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Mediation Is Having Its Moment

Posted: April 6th, 2020

Tags: commercial litigation, coronavirus, negligence

Back in normal times – loosely defined as early March 2020 and before – mediation could be either a great tool to move beyond an impasse or – if the parties were too far apart and unrealistic – a colossal waste of time and money. Now that the court system has effectively shut down due to the COVID-19 pandemic, however, mediation has emerged as a critical tool to resolve disputes that keep marching on even as the world around us has stopped.

Alternative dispute resolution (known as “ADR”) is the settling of disputes outside the courtroom. Non-binding mediation is a voluntary form of ADR in which a neutral third party, the mediator, works to help the parties come to a mutually acceptable resolution to their dispute. (Unlike arbitration, mediation is not binding and mediators are not empowered to make or enforce decisions.)

In general, without the proper approach and preparation to mediation, the parties may be pushed further apart. Consider this example: a couple of years ago, my client was amenable to settling but the plaintiff, in the lead-up to the mediation, was less than forthcoming. He led me to believe that he was looking to settle for less than six figures. Based upon this understanding, my client agreed to mediation. We prepared our submission for the mediator and attended the mediation with the goal of resolving the case. At the mediation table, however, the plaintiff’s counsel increased his prior settlement demand and then acted indignantly when the offer presented was, in his mind, inadequate. While the mediator sided with us when it came to valuation, there was no reasoning with the plaintiff and needless to say, the case did not settle and we all moved forward to trial more frustrated than before.

Considering situations like that one, our office generally moves a case into mediation only when there is a glimmer of hope for a resolution. But remember, mediation is a tool to avoid trial in an effort to resolve matters reasonably. Well, regardless of how badly we may want to go to trial on a matter, for the foreseeable future in New York, that’s an impossibility. But the disputes that led litigations to be filed in the first place have not gone on hiatus. Therefore, in just a few [long] weeks, mediation has emerged as a vital tool to resolve disputes that were previously headed for trial before the coronavirus upended life as we know it.

In normal times, if the parties are reasonable and amenable to settling, mediation can be an economical way to resolve a matter before fully preparing for a long and costly trial. When we are prepared and the parties are close enough to make it worthwhile, mediation is almost always a success. Now that litigation is temporarily off the table, mediation is a more important tool than ever to achieve a final resolution when the parties need it. Please contact us to discuss whether the time is right to mediate.

CMM Closes M&A Deal Remotely in Positive Sign for the Economy

Posted: April 3rd, 2020

Demonstrating adaptability in unprecedented circumstances and a determination to keep the economy moving, CMM has just closed an M&A deal entirely remotely involving parties across multiple states.

Vincent Costa handled the transaction – the third for our client. The deal involved our New York-based client’s asset purchase of a Florida company that provides access to remote liquid tank monitoring information through web-based portals, including standard and customized hardware, software, and implementation. CMM had to be extraordinarily nimble to convert the negotiation, due diligence, and closing of a deal that would have otherwise taken place in person and complete it wholly online, without any delays.

“A very tough time trying close a deal between New York and Florida with the circumstances the country is facing,” observed the other side. “[While] it would have been much easier if we could have held a couple of face to face meetings,” CMM was determined the close the deal, and we did.

“I’m very proud of our Corporate team – which is not unusual, but this particular deal is symbolic of so much more,” said CMM Managing Partner Joe Campolo. “It not only shows our ability to adapt to the circumstances, but more importantly, is also such a positive sign that if we all keep pushing as hard as we can, our economy will recover from the coronavirus pandemic.”

Learn more about our Mergers & Acquisitions practice here.

Paycheck Protection Program Update

Posted: April 2nd, 2020

Tags: coronavirus, labor & employment

Guest Post by Alan R. Sasserath, CPA, MS, Sasserath & Zoraian, LLP

Note: Please visit the S&Z blog here for additional information current as of April 3, 2020.

As you are aware, there is a lot of confusion surrounding the Paycheck Protection Program (“PPP”) – maybe more confusion than certainty.

Many of you have taken advantage of our workbook to calculate the loan amount under the PPP. We have adjusted our workbook as described below based on questions we have received:

Q: What period should be used to calculate the “Average Monthly Payroll”?

A: Based on our reading of the law, you are to use the 12 months ending on the date of the loan applications. From a practical perspective, the banks may require you to use calendar year 2019 as indicated in the instructions to the SBA Application. You should contact your lender for guidance.

