BCLP's Covid-19 in 19: Recent Episodes
Bryan Cave Leighton Paisner
The notion that U.S. employers would engage in broad-scale temperature screening of employees and visitors would have once been unthinkable. But the realities of COVID-19 are changing the workplace, as least for the time-being. With the encouragement of the CDC and certain state and local governments, and a green light from the EEOC, many employers are implementing daily temperature screening as one means of keeping their employees healthy. As part of our continuing series of 19-minute teleconferences on the impacts of COVID-19, join us as we discuss best practices for temperature screening and highlight potential issues employers should keep in mind.
Increased discussion of reopening the U.S. economy has raised numerous questions as employers prepare to return their employees to the workplace. In just the last week, President Trump's White House issued its Opening Up America Again three-phased approach for re-opening the economy, the Equal Employment Opportunity Commission issued guidance about returning to work, and the states of Texas, Georgia, South Carolina and Vermont have issued plans to rescind their shelter in place orders in phases – all while other states have extended their shelter in place orders. While there is no single roadmap to reopening in these continuing uncertain times, employers should begin to consider what measures will help ensure a safe, orderly return to business.
As part of our continuing series of 19-minute teleconferences on the impacts of COVID-19, learn how you can help your employees during the coronavirus pandemic. New legislation makes important changes to group health and retirement plans. Some changes are mandatory, including changes designed to help prevent the spread of COVID-19. Other changes are optional and can provide a means by which to make financial and other relief available to employees impacted by COVID-19.
As part of our continuing series of 19-minute teleconferences on the impacts of COVID-19, our Employment and Labor team is hosting weekly teleconferences.
In this first session, we discussed how new legislation makes important changes to group health and retirement plans. Some changes are mandatory, including changes designed to help prevent the spread of COVID-19. Other changes are optional and can provide a means by which to make financial and other relief available to employees impacted by COVID-19.
Continuing in our series of concise COVID-19 teleconferences, BCLP's Susan Brice and Zeke Katz discuss the evolving impact of price gouging laws at the state and federal level in the United States, and what businesses can do in order to best protect themselves from price gouging claims, investigations and penalties.
As part of our continuing series of 19-minute teleconferences on the impacts of COVID-19, lawyers with BCLP will address the CARES Act's forgivable loan program for small businesses. Topics addressed will include terms of the program, eligibility requirements, and how small businesses can have their loan forgiven.
Continuing our series of brief COVID-19 teleconferences, BCLP's Mark Srere, Ben Saul andJennifer Mammen discuss the importance of compliance for any company planning to apply for funds under the new relief legislation. In particular, clients should note that the legislation creates several new oversight bodies, each with investigative authority and the ability to refer cases to DOJ for prosecution. This is similar to the SIGTARP set up to investigate financial institution crime and other fraud, waste and abuse related to TARP.
Below is an overview of key considerations for companies to consider as well as the recording of the program.
The Coronavirus Aid, Relief and Economic Security Act (CARES Act or the Act) provides more than $2 trillion in economic stimulus and will offer hundreds of billions of dollars in relief to small businesses nationwide. To ensure that money is disbursed and administered fairly and without preference and that the funds are used for the purposes the CARES Act intends, the Act contains several noteworthy oversight provisions. Based on past precedent, it is reasonable to think that the oversight provisions of the CARES Act could result in a significant volume of investigations and enforcement actions.
The Act provides for the creation of the following oversight bodies:
- Special Inspector General for Pandemic Recovery. The Special Inspector General for Pandemic Recovery (“SIGPR”), presidentially appointed within the Treasury Department, will be responsible for conducting, supervising and coordinating audits and investigations concerning the “making, purchase, management and sale of loans, loan guarantees, and other investments” by the Treasury Department. In addition to granting the SIGPR investigative powers, the Act directs federal agencies to provide all requested information and assistance to the extent practicable. If, however, the SIGPR thinks information or assistance is unreasonably refused then the Act directs the SIGPR to report this to Congress without delay. The SIGPR is authorized for five years, has a $25 million appropriation, and will be able to refer both civil and criminal matters to the U.S. Department of Justice (“DOJ”).
- Pandemic Response Accountability Committee. The Act appropriates $80 million to establish a committee that will be comprised of existing, independent Inspectors General (“IGs”). The Committee will coordinate with IGs and will conduct audits and investigations into “fraud, waste, abuse, and mismanagement.” The Committee will also work to “mitigate major risks that cut across programs and agency boundaries.” The Committee is responsible for ensuring IGs in relevant agencies have authorities and funding needed to conduct their oversight activities. The Committee has independent investigative authority, the power to hold public hearings, issue subpoenas for documents and testimony, and refer civil and criminal matters to the DOJ.
