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Business owners, if you received a PPP loan and are now contemplating a change of ownership, you may need consent from your lender and even the SBA under certain circumstances. Read on to learn what qualifies as a “change of ownership” and what to be aware of before moving forward with the sale.

For purposes of the PPP, what is a “change of ownership”?

1. At least 20 percent of the common stock or other ownership interest of a PPP Borrower is sold or otherwise transferred.
2. The Borrower sells or otherwise transfers at least 50 percent of its assets.
3. A Borrower is merged with or into another entity.

Regardless of any change of ownership, the Borrower remains responsible for a variety of tasks, most notably, the performance of all obligations under the PPP loan. Additionally, prior to the closing of any change of ownership transaction, the Borrower must notify and provide the Lender with a copy of the proposed agreements.

What if the PPP Note is fully satisfied prior to the change of ownership?

There are no restrictions on a change of ownership if, prior to closing the sale or transfer, the Borrower has:

• Repaid the PPP Note in full; or
  • Completed the loan forgiveness process in accordance with the PPP requirements; and
    • SBA has remitted funds to the Lender in full satisfaction of the PPP Note; or
    • The Borrower has repaid any remaining balance on the PPP loan.

What if the PPP Note is NOT fully satisfied prior to the change of ownership?

Prior approval of the SBA IS NOT required:

• If the change of ownership is structured as a stock sale of 50 percent or less of the common stock of the Borrower, or if the Borrower completes a forgiveness application reflecting its use of all PPP loan proceeds and submits it to the Lender, and an interest-bearing escrow account is established with funds equal to the outstanding balance of the PPP loan.

• If the change of ownership is structured as an asset sale, if:
  • The Borrower completes a forgiveness application reflecting its use of all the PPP loan proceeds and submits it to the Lender, and an interest-bearing escrow account is established with funds equal to the outstanding balance of the PPP loan.
  • After the forgiveness process is completed, the escrow funds must be disbursed first to repay any remaining PPP loan balance plus interest.
  • The Lender must notify the appropriate SBA Loan Servicing Center of the location of, and the amount of funds in, the escrow account.

Prior approval of the SBA IS required if a change of ownership does not meet the conditions above. When this approval is needed, contact us or your accounting professional for guidance on how to make the submission.

If you have an outstanding PPP loan and are contemplating a sale of your business or its assets, our attorneys are ready to answer questions regarding this latest guidance or any other COVID-19 related legal concerns. For assistance, please contact us at (631) 738-9100 and visit our Mergers & Acquisitions practice area to learn more about our services.

The information in this article is from: SBA Procedural Notice, Small Bus. Admin. (Oct. 2, 2020)

Thank you to Daniel Axelrod for his research and writing assistance for this article.

Campolo, Middleton & McCormick, LLP is proud to announce that seven attorneys at the firm, in multiple practice areas, have been named to the 2020 Super Lawyers list. The CMM attorneys recognized this year, in practice areas including Business and Corporate, Personal Injury, Real Estate, Business Litigation, Mergers & Acquisitions, Construction Litigation, Employment Litigation, Civil Litigation, and Appeals, are:

• Joe Campolo
• Scott Middleton
• Patrick McCormick
• Christine Malafi
• Jeffrey Basso
• Donald Rassiger
• David Green (Rising Star)

The rigorous Super Lawyers selection process is based on peer evaluations, independent research, and professional achievement in legal practice. The “Rising Stars” recognition denotes superior professional achievement by attorneys who have been in practice for under 10 years or are under age 40. No more than 2.5 percent of lawyers in New York State are named to the Rising Stars list.

Learn more about CMM’s outstanding legal professionals here.

By Christine Malafi

As Election Day approaches, employers should take note: last year, you may recall that New York State’s Election Law was amended to increase the amount of paid time off that employees could take to vote from two hours to up to three hours. This year, the law has reverted to the previous provisions with additional changes outlined below.

As of April 12, 2019, Election Law § 3–110 required that employees in New York who are registered voters may request and receive up to three hours paid time off to vote, regardless of their work schedule and without loss of pay. Under the 2020 amendments, the law reverts back to up to two hours of paid time off to vote, but only if the employee did not have four or more consecutive hours off between either the time the polls opened and the start of their shift, or the end of their shift and the time the polls closed.

Every employer must post the new Election Law requirements in a noticeable place, accessible to all employees and on company grounds, at least 10 days prior to every election, and leave the notice up through at least the close of the polls on Election Day. Additionally, employee handbooks need to be updated to reflect the new Election Law requirements.