Q: Are Independent Contractor Payments included in the definition of Payroll Costs used to determine “Average Monthly Payroll”?

A: Based on our reading of the law, they are included. This is open to interpretation, however; this Borrower Summary indicates that they are as does guidance on the JP Morgan Chase FAQ regarding the CARES Act.

Q: What is included in the definition of “Group Health Care Benefits” used to calculate Payroll Costs? Does it only include medical or does it include vision and dental among others benefits?

A: This is subject to interpretation as there is no additional guidance in the CARES Act. We will provide additional information as it becomes clearer.

Q: How is the $100,000 cap on per employee payroll computed?

A: Unfortunately, this too is confusing with no clear guidance. Please see “PPP Information Sheet: Borrowers.” We have highlighted several sections of the sheet that discuss this issue. Here are the areas of this document causing confusion:

The first highlighted sentence indicates: “Payroll costs are capped at $100,000 on an annualized basis for each employee.”

The next highlighted sentence indicates: “Payroll costs include: Salary, wages, commissions or tips (capped at $100,000 on an annualized basis for each employee)” and then goes on to add group health care benefits among other costs to the calculation of payroll costs and does not mention the $100,000 limitation on Payroll costs.

The third highlighted sentence states: “Payroll costs will be capped at $100,000 annualized for each employee.”

How do we interpret that? Are salary, wages, commissions or tips capped at $100,000 annualized for each employee or are Payroll costs capped at $100,000 annualized for each employee? Are both capped? The wording on the JP Morgan Chase site referred to above parrots the language in the PPP Information Sheet: Borrowers. Unfortunately, we don’t have a clear answer on that yet but we will keep you updated.

Because of the questions above, our workbook has been updated as follows:

Independent contractors can be entered in the workbook by using the dropdown menu on tabs 2a and 2b, line 12. That functionality has always been there. Choose “Other” to enter independent contractor information.
With regard to the $100,000 cap on employee payroll, we have two separate workbooks as follows:
1. PPP loan calculation V1.1 033020 calculates the cap based on payroll costs per employee.
2. PPP loan calculation V2.0 040220 calculates the cap based on Salary, wages, commissions or tips per employee and will yield a higher loan amount because of that.

Please note that the workbooks are meant to be used as a guide to calculate the loan amount. Please consult with your advisor and bank regarding the final amount of the loan.

Negotiating from a Distance

Posted: April 2nd, 2020

By: Joe Campolo, Esq. email

Published In: HIA-LI Reporter

Tags: negotiation

Clammy handshakes, a scratched mahogany table with papers strewn about, laptops fighting for space with half empty cups of coffee, and that awful fluorescent lighting above – sounds pretty great right about now, doesn’t it?

In this unprecedented time of social distancing due to the coronavirus pandemic, negotiations are still happening every day (and they must, for our economy to recover) – they just look different. Critical tools in the negotiator’s toolbox involving nonverbal cues, such as body language and emotional expression, take a back seat during negotiations that take place by phone, videoconference, or even [shudder] email. Research has shown that in-person negotiations yield better results than negotiations that happen via screen, but don’t get discouraged – just reframe your thinking.[1] Here are some tips to make the most of your virtual negotiations until we’re back in the conference room.

Go back to basics. You still can’t skimp on the preparation, folks. You still need to do your homework. Gathering as much information as possible is key to identify and make sense of the issues in your negotiation. Spending the time on preparation will open more doors for you to create value.

Be an active listener. While leaning in or using other body language may be off the table, you can still show your interest in your adversary’s point of view by paraphrasing their phrases back to them and peppering the conversation with simple phrases such as “yes,” “I see,” and “I understand.” Actively listening encourages your opponent to continue talking – and the more that happens, the more control you have over the negotiation.

Build affiliation. You may be separated by screens, but if there were ever a time to bond with someone you may otherwise have nothing in common with, it’s now. In normal circumstances, I find mindless banter about the weather and traffic to be a waste of time you could instead be building a connection that can help you negotiate. But now… the rules have changed. People are hurting, anxious, and overwhelmed. Ask your adversary how he or she is holding up, and take the opportunity to share what’s going on in your world. Don’t cut right to the chase. By creating rapport, you create value.