- Congressional Oversight Commission. This Commission, consisting of five members selected from majority and minority leadership in the House and Senate, will have oversight of stimulus implementation, including how loans, loan guarantees and other investments made under the CARES Act are impacting U.S. markets, financial institutions and citizens. The Commission has the authority to hold hearings, take testimony, receive evidence and issue reports. It must submit reports to Congress every 30 days, and will operate until September 30, 2025.
The CARES Act also allocates $20 million to the Government Accountability Office to enable it to issue reports on related federal spending. It further directs additional monies to existing IGs so they can increase oversight of any programs comprised of CARES Act funds.
Beyond the oversight measures discussed above, Congress is already exercising COVID-19 oversight. Several Congressional committees have sent oversight letters to companies on COVID-19 related issues in recent weeks. The House of Representatives has formed a Select Committee on the Coronavirus Crisis to be chaired by House Majority Whip Jim Clyburn. Speaker Pelosi has indicated that the Select Committee would be “empowered to examine all aspects” of the federal COVID-19 response. If Congress passes additional stimulus measures, it is likely oversight bodies would receive additional appropriations and resources and maybe expanded authorities. This is something for all of us to watch closely.
The obvious historical parallel, particularly with respect to the newly created SIGPR, is to the creation of the Office of Special Inspector General for the Troubled Asset Relief Program (SIGTARP) following the 2008 financial crisis. SIGTARP is an independent oversight body that was created to investigate financial institution crime and other fraud, waste and abuse related to TARP. Over a decade since its creation, SIGTARP continues to operate and has reaped hundreds of criminal convictions and billions in penalties.
The funds being made available now under the CARES Act are vastly more than those included in the TARP. There is, therefore, every reason to think that CARES Act oversight will be equally, if not more, aggressive than SIGTARP and will continue long after the COVID-19 public health crisis ends and the economy recovers. Given the recent history of legislation-specific oversight bodies, companies looking to obtain benefits under the CARES Act should be on notice that the federal government will be reviewing and auditing fund applicants and recipients and pursuing significant recoveries from any companies and individuals found to have failed to comply with program requirements.
There are steps a company can take now to ensure that it has access to money that will help it survive these trying times, yet mitigate the chance that it will be investigated and prosecuted in the aftermath.
- First, and perhaps the most important, is to ensure that legal/compliance has an oversight role in requesting available funds – ensure that your compliance mechanism has a seat at the table before the requests for funds are made. This will allow you to put in place the processes and procedures to make sure everything is done correctly and documented properly. It will also help set up appropriate reporting lines and ensure that everyone in the company knows that compliance is an integral part of the process and program.
- Second, ensure that any back-up documentation that is created is accurate and truthful. There will be requirements to qualify for funds on the front end as well as requirements to qualify for forgiveness of loans on the back-end. Those requirements will need to be backed up by appropriate and accurate documentation, including corporate governance documents such as board meeting minutes and appropriate resolutions. Consider assigning responsibility to an individual to ride herd over the process and to make sure that appropriate records are kept to demonstrate that the company is complying with all the rules and recordkeeping requirements.
- Third, ensure that the documentation is maintained. Follow good document retention practices. For electronic documents, make sure that they are retrievable through back-ups in case of system failure. For paper documents, make sure you make electronic copies or have several copies in different locations. In addition, maintain all communications with the government agencies and financial institutions that provided the funds. Such communications can be helpful in explaining actions that the company took or did not take during the program.
- Fourth, monitor and audit compliance with receipt of CARES Act funds and compliance with documentation procedures. Make this part of your regular audit program and consider making it part of your regular report to your audit committee. Regular monitoring and auditing will allow for the correction of any missteps that may occur along the way. Keeping records of this monitoring and auditing process will demonstrate that the company took its obligations seriously.
- Finally, take seriously and investigate appropriately any whistleblower complaints or hotline allegations about the use of CARES Act funds. This is important for two reasons. One, it gives you a chance to correct a problem when it first arises. It is an early warning system that allows you to act swiftly to nip any problems in the bud. Two, if the problem is more serious, it gives the company a chance to avoid harsher penalties by investigating thoroughly any fraud and making a voluntary disclosure if appropriate and warranted. This fits with the Department of Justice’s corporate leniency programs.
