Everybody is feeling some form of stress throughout their personal and professional lives during this pandemic. Leaders have a responsibility to recognize that stress in their employees and in themselves and keep their organizations focused on productive action. This is harder than it sounds, so Lili Powell, professor at the University of Virginia’s Darden School of Business, offered powerful insights and strategies for mindful leadership.

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Jeannette Chapman, Director of the Stephen S. Fuller Institute, presented an economic forecast for the D.C. region that reflects the impacts of the coronavirus pandemic in the months and years to come. You can access the full forecast here.

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The COVID-19 pandemic is a public health emergency with far-reaching and severe economic impacts. Susan Lund, Partner at the McKinsey Global Institute, presented findings from their research on several economic scenarios. Tom Barkin, President & CEO of the Federal Reserve Bank of Richmond, explained what the Fed has done to address this crisis and how he sees that dovetailing with other government intervention.

Susan Lund, Partner at McKinsey Global Institute

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Tom Barkin, President & CEO of the Federal Reserve Bank of Richmond

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The economic impacts are serious.

• The US is mostly a service economy, and now 70% of the service sector has been shut down. Other industries have been deeply impacted too, including auto sales, hospitals, retail, and airlines.
• Unemployment claims have skyrocketed, and we saw unemployment claims in one week that were 10x greater than any other previous week.

The response has three lanes: public health, fiscal, and monetary.

• This is primarily a public health crisis. That’s the first priority.
  • We can’t get our economy rolling again without knowing that people will be safe. The best “stimulus” would be nation-wide testing. Making sure the hospitals have enough capacity, that we are working as quickly as possible on a vaccine, are also important.
• The second lane is fiscal. The aim here is stabilization more than stimulus.
  • The CARES Act included several important provisions, including expanded unemployment insurance, an expanded small business loan program, and funding for endangered industries like airlines. The scale, scope, and design of this act was necessary and helpful given the circumstances, according to Barkin.
  • The challenge now is delivering these benefits to people and businesses in a timely manner. For example, about half the population does not file their taxes electronically and can only receive the $1200 cash rebate via a paper check. Many of these people do not have current addresses registered with the Federal government. It will take time and effort to get this money into the hands of those people. The SBA loan website has also been absolutely overwhelmed.
• The third lane is monetary. Thanks to lessons learned in 2009, the Fed was able to move the fastest.
  • First, they moved interest rates to 0.
  • Second, they encouraged the banks to step up. They’ve been given supervisory guidance to extend forbearance to good borrowers who need it. Banks remain liquid and they need to be motivated and incentivized to do the right thing at this time.
  • Third, they’ve deployed interventions to make markets work. They’ve been trying to intervene in treasury markets to make sure lending rates are at appropriate levels. They’ve set up a lot of backstop facilities for commercial paper, money market funds, etc. These actions are intended to make sure those markets continue to function and that folks who should get credit can get credit.
  • Some challenges remain. How much credit risk can these funding facilities make? That’s a challenge. How do you get the money out there quickly? Barkin says they are the authorities they have to backstop a number of these funding markets. But it’s a third priority behind health and fiscal.

How do we get to the other side of this economic crisis?

• We need our essential industries to continue to operate and for those workers to be safe in their jobs. Food, fire and safety, cleaning supplies, hospitals, inspectors, electricity, broadband, supply chains, etc. are all essential.
• We need a return to business and consumer confidence. This has been a real shock, and to get in the other side we will need consumers to spend and businesses to invest again. But that’s not going to be easy when the pandemic is going to last a long time. We need to be able to bring workers back in a way that makes sense and protects their health.
• We’re going to need a health protocol. You need to know that you can go shop, or go to a restaurant, and you aren’t going to put your life at risk. A good analogy is 9/11 – after the attack, the TSA took safety very seriously and it made people feel safe to fly again. We are going to need to change the way we do business everywhere—from empty middle seats on planes, empty tables in restaurants, etc.

The massive, historic, $2 trillion CARES Act passed last week provides many opportunities for individuals and businesses to find financial assistance. Sorting through those opportunities can leave you asking questions about what your options are and where to start. A stellar briefing team from K&L Gates offered their insight on a call with Board of Trade members this week. Watch the recording or scroll down for a written summary.

The K&L Gates briefing team:

• Paul Stimers, Partner
• Karishma Shah Page, Partner
• Mary Burke Baker, Government Affairs Counselor
• Brenden R. Chainey, Associate

SUMMARY

Keeping the Cash Flowing

A collection of tax provisions in the CARES Act are designed to help individuals and businesses with immediate cash flow problems. The goal is to make sure that businesses have a workforce ready for them when it’s time to resume business-as-usual.