Mix it up. Modern technology enables us to be connected 24/7/365, and the COVID-19 crisis has proven it. While you may not be meeting face to face, you still have a wealth of options to get in touch. If you’re negotiating with someone you don’t know well or if the negotiation has just begun, consider a videoconference as the next closest thing to an in-person meeting. As the negotiation progresses, the timing may be right to negotiate by phone. I really believe that email, which is about as impersonal as things can get, is a last resort when negotiating – but it’s still an appropriate choice, of course, to settle simple issues and share documents.

To lift ourselves out of the economic fallout of COVID-19, continuing to make deals and negotiate is critical. In that way, the negotiations that take place during this period are among the most important of our lives. Keep focused and keep moving forward so we can get back to those fluorescent lights and clammy handshakes as soon as possible.

[1] Read more on Harvard Program on Negotiation Blog.

Experts to Help Your Business with Cash Flow and Applying for Stimulus Relief

Posted: April 1st, 2020

Force Majeure: What Happens When COVID-19 Prevents Parties from Performing?

Posted: March 31st, 2020

Published In: HIA-LI Reporter

The COVID-19 crisis and the measures implemented in response, including states of emergency, social distancing, and mandatory closures, have created extreme challenges for businesses, especially those that are unable to fulfill their contractual obligations due to shutdowns, layoffs, and delays. Whether your own business can’t perform or you’re frustrated by another party’s inability to perform, the degree of relief on the horizon depends on the force majeure language in your contract.

By either excusing or deferring performance, force majeure clauses are designed to protect businesses or individuals when they are unable to perform their contractual obligations due to events beyond their control. The clause is typically triggered only if an event occurs beyond the parties’ control, such as a fire, terrorist attack, war, an “act of God,” and even governmental action that prevents the parties from being able to perform.

Under New York State Law, to be enforceable, a force majeure clause must specifically state what type of event triggers the protection. If the specific event is not listed in the clause, or there is no broad catch-all, the force majeure clause will not excuse or delay performance under the agreement.

To be covered during the COVID-19 pandemic, the force majeure clause must include language about illness, plague, outbreak, and the like, or acts of government (which would apply to a non-essential business’s inability to perform due to Governor Cuomo’s Executive Orders), and/or a catch-all provision, such as “a cause beyond the control of such party for any reason.”

Because the enforceability and applicability of force majeure clauses are so dependent on the language, such clauses may help a business during this time – or be useless depending on how the clause was drafted and what was expected by the parties at the time of negotiation. The shutdown brought about by the coronavirus pandemic almost seems like fiction, and was thus likely not considered by most parties at the time they negotiated contracts calling for performance during this unprecedented time.

However, even in the absence of an applicable force majeure clause, or if the clause does not list a qualifying event, the non-performing party may still be protected under New York law. New York State courts have found that if performance is impossible in certain situations, the parties may not have to perform their obligations under the contract. The Courts have also held that one party cannot keep payment received in exchange for something it is unable to perform for the second party. For example, a resort whose kitchen burned down was required to return the down payment to a patron who had reserved the resort’s kitchen facilities for an event. The Court held that the resort would be unjustly enriched if it could keep the deposit while the patron was unable to use the kitchen facilities as agreed.[1]

If you have a contract that you or the other party is unable to perform and you have questions about what to do next, please reach out to us. We’ll review your agreement and let you know your options so you can move forward in the most productive way possible.

[1] Leisure Time Travel, Inc. v. Villa Roma Resort & Conference Ctr., Inc., 55 Misc. 3d 780, 782 (N.Y. Sup. Ct. 2017)

The CARES Act Paycheck Protection Program

Posted: March 31st, 2020

Tags: coronavirus, labor & employment

Guest Post by Alan R. Sasserath, CPA, MS, Sasserath & Zoraian, LLP

On Friday, March 27, the President signed the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) into law. There are a myriad of tax changes and economic stimulus provisions in addition to unemployment, health care, health system as well as other stimulus and stabilization provisions.

Cash flow is critical right now for all businesses, especially small businesses. We are still at the point where it is the most critical issue and will continue to be the most critical issue for at least the short term. In our estimation, the most significant business provision in the CARES Act is the Paycheck Protection Program (“PPP”) which falls under the U.S. Small Business Administration’s (“SBA”) 7(a) loan program.

Because it is so significant from the cash flow perspective, we have spent the better part of the last few days analyzing the PPP. The tax and other cash flow provisions in the CARES Act are important and we expect to take a deeper dive into those this week; however, they don’t come close to comparing to the cash flow significance of the PPP.