Employees are allowed time off to vote only at the beginning or at the end of their work shift, at the employer’s discretion, unless another time is agreed upon between employee and employer. Employees must also notify their employer at least two working days prior, though not more than ten, to an election if they require time off to vote. Notably, the time off is “up to” two hours, not two hours. The law states that employees cannot be required to utilize any form of earned leave time or paid time off (PTO) to vote.

This law applies to all elections under the Election Law in its entirety—including primary and special elections. Specifically, the Election Law covers federal, state, county, city, town, or village office elections, as well as elections on ballot questions that are submitted to voters either state, county, city, town, or village-wide.  It does not apply to school district, fire district, or library district elections and budget votes, as these are generally governed by laws other than the Election Law. The amended law does not indicate whether an employer is permitted to request proof of voter registration or require a voting receipt or other proof that the employee actually used their time off to vote.

Changes such as this one can leave businesses, especially small businesses, scrambling to stay on top of the requirements and at increased risk for non-compliance. For any questions about how to implement these changes at your organization in the least disruptive way possible, please contact our office.

By Christine Malafi

A year of unprecedented circumstances has wreaked economic havoc on businesses. Since March, employers have been necessarily focused on ensuring the survival and continuity of their businesses. However, during this “work from home during COVID-19” age, employers must ensure that compliance with the Fair Labor Standards Act (“FLSA”) remains a priority. Given the sudden, mandatory work-from-home Executive Orders in March, and the continued use of remote work to reduce in-person numbers even as the economy reopens, staying on top of the requirements can be a challenge. Here’s a look at what employers need to know.

What does the FLSA require?

The FLSA requires all non-exempt employees be paid for all hours worked, including overtime hours, regardless of whether the work is performed outside the office, including at home.[1] This has been held to include employee time spent checking email and voicemail, work-related telephone calls and texts, etc., as compensable.

When it comes to working from home, employers must pay non-exempt employees for all time utilized in remote work, “even if [the employer] d[oes]not ask for the work, even if they did not want the work done, and even if they ha[ve] a rule against doing the work” after set work hours. However, employers do not have to pay for work they do not, or should not, know about. Employers must pay for work done after hours only if they have actual or constructive notice of such work.

How can my business track employee time?

Given that employers may be on the hook for employees’ hours worked even if the employer did not request the work, did not want the work, or even prohibited the work, employers cannot simply close their eyes to tracking remote work by employees. They must use reasonable diligence to inquire into, and track, their employees’ work hours. Employee time sheets are a good first step, but they are not sufficient to establish “reasonable diligence” by employers to ensure time is not being spent outside of “normal” work hours.

Employers should establish procedures by which employees can report additional work time so as to be compensated.[2] This procedure should include proper instruction on how to report additional work time and actively encourage employees to report the additional work time. Under no circumstance should an employee be implicitly or overtly discouraged or impeded from the accurate reporting of work hours. Further, simply establishing a rule against unauthorized work is not enough to absolve the employer of its responsibility to pay for that time. Indeed, the Department of Labor’s Wage and Hour Division issued a Field Assistance Bulletin (“FAB”) on August 24, 2020, emphasizing that employers “ha[ve] the power to enforce the rule and must make every effort to do so.” The employer’s obligation is not unlimited: the FAB confirms that if an employer has a procedure in place for reporting time, and “an employee fails to report unscheduled hours worked through such a procedure, the employer is not required to undergo impractical efforts to investigate further to uncover unreported hours of work.”

Therefore, being able to accurately track hours is key. While there are time and attendance software or cloud services available, they aren’t a good fit in all workplaces, and additional steps should be taken anyway and incorporated into the procedures adopted by a business. These steps include directing exempt employees/management not to send/deliver emails, texts, etc. to non-exempt employees after hours, and requiring those employees to remind non-exempt employees to report after-hours work in accordance with the procedures put into place by the employer.

CMM can help you review and revise your procedures both to ensure compliance as well as to maximize the productivity of your workplace. In these unprecedented times, there’s no one-size-fits-all solution. Please contact us at (631) 738-9100 for personalized guidance and the peace of mind you need to keep your business moving forward.

[1] 29 C.F.R. 785.12.

[2] Field Assistance Bulletin No. 2020-05, Wage & Hour Administrator Cheryl M. Stanton; Allen v. City of Chicago, 865 F.3d 936 (7^th Cir. 2017) (City not liable for uncompensated time police officers spent reading and responding to emails received on their Blackberrys after hours, as City was not shown to have actual or constructive notice of same).

Campolo, Middleton & McCormick, LLP, a premier law firm with offices across Long Island, is thrilled to announce that that Senior Partner Christine Malafi has been recognized by her peers for the fourth year in a row to be featured in The Best Lawyers in America® in the category of Employment Law – Management (2021 edition). With this distinction, Malafi ranks among the top five percent of private practice attorneys nationwide as determined by a rigorous peer-review process.