For Individuals and Employees

• Each American adult with an adjusted gross income of $75,000 or less will receive $1,200 and parents will receive $500 for each child under 17. Individuals earning between $75,000 and $99,000 will earn a lesser amount. This benefit does not apply to individuals earning over $99,000.
• Individuals can now take early withdrawals of under $100,000 from their retirement savings without paying a 10% penalty fee.
• Employers can provide up to $5,250 of student debt relief per employee on a tax-free basis.

For Employers

• Employers can defer their 2020 payroll taxes; half is due is 2021 and half in 2022. (However, employers cannot defer payroll taxes if they are taking advantage of the loan forgiveness provision of the Paycheck Protection Program.)
• The bill includes an employee retention credit. If employees are furloughed, employers get a 50% credit on payroll taxes, receiving up to $5,000 per employee. (This can be used in conjunction with the Payroll Protection Program.)
• Employers are entitled to a credit against payroll taxes to accommodate providing paid emergency sick leave.
• Companies can use AMT credits right away.
• The bill relaxes the limitation on business interest expense deductions from 30 percent of adjusted taxable income to 50 percent.

More Unemployment Insurance, for More People

Bolstering unemployment insurance is a big part of the CARES Act, significantly expanding who is eligible and what they can receive.

• Individuals should start by applying for unemployment through their state, like they normally would.
• The bill adds $600 per week to the amount that the individual would normally receive from their state between now and the end of July 2020. The Federal Government is compensating the states for that extra money.
• The Federal government is also providing an additional thirteen weeks of unemployment insurance beyond what individuals would normally receive from their state.
• The legislation expands who is eligible to include gig workers, contractors, and the self-employed. The Federal government is also waiving the one-week waiting period before individuals normally become eligible for unemployment benefits.
• If an employer cuts an employee’s hours, that employee may be eligible for unemployment benefits.

Big Money for Industries in Need

The bill provides hundreds of billions of dollars of funding to large and mid-sized businesses in need of financial stimulus while much of the economy is forced to hit pause. It also carves out funds for hospitals, airlines, and other industries that are being hit especially hard.

• The bill provides $100 billion to the healthcare industry to help it prepare for and respond to the COVID-19 crisis. Hospitals and other entities involved with the emergency response will receive most of these funds, and more funding will likely be provided in the future as the crisis develops.
• The bill provides loan guarantees from the Treasury Department for especially impacted industries, including passenger air carries, cargo air carriers, and national security businesses.
• The bill also provides a large credit facility from the Treasury and the Federal Reserve. There is very little statutory guidance on what this will look like—more to come. It will likely be modeled on what we saw in the 2008 financial crisis: capital infusions to particular types of businesses where Treasury has broad discretion on what types of investments they want to make.

Help for Small Businesses

The bill provides funding for small businesses to help them stay afloat and keep their workers on payroll.

• The bill provides subsidies for small businesses that have existing Small Business Administration (SBA) loans to help them service those loans.
• It provides money for SBA Economic Injury Disaster Loans, which are targeted at small businesses with fewer than 500 employees, but this could change depending on industries. Those businesses can borrow up to $2 million for working capital. The loans are not forgivable. Businesses are also eligible for a $10,000 immediate advance.
• The SBA is also offering the Paycheck Protection Program. These loans can be used to pay for specified expenses such as salaries and wages, rent, utilities, employee benefit costs, interest paid on mortgages. They are managed by the SBA but distributed through participating lenders. The lender will add up how much the company spends on these approved expense categories in a month and multiply that amount by 2.5 to calculate the maximum loan amount allowed (but all loans must be capped at $10 million). The loan forgiveness provision states that any money spent on these approved categories can be forgiven so long as the company does not reduce its workforce or their pay. If the company does reduce workers or pay, the loan may be partially forgiven or not at all. Nonprofit organizations are qualified to participate in this program.

Employers are scrambling to figure out how to manage their workforce during this unprecedented and fast-changing public health crisis. Elizabeth ‘Betsy’ Lewis, partner at Cooley, LLP, graciously gave 45 minutes of her time and invaluable legal guidance to Board of Trade members on March 31 to help them navigate this complex and challenging situation.

You can listen to the full briefing here or scroll down for a summary of the key points.

