As previously discussed here, the Paycheck Protection Program (PPP) Flexibility Act established an additional safe harbor to the loan forgiveness reductions and full-time equivalent headcounts for the PPP. A borrower’s reduction in the number of full-time equivalent employees will not affect forgiveness if the borrower, in good faith, is able to document an inability to return to the same level of business activity as such business was operating at or before February 15, 2020 due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, Director of the CDC, or OSHA during the period beginning on March 1, 2020 through December 31, 2020, related to the maintenance standards for sanitation, social distancing, or any other worker or customer safety requirements related to COVID-19 (the Safe Harbor). The Small Business Association (SBA) later clarified that the Safe Harbor includes state and local governmental orders.
It appears that the SBA will be broadly interpreting this Safe Harbor and anticipates that the vast majority of borrowers will rely on this particular safe harbor (as opposed to the other available safe harbors).
If a borrower intends to certify that it qualifies for the Safe Harbor, the PPP forgiveness application requires the borrower to maintain documentation supporting the certification. This documentation includes copies relevant governmental orders, copies of the applicable requirements for each borrower location, and relevant borrower financial records.
As of September 10, 2020, Gov. Cuomo has issued more than 60 executive orders (EOs) related to the COVID-19 pandemic. Below is comprehensive outline of the executive orders and other governmental documents that your business may maintain if certifying to this Safe Harbor to avoid forgiveness reduction. However, note that it is important to consider when your specific region was approved to reopen according to Gov. Cuomo’s four phases, including which phase your business qualifies under.
General Overview
As a reminder, each region entered into each phase at different times and your region’s reopening phase date may differ from the dates of the EOs set forth above. Further, industry-specific guidelines, which may also be relevant to your ability to assert the Safe Harbor, have also been released. These guidelines set forth re-opening information for industries including, but not limited to: (i) schools; (ii) camps; (iii) personal care services; (iv) malls; (v) food and bar services; (vi) large gatherings and event venues; (vii) gyms, fitness centers and exercise classes; (viii) video lottery and casino gaming facilities; (ix) movie theaters; and (x) places of amusement.
If you need assistance determining the exact date when your particular industry and region entered into a phase, or would like guidance on which EOs to use as documentation for your forgiveness application, please contact Jeffrey B. Scheer or the attorney at the firm with whom you are regularly in contact.