For over three decades, the legal profession and the public have turned to Best Lawyers as one of the most credible measures of legal integrity and distinction in the nation. Inclusion in Best Lawyers is based on over seven million confidential evaluations by top attorneys. The Best Lawyers’ founding principle forms the basis of this transparent methodology: the best lawyers know who the best lawyers are. No fee to participate is permitted.

Malafi chairs the Corporate and Labor & Employment Departments at CMM, which was recently recognized by Forbes as a Top Trusted Corporate Law Firm in America. Her practice focuses on mergers and acquisitions, corporate governance, routine and complex transactions, drafting and negotiating a wide range of agreements, and helping businesses navigate all types of human resources matters. She routinely represents buyers and sellers in multimillion-dollar transactions and serves in a general counsel role for many of the firm’s corporate clients.

This year, Malafi has also played a critical role on CMM’s Coronavirus Response Team, answering a myriad of questions from the business community about various aspects of businesses’ handling of COVID-19 issues, including HR issues impacting their companies’ survival. Based on her strong labor and employment background, clients turn to Christine both for answers to their most important employment concerns and for solutions to move forward. 

In addition to her legal work, Malafi serves on the Boards of Directors of Family Service League and Girl Scouts of Suffolk County, among others. She also sits on the Board of Governors of Touro Law School and the New York State Pro Bono Scholars Task Force.

After more than 10 years of dedicated service at Campolo, Middleton & McCormick, Patty Brunn has turned her passion for real estate into a successful new career. As a Licensed Real Estate Salesperson, Patty now works with residential buyers and sellers across Suffolk, Nassau, and Queens, helping clients sell their homes for top dollar or find their new dream homes.

CMM clients remember Patty as a knowledgeable, service-oriented paralegal. She joined CMM in 2008 as one of the firm’s first hires, starting in the litigation department and eventually working with the firm’s real estate team, where she found her passion. “Communicating with clients regularly and guiding them through the real estate process was always one of my pleasures,” Patty says. “I enjoy helping people, so getting them to the finish line as stress-free as possible always brought me joy.”

Patty spent several years in CMM’s Bridgehampton office, helping to build our presence and reputation on the East End. While working full-time, she studied for and received her Real Estate Salesperson license in January 2019, pursuing real estate on the side, but staying focused on her work at CMM.

While COVID-19 has caused unprecedented economic disruption and challenges, Patty – true to her nature – decided to view the pandemic as an opportunity. With the Long Island residential real estate market rapidly heating up as people look to relocate, Patty decided to focus on her real estate career full-time. She’s now affiliated with Nappa Realty in Massapequa, where she uses the customer service skills she honed at CMM to help her real estate clients maximize the value of their investments and start new chapters in their lives.

“Patty has always been a tremendously hard worker, a good listener, and client-oriented – all required traits for a successful real estate salesperson,” said CMM Managing Partner Joe Campolo. “My own family has already used Patty to sell a home and she did an amazing job. We miss her at the firm, but are extraordinarily proud of her, and will happily recommend her to our network.”

To get in touch with Patty, email pattybrunnrealtor@gmail.com or call 631-704-5015.

Within days of Governor Cuomo’s “New York State on PAUSE” Executive Order in March, CMM led the way with the launch of a first-of-its-kind coronavirus hotline, providing free, immediate guidance to business owners and employers fighting for survival.

As Long Island reopens, our Coronavirus Response Team continues to provide critical counsel to businesses navigating unprecedented challenges, including:

• Partnership Disputes and Business Succession: Due to the prolonged economic disruption of COVID-19, many business owners are looking to plan for the next generation of their business, dissolve partnerships, or creatively restructure their businesses. Contact Joe Campolo.
• HR Questions: Employers turn to us for guidance on the complex employment issues they now face including workplace safety, sick leave, remote work, healthcare and HIPAA issues, benefits plan administration, closures, worker’s compensation, wage and hour, the Americans with Disabilities Act, and more. Contact Christine Malafi.
• Commercial Lease Renegotiation: CMM’s busy commercial leasing practice has taken on new urgency as businesses continue to weather the economic fallout of the pandemic. We have helped countless businesses renegotiate their commercial leases and stay afloat. Contact Arthur Yermash.
• Banking Issues: CMM has worked with many Long Island businesses to renegotiate their financial instruments and bank lines. We also work closely with accountants and financial professionals to offer key guidance on cash flow management, PPP, and more. Contact Don Rassiger.

As in good times, CMM is here to help businesses become as strong and resilient as possible. Don’t go it alone – CMM can help you get through this. Contact us today.