SUMMARY

Managing and protecting essential employees

• To determine which employees are deemed essential and can physically show up to work, consult the executive order in your jurisdiction.
• For those employees, be sure you are providing a clean and safe work environment. Provide gloves and masks if you can, especially if these employees are required to enter other people’s homes. Provide for social distancing as much as possible by limiting the number of people who can be in the same confined space at the same time.
• If an essential employee refuses to work because they feel unsafe, first ask what might change that. What could you provide to make them feel safer? If no solution is available, see what paid leave you can provide. Then, offer unpaid leave. Avoid termination unless you must have an active employee in that position immediately.
• If an employee contracts the virus and claims that they did so on the job, advise them to file a worker’s compensation claim. They may be denied because for most fields beyond healthcare it is difficult to prove that an employee contracted the virus on the job and not elsewhere. Regardless, this is the right direction to give this employee.
• If an employee contracts COVID-19 and has potentially exposed other employees to the virus, notify other employees that they may have been exposed without naming the diagnosed individual. If you obtain that individual’s permission, you may name them, otherwise you must protect their privacy. There may be exceptions to this rule if naming the diagnosed employee is critical to the safety of other employees, but these cases are rare, and you should seek legal counsel first.

Facilitating remote work

• Don’t be stingy with equipment that will make remote work more comfortable and productive. Do your best to comply with requests for office equipment that the individual may need, such as standing desks.
• If you are concerned that some employees will not be adequately productive working from home, be sure to set very clear expectations about when they should be online, what they should produce, and other aspects of their performance. Then, monitor and assess their performance. This provides an objective measure of their ability to work from home.  
• If possible, be flexible with respect to work hours. Many people are trying to juggle work and childcare, and some might be more productive if they can work when it suits them.
• Communicate, communicate, communicate. Check in with them about work and about their personal lives. Stay connected!

Options for reducing salaries

• Check offer letters and contracts to see if there are any restrictions on your ability to reduce salary. For example, some employment agreements might allow the employee to quit and collect a severance. If your offer letter specifies that the employment is at will, this may not be a problem.
• If you do reduce salaries, include everyone except perhaps your lowest-paid employees. There will likely be ill-will among your workforce if executives are spared the salary reduction. Many companies are reducing salaries by a percentage according to employment tier, with higher earning employees taking the bigger cuts.
• Don’t promise to make up the difference in lost wages later. The law does not allow you to defer wage payments. You can reduce pay now and make employees whole later by issuing a bonus, if you are able. Just don’t make any promises that you aren’t very confident you can keep.

Furloughing employment

• Furloughing an employee means you are temporarily stopping work for an employee but intend to bring them back to work when business resumes. Furlough notices should allow the employer flexibility by stating that employees could be called back early, their furloughed could be extended, or they could be terminated.
• Furloughed employees are eligible for unemployment compensation.
• Furloughed employees may not be able to keep their health benefits, so be sure to check with your policy provider. Some providers are changing the rules and allowing furloughed employees to stay in the plan due to the COVID-19 crisis, but the employer needs to check. If not, furloughed employees can continue in the plan via COBRA or state-provided coverage.

Terminating employment

• Termination means that there is no intention to bring and employee back to work.
• The WARN Act requires that employers give an employee 60 days of notice when terminating their employment. This typically applies to employers with 100 or more employees who work 20 hours or more per week when there are plant closings or mass layoffs.
• If an employee is furloughed for less than six months, the requirements of the WARN Act do not apply and you do not need to give them 60 days of notice. You can later extend the furlough past 6 months if circumstances justify it. For example, an employer that services schools is furloughing employees expecting to bring them back in the fall when schools reopen. But if they don’t, they could extend that furlough and not be impacted by the WARN Act.
• The Family Medical Leave Act (FMLA) requires that eligible employees be given emergency sick leave to care for themselves or a family member. You can find more details on this law here. In response to the COVID-19 pandemic, the IRS is now offering a 100% tax reimbursement to employers who provide paid emergency sick leave. More information on that benefit can be found here. It is inadvisable to ask employees to take paid sick leave followed by a furlough.
• Unemployment is beyond the scope of this call because it is complex and the rules vary from one jurisdiction to another. However, do note that though some jurisdictions provide unemployment insurance to low-wage workers with cut hours, employers should not attempt to use it as a tool to conserve costs.
• Paycheck Protection Program (PPP) loans under CARES Act can help small businesses keep employees on payroll. The specifics of this program are beyond the scope of this call. For information on PPP loans, read this blog from Cooley or join the presentation on the CARES Act by K&L Gates tomorrow at 10:00AM.

MARCH 27, 2020

Congress Must Ensure Adequate Economic Relief Funding for Washington, D.C., says Greater Washington Board of Trade

The $2 trillion funding bill is a life raft for a national economy in peril, but much remains to be done—especially a fair and adequate funding measure for Washington, D.C.

WASHINGTON, D.C.—The historic $2 trillion economic relief bill passed in the Senate early Thursday morning is expected to pass the House and be swiftly signed into law by the President. This legislation is a strong demonstration of Congress’s willingness to meet the extreme economic and business impacts resulting from the COVID-19 pandemic.

