manner that appears to permit both an eligible self-employed individual, such as a partner or the owner of a single member limited liability company, and the associated partnership or limited liability company to apply for a loan.  However, in both of those instances the unfortunate terminology in the Act used to define “payroll costs’ could cause the loan amount to be zero regardless of whether the individual owner or the entity applied for the loan because in either case the individual owner or owners’ net earnings from self-employment are not defined as payroll costs, for the reasons mentioned above.  Thus, in the case of an entity with no employees that suffered losses related to the pandemic, depending on how the language is interpreted by a decision-maker lender, neither the entity nor its individual owner(s) would be eligible for meaningful relief.

It is not clear how lenders will interpret the definition of payroll costs in this context.  Given the pressing need to distribute cash to business owners quickly, it may be that lenders include payroll costs related to an eligible self-employed individual in the loan calculation.  But issues may arise when the applicant seeks loan forgiveness depending on how the lender interprets the immunity provisions in Section 1106 of the CARES Act.

There is no indication that Congress intended to preclude a large swath of the American economy doing business in partnership form from receiving Paycheck Protection Program loans based solely on their choice of business organization.  It is our understanding that the Small Business Administration is in the process of drafting detailed regulations that will address the computation of “payroll costs” as it relates to partners and partnerships and other businesses as well as their owners, for a Paycheck Protection Program Loan.  As we understand it, the Small Business Administration intends to release that guidance on Friday, April 3.  What is not clear at this point is whether the apparent drafting error will be clarified by regulation or, ideally, a technical corrections act.  It should be noted that, if needed, Congress could pass a statute containing the necessary technical corrections, making the corrections retroactive to the passage of the CARES Act.  Although Congress is not currently in session, ideally any such action could take place prior to the time applicants began seeking loan forgiveness.  Nevertheless, uncertainty about loan eligibility for certain businesses and self-employed individuals may remain for some period of time.

Hopefully the regulations to be issued tomorrow will mitigate at least some of the uncertainty.

Determination of Payroll Costs for a Sole Proprietor, Partner, or Owner of an S corporation – The amount of compensation paid to an eligible self-employed individual is relevant to both determining the amount of the Paycheck Protection Program loan as well as the amount of the loan that may be forgiven.  The term eligible self-employed individual is defined with reference to Section 7702(b) of the Families First Coronavirus Response Act (Public Law No: 116-127).  The Families First Coronavirus Response Act defines an eligible self-employed individual as an individual who:

  1. Regularly carries on any trade or business within the meaning of [IRC Section 1402], and
  2. Would be entitled to receive paid leave during the taxable year pursuant to the Emergency Paid Sick Leave Act if the individual were an employee of an employer (other than himself or herself).

IRC Section 1402 defines self-employment income and generally includes income received by a sole proprietor or a partner in a partnership.

With respect to eligible self-employed individuals, the definition of payroll costs includes net earnings from self-employment.  Taken together with the reference to IRC Section 1402 in the definition of eligible self-employed individual, the reference to net earnings from self-employment appears to mean that the amount of a sole proprietor or partner’s payroll costs is the amount reported on their tax return that is subject to self-employment tax.   Thus, for purposes of determining the payroll costs related to a sole proprietor or an individual partner in a partnership, it appears appropriate to reference the amount of income reported on their individual income tax return that was subject to self-employment tax, which generally includes the gross income derived by an individual from any trade or business carried on by the individual, less deductions allocated to the business, and also includes a partner’s distributive share of income or loss from a trade or business carried on by a partnership.  This position appears to be supported by the Paycheck Protection Program Information Sheet for Borrowers, which was released by the Treasury Department on March 31, 2020.  That said, as noted above, at present a partner is not included in the definition of an eligible self-employed individual and it is not clear how a partnership (or its partners) should apply for a Paycheck Protection Program loan.

Generally speaking, the owner of an S corporation would receive wages (reported on Form W-2) from the S corporation.  It appears those wages would likely be considered to be the S corporation owner’s payroll costs, i.e., it is unlikely the owner of an S corporation could include dividends received in the payroll costs for purposes of the Paycheck Protection Program.

Because the determination of payroll costs for a sole proprietor, partner, or owner of an S corporation is not entirely clear, additional guidance is required.  The lack of guidance is problematic because the amount of a sole proprietor or partner’s payroll costs may be directly related to previously made tax elections or decisions or to decisions currently being considered for their 2019 return.  As a result, it may be necessary to amend previously filed returns or carefully consider decisions related to a 2019 return after additional guidance is released.

Loan Forgiveness –Section 1106 of the Act provides a mechanism under which certain indebtedness related to these loans can be forgiven.  Unless an exception applies, Internal Revenue Code (“IRC”) Section 61 requires a taxpayer to include cancellation of indebtedness income in its taxable income.  Section 1106 creates an exception to IRC Section 61 and provides that loan forgiven under the Act shall be excluded from a taxpayer’s taxable income for purposes of the Internal Revenue Code.  It should be noted that the Act is silent on whether a borrower’s tax attributes will be reduced under IRC Section 108 in the amount of the forgiven debt.  Additional guidance may be necessary to clarify this issue.

Employee Retention Credit for Employers Subject to Closure Due to COVID-19 – Section 2301 of the CARES Act provides an employee retention credit to employers, based on wages (and a proportionate amount of qualified health plan expenses) paid to employees, which is discussed in more detail here.  It is important to note that an employer taking a small business interruption loan under the Paycheck Protection Program is not eligible for the credit.

Deferral of Payment of Employer Payroll Taxes – Section 2302 of the Act also permits an employer to defer the payment of certain employer payroll taxes, which is discussed in more detail here.  The ability to defer payment of payroll taxes may not apply if the employer had indebtedness forgiven under the under the Paycheck Protection Program.

Interplay with the Families First Coronavirus Response Act – It should be noted that for purposes of the Paycheck protection Program payroll costs do not include qualified sick leave wages or qualified family leave wages for which a credit is taken under Sections 7001 or 7003 (respectively) of the Families First Coronavirus Response Act.

Implications

The CARES Act contains an unprecedented economic stimulus and the tax provisions are designed to facilitate getting cash to individuals and businesses as soon as possible. Unfortunately, the CARES Act requires many small businesses to make decisions quickly but because of the uncertainty created by the loose language of the Act and the lack of guidance to-date it is not clear how some businesses and business owners can make the decisions most appropriate for their businesses. The apparent drafting error and lack of guidance is particularly problematic for certain business organizations, such as partnerships, because previously taken tax positions or tax positions currently being evaluated may directly impact the amount of their potential Payroll Protection Program loan, including the amount eligible for forgiveness.

Until additional guidance is released, if possible, it may make sense for a business refrain from taking action, which is unfortunate because many businesses are struggling or are in the midst of an existential crisis due to the coronavirus pandemic. It is our hope that the Small Business Administration will release comprehensive guidance on these issues quickly that will mitigate the uncertainty.

For additional information, please contact the Kean Miller Tax Group:  Jaye Calhoun at (504) 293-5936; Kevin Curry at (225) 382-3484; Jason Brown at (225) 389-3733; Angie Adolph at (225) 382-3437; J. Mark Miller at (318) 562-2701; Phyllis Sims at (225) 389-3717; Robert Schmidt at (225) 382-4621; or Willie Kolarik at (225) 382-3441.