On June 16, 2020, Christine Malafi joined Gettry Marcus, CPA, P.C. for Part 3 of their successful webinar series on PPP loan forgiveness. This webinar focused on the recently passed Paycheck Protection Program Flexibility Act (“PPPFA”), which greatly increases the likelihood of loan forgiveness.

Topics included:

• An increase in the Covered Period
• During the period February 15, 2020 to December 31, 2020, loan forgiveness will be exempt from a reduction in the number of FTE’s pursuant to additional PPPFA guidelines
• To receive loan forgiveness, a borrower now must use at least 60% of the PPP loan amount for payroll costs and may use up to 40% for non-payroll costs (with possible “cliff” provisions)
• PPP loan terms can now generally range from 2 to 5 years, with the possibility of a longer 10-year term
• PPP loan borrowers are now eligible for the CARES Act payroll tax deferral
• Planning Tools
• SBA and Treasury Department Guidance

View the webinar here.

By Jamie Herzlich, Newsday

The pandemic has shaken up the structure of many workplaces.

For many companies, it’s resulted in reduced workforces, changing roles and responsibilities for employees and salary reductions.

Given that, as companies reopen, there are wage and hour issues employers should be aware of including the possibility that some employees previously designated as overtime exempt no longer fit into that category.

Keep in mind the salary and duties test differs for those considered highly compensated white-collar employees. For 2020, these employees are considered exempt from overtime if they make at least $107,432 and perform certain functions, says Christine Malafi, a senior partner at Ronkonkoma-based Campolo, Middleton & McCormick LLP. See https://tinyurl.com/htnrp8m for duties.

Malafi advises employers to “review classifications as you hire employees back.”

Separately, employers also need to make sure they are properly tracking hours especially if some employees will remain remote, says Malafi.

Consider that if hourly employees check their work emails outside of working hours, even if told not to, or forbidden to do so, they are still entitled to overtime pay, she says. To help with that, employers might consider actually cutting off access to work emails and/or work VPNs after a certain time, she noted.

Read the full article on Newsday’s website.

On May 22, 2020, Christine Malafi joined Gettry Marcus, CPA, P.C. for Part 2 of their successful webinar series on PPP loan forgiveness. This webinar focused on:

• A review of the PPP loan forgiveness application, including alternative payroll Covered Period, 40-hour workweek benchmark for FTE status, safe harbor requirements for both rehiring of employees and adjusting employee compensation, FTE reduction exemptions for employees in the Covered Period or Alternative Payroll Covered Period, and documentation required to substantiate loan forgiveness calculation
• Planning tools
• SBA and Treasury Department Guidance
• Q&A

View the webinar here.

By Bernadette Starzee

Employers have many questions as they start to think about reopening their workplaces. Chief among them are what they can do to ensure the safety of their employees, as well as customers and other visitors. Another biggie is what liability they’re looking at if someone gets sick.

But guidance from government bodies changes from day to day, making it difficult for companies to know what they’re expected to do.

Guidelines from the CDC, OSHA and the New York State departments of labor and health must be monitored on a regular basis, said Christine Malafi, a senior partner at Campolo, Middleton & McCormick, which is based in Ronkonkoma.

Generally speaking, employers are looking at social distancing, personal protective equipment, cleaning routines and ways to screen for illness, as well as policies for what to do when someone tests positive for COVID-19.

Separation
Current guidance calls for employees to be six feet away from each other and to wear masks if they will be coming within six feet of others.

“Every workplace is unique, but generally speaking, employee workstations should not be within six feet of each other, even if the employees are wearing masks,” Malafi said.

For workplaces where employees interact directly with the public, companies are looking at ways to limit contact.

PPE/cleaning
As workplaces will have to be cleaned more often, “employers might tell employees that no excess paper can be kept on their desks,” Malafi said. “Employers should have notices up reminding employees about washing hands and other policies, such as “Only X amount of people can be in the lunchroom at a time.”

Testing/checking symptoms
Employers should institute a policy in which they ask employees daily to confirm whether or not they are asymptomatic.

The CDC allows employers to test for COVID-19. However there are obvious problems with this, including the fact that tests are not widely available, and they only certify that someone is negative at that moment.

Another option is to take employees’ temperatures daily. This, too, has problems, since not everyone with COVID-19 has a fever, so it could lead to a false sense of security.

If someone tests positive
There are CDC and OSHA guidelines about what to do if someone who was in the workplace – whether an employee or visitor – is found to be positive.

In general, the workplace will have to be disinfected and employees will have to be informed.

Liability
Employers are concerned about liability should an employee come down with the virus.

Generally speaking, if someone gets sick at work, it’s covered under worker’s compensation.

“As long as employers act in good faith in taking precautions based on known facts and guidelines, they should not have any additional liability,” Malafi said.

Read the full article here.