Unfortunately, the bill does not provide adequate or appropriate funding for Washington, D.C. The Greater Washington Board of Trade, the Washington region’s oldest business organization, calls on Congress to ensure the District of Columbia has the resources needed to address growing economic and business challenges.

Following is a statement from Jack McDougle, President and CEO of the Greater Washington Board of Trade:

“We applaud members of Congress for taking bold, swift action to address the economic fallout from COVID-19. Yet, we were very concerned to learn the bill applied the wrong funding formula to Washington, D.C., shorting the nation’s capital by a staggering $725 million. This mistake doesn’t just jeopardize Federal government operations, it jeopardizes a vibrant community of entrepreneurs, restaurants, artists, families, hospitals, businesses of all sizes, workers, nonprofits, and so much more. This can’t stand and Congress must resolve to provide D.C. with the means to alleviate current hardships and accelerate its economic comeback.”

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MARCH 26, 2020

Senate Bill Gives Communities and Businesses a Fighting Chance, says Greater Washington Board of Trade

A massive Federal government investment will keep households and businesses afloat while state and local leaders do what they must to contain the virus.

WASHINGTON, D.C.—The historic $2 trillion economic relief bill passed in the Senate today is a critical step and we call on Congress and the President to push this legislation into law, says the Greater Washington Board of Trade, the D.C. area’s oldest business organization.

Following is a statement from Jack McDougle, President and CEO of the Greater Washington Board of Trade:

“Our country and region suffer from the double whammy of a health pandemic and a near economic shut down. We applaud the Senate for working together to get this bill passed and now the House must do the same so the President can sign it into law. We recognize the importance of efforts to contain the virus to protect public health, but we must respond to immediate economic hardships and begin preparing for economic recovery.  

The Senate bill begins the healing process by providing much needed relief to businesses and workers, which are the lifeblood of our communities. Our region’s state and local leaders are doing all they can—now Congress and the administration must pass this law and continue working together to keep American households and businesses afloat.”

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About the Greater Washington Board of Trade

The Greater Washington Board of Trade is a nonpartisan business organization and has represented all industry sectors in the District of Columbia, suburban Maryland, and Northern Virginia since 1889. The Board of Trade works collaboratively to advance polices, practices, and actions that benefit its members and improve the business environment and quality of life across the region. Learn more at www.bot.org.

Press Contact

Lindsey Longendyke
980-322-9904
[email protected]

Statement on March 23:

Widespread Business Closures in DC, MD, and VA Protect Public Health but Require Bold Economic Remedies, says Greater Washington Board of Trade

WASHINGTON, D.C.—Governments in Virginia, Maryland, and the District have required that all nonessential public spaces, from restaurants to hair salons to gyms, be closed to help quell the COVID-19 pandemic. This necessitates extreme measures to keep local businesses afloat and prepare for an accelerated recovery says the Greater Washington Board of Trade, the D.C. area’s oldest business organization.

Following is a statement from Jack McDougle, President and CEO of the Greater Washington Board of Trade:

“Mayor Bowser and Governors Northam and Hogan are navigating very difficult decisions in order to protect the public’s health and safety. They need our support. Experts have been clear that extreme social distancing is our best hope for getting COVID-19 under control.

At the same time, we must do everything possible to mitigate the economic fallout. Now is the time for lawmakers and business leaders everywhere to think and act big. Governments at all levels must use every tool at their disposal to keep businesses and households afloat while so much of the economy is shut down. Businesses also must push their ingenuity to discover new ways to serve their communities and customers while supporting and protecting their workers. This situation is entirely unprecedented and we must unite as a region to overcome these many challenges.”

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Statement on March 19:

Board of Trade Supports Bold Actions to Aid Businesses and Slow the Spread of COVID-19

WASHINGTON, D.C.—The Greater Washington Board of Trade, which represents more than 300 organizations across all sectors throughout the District, suburban Maryland, and Northern Virginia, supports government and business leaders’ bold actions to slow the spread of COVID-19. We also call for the continuation of significant measures that are essential to blunt economic impacts, such as the COVID-19 Response Emergency Amendment Act of 2020 which passed in the District. This and other critical actions are needed to support suffering businesses.

This unprecedented crisis is affecting each of our industries, small and large businesses, and all categories of workers. The extraordinary measures taken by government officials seek to “flatten the curve” of virus case growth so that adequate healthcare can be provided to avoid a public health calamity. Our region is fortunate to have an amazing medical community focused on caring for our residents.

Still, the economic consequences of these decisions are felt harshly across the region, especially for hourly and tipped workers who are losing their incomes overnight, and small businesses dependent on daily revenues. Government and business leaders must further deliver innovative solutions to meet current needs while preparing for an economic recovery.