Following these steps will help mitigate the risk to your company of receiving funds provided by the CARES Act.
We are experiencing what we hope is a once in a generation public health and economic crisis. The government is trying to meet that moment with historic levels of stimulus and economic support for businesses across the country. But it is mindful of the risk of fraud and abuse and has put in place the above oversight systems to police those risks. We expect this oversight to be aggressive, persistent and enduring. That is why it is critical to ensure your compliance management system, internal audit function and whistleblower and other complaint response processes are updated to reflect these risks.
As part of our continuing series of 19-minute teleconferences on the impact of COVID-19, Mark Srere, Jennifer Mammen, Mukul Chawla QC, David Père, and Cécile Terret offered a global perspective - from Washington, DC, London and Paris - on the importance of companies affirming their commitment to anti-corruption standards during a period of decreased scrutiny and increased urgency.
Next in our continuing series of 19-minute teleconferences on the impacts of COVID-19, leaders of our COVID-19 Task Force and Environmental Practice Group discuss how to mitigate premises liability and product liability risks in the wake of COVID-19.
In this COVID-19 in 19 teleconference, BCLP's attorneys in M&A and Corporate Finance cover considerations in U.S. M&A Transactions.
Part of our continuing series of 19-minute teleconferences on the impacts of COVID-19, Hope Goldstein (Employment and Labor) and Tom Lee (Environmental) discussed Shutdown and Shelter in Place orders, the definition of 'Essential Businesses' allowed to operate under such orders, and what businesses can do to reduce the impact of these new orders on their operations.
Key Takeaways from the Teleconference Include: * The situation is fluid. + At the beginning of last week were there were no orders preventing non-recreational businesses from operating. After seven days twelve states, accounting for over 40% of the nation’s GDP, had issued statewide orders impacting all businesses. + Even in jurisdictions where orders have been passed, the definition of Essential Businesses continues to develop as further guidance is issued by regulators. + In some states, county and metropolitan officials have issued orders which add requirements beyond the statewide orders, so attention to local action is important. + In other states, only local orders have issued * There are some common themes in the definition of Essential Businesses, but it is essential to take a hard look at the language of your state and/or local order, because they vary. + The following sectors are usually allowed to continue in-person operations: the food supply chain, power production, healthcare services including pharmaceuticals, transportation, financial services and banks, IT systems and communication networks, first responders and safety officials + Recreational and amusement businesses are usually not allowed to continue in-person operations. These include movie theaters, gyms, music venues, in-restaurant dining, and bars. * You can take steps to manage your shutdown risk: + Make a list of all of your facilities and the specific work that is done at each facility. + Carefully review all state and local orders that apply to each facility to understand the specific definition of businesses that are allowed to continue in-person operations. + If you believe you are an essential business, consider the following: - Identify those who can work remotely. - Messaging to employees about continued operations. - Employee travel letters and ID cards - A letter of explanation held at the facility to be provided to inspectors. - Letters to upstream suppliers and downstream customers notifying them of your determination and continued operation. - Outreach to relevant government agencies to clarify the interpretation of the applicable order(s). + If you believe you are not an essential business, and need to suspend in person operations be prepared to address: - Think about who can work remotely. - Closures, furloughs, layoffs, leaves of absence - Application of existing company policies and procedures to time off - New Federal Paid Leave Law, effective April 2, 2020 - State and city paid leave laws - Unemployment issues, e.g., GA mandate and NY waiver of waiting period - WARN and mini-WARN obligations - Union demands * We are here to help. Our COVID-19 Shutdown task force, as well as the rest of our COVID-19 teams is available to help you navigate these challenging times and keep you updated on new regulations as they are passed.
In the first of our series of 19-minute teleconferences on the impacts of COVID-19, leaders of our COVID-19 Task Force discussed force majeure provisions and the doctrine of impracticability as they apply to commercial contracts in the United States.
Key Takeaways from the Teleconference Include:
- Consider establishing a process for assessing how force majeure will affect your business to include review of contracts and preparation of notices to customers and affected partners
- Consider sending regular updates to customers but be wary of assuming they will count as notices under your force majeure clause
- Send a force majeure notice before the breach occurs
- The availability of a defense of force majeure depends on contract language and possibly, state law
- Consider establishing and documenting allocation methods if products become scarce
- We’re in uncharted waters here – no one knows how this is going to shake out. The law is sparse and in very different contexts