The most significant provision of the PPP is the provision that it is a loan that can be forgiven under certain circumstances.

Here is a high-level overview of the PPP:
• It generally applies to businesses with fewer than 500 employees.
• The amount of the loan is the lesser of (1) the average monthly payroll (salary, wage, commission, tips, vacation, group health benefits, certain other payments, etc.) up to $100,000 on an annualized basis per employee/payee for the 12 months preceding the date of the loan multiplied by 2.5 plus the balance of any pre-existing emergency loan, or (2) $10,000,000.
• The loan proceeds may only be used for payroll as defined above, interest on any mortgage obligation, rent, utilities and interest on any other debt obligations that were in place before February 15, 2020 (“Covered”).
• In evaluating the eligibility of a borrower, the lender shall consider whether the borrower was in operation on February 15, 2020; had employees; or paid independent contractors as reported on Form 1099-MISC.
• No personal guarantee requirement.
• No collateral requirement.
• Forgiveness: The amount that can be forgiven include the amounts paid by the borrower during the 8-week period following the loan origination date for:

• Covered payroll costs – Generally including payroll as defined above up to $100,000 per employee/payee on an annualized basis. In other words, the amount of loan forgiveness available is limited to $1,923.07 per week or $15,384.56 over an 8-week period per employee.
• Interest on a “Covered” mortgage obligation.
• “Covered” rent obligation.
• “Covered” utility obligation.
• Any amount not forgiven will become a term loan for up to 10 years with a maximum interest rate of 4%.

The loan forgiveness can be reduced either based on a reduction in employees or a reduction in salaries of certain employees if their salaries are less than $100,000 on an annualized basis.

Even if you have laid people off, you are still entitled to the loan based on prior year payroll. If you lay people off during the period February 15, 2020 – April 26, 2020 and hire them back by June 30, 2020, then you will not be penalized as discussed in the paragraph above. Remember, even if you are penalized, the penalty is that the term loan remains in effect and is not forgiven. Please note that the penalties related to the forgiveness of the loan is a complicated area of this program and beyond the scope of this writing.

We are suggesting that everyone should analyze this loan as it pertains to their circumstance. If you aren’t sure, take it. There is no penalty to prepay it.

It is going to take a little while for the banks to gear up to be able to make these loans. We don’t know how long. As of Friday, one banker mentioned that they were waiting from the SBA for guidelines. Treasury Secretary Mnuchin said that he wants loans to start by Friday. We’ll see.

With the program’s dependence on banking relationships, those businesses who lacked strong relationships prior to the coronavirus pandemic may get left behind if they don’t act quickly. We can help you with this. In the meantime, if you do have a banking relationship, call your bank and make sure they know you are on top of this and want it as soon as it is available.

Here is a workbook to assist in the calculation of the amount of the loan. Please call us if you need assistance and we will walk you through it.

It’s the start of a new week, and we are now one week closer to getting through this ordeal. Keep moving forward. Look at the shovel, don’t look at the mountain.

Thank you for your time.

Note: This workbook is provided by Sasserath & Zoraian, LLP and is intended solely for general informational and educational purposes. It is not intended in any way as financial, securities, insurance, tax or legal advice or services, or as a solicitation for any financial, securities, insurance, tax or legal product or service. Please consult with your financial, securities, insurance, tax and/or legal advisors for advice regarding your specific circumstances. The calculations herein are estimates based on our interpretation of the bill signed into law on March 27, 2020 under the CARES Act.

Shareholder Liability for Unpaid Wages

Posted: March 29th, 2020

By: Arthur Yermash, Esq. email

Tags: coronavirus, labor & employment

As the coronavirus pandemic continues to spread around the world and particularly in New York, business owners are being challenged like never before to keep their companies, employees, and their own families afloat. As we shared in a recent article, litigants must reach an extraordinarily high bar to be able to “pierce the corporate veil” of a business and shift a company’s liabilities to the owner personally. One notable exception to be aware of, however, concerns unpaid wages for New York employees. This issue is of particular concern as business owners grapple with challenging decisions in light of business shutdowns and other challenges brought on by the deadly COVID-19 virus.

Pursuant to changes to the Limited Liability Company (LLC) Law and Business Corporation Law (BCL) enacted about five years ago, the 10 LLC members with the largest membership interest, as well as the 10 largest shareholders of a foreign (non-New York) corporation with New York employees, may be held jointly and severally liable for “all debts, wages, or salaries” due to “any of its laborers, servants or employees… for services performed by them for [the entity].” (The 10 largest shareholders of New York corporations were already on the hook for such wages under the BCL prior to the other law changes five years ago.)

Such imposition of liability on the 10 largest shareholders/members creates an exception to the general shielding of a shareholders/members for claims made against the corporate entity. The definition of “wages or salaries” includes all compensation and benefits payable by an employer to an employee, such as overtime, vacation, holiday and severance pay, employer contributions to pension funds, and insurance payments.

A New York employee seeking payment for unpaid wages must first seek payment from the business itself. If payment is not made, the top 10 shareholders/members may be held liable for any unsatisfied judgments. Note, the employee must provide notice to the shareholders/members within 180 days after his or her employment terminates.

As many business owners are facing harsh realities and extremely difficult business decisions in light of the deadly COVID-19 virus, it is important to keep some of these issues in mind. Asking employees to work without pay, or even where employees volunteer to work without pay still creates potential financial exposure (including penalties) to the employer and its principals in these trying times. Any decision regarding reduced or no pay should be carefully evaluated in light of applicable law.

With today’s economic uncertainty, business owners should be aware of any potential liability they may face so they can plan accordingly and take steps to mitigate. Please call us for guidance on your specific situation. We are here to help your business get through these challenges.

Employer Dos and Don’ts for Employees with COVID-19 or Associated Symptoms

Posted: March 26th, 2020

By Christine Malafi

The U.S. Equal Employment Opportunity Commission (EEOC) enforces workplace anti-discrimination laws, including rules about medical examinations of employees. As the COVID-19 pandemic wreaks havoc across the globe, many questions that were unthinkable even a few weeks ago have now become routine for employers. Based on EEOC guidance, below are answers to some now-common questions from employers regarding the health of their employees.

How much information may an employer request from an employee who calls in sick?

During a pandemic, employers covered by the ADA (Americans with Disabilities Act) may ask such employees if they are experiencing symptoms of the virus. These include symptoms such as fever, chills, cough, shortness of breath, or sore throat. Employers must maintain all information about employee illness as a confidential medical record in compliance with the ADA.

When may an ADA-covered employer take the body temperature of employees during the COVID-19 pandemic?

Generally, measuring an employee’s body temperature is a medical examination. But because the CDC and state/local health authorities have acknowledged community spread of COVID-19 and issued attendant precautions, employers may measure employees’ body temperature. However, employers should be aware that some people with COVID-19 do not have a fever.

Does the ADA allow employers to require employees with symptoms of COVID-19 to stay home?

Yes. The CDC states that employees who become ill with symptoms of COVID-19 should leave the workplace. The ADA does not interfere with employers following this advice.

When employees return to work, does the ADA allow employers to require doctors’ notes certifying their fitness to work?

Yes. Such inquiries are permitted under the ADA either because they would not be disability-related or, if the pandemic influenza were truly severe (as is COVID-19), they would be justified under the ADA standards for disability-related inquiries of employees. As a practical matter, however, healthcare professionals may be too busy right now to provide fitness-for-duty documentation. Therefore, new approaches may be necessary, such as reliance on local clinics to provide a form, a stamp, or an email to certify that an individual does not have the virus.

If an employer is hiring, may it screen applicants for symptoms of COVID-19?

Yes. An employer may screen job applicants for symptoms of COVID-19 after making a conditional job offer, as long as it does so for all entering employees in the same type of job. This ADA rule applies whether or not the applicant has a disability.

May an employer take an applicant’s temperature as part of a post-offer, pre-employment medical exam?

Yes. Any medical exams are permitted after an employer has made a conditional offer of employment. However, employers should be aware that some people with COVID-19 do not have a fever.

May an employer delay the start date of an applicant to has COVID-19 or associated symptoms?

Yes. According to current CDC guidance, an individual who has COVID-19 or symptoms associated with it should not be in the workplace.

Can an employer withdraw a job offer if it needs the applicant to start immediately, but the applicant has COVID-19 or associated symptoms?

Yes. Based on current CDC guidance, this individual cannot safely enter the workplace, and therefore the employer may withdraw the job offer.

Please contact us to discuss your questions so we can assist you in moving forward. View our Labor and Employment legal department page for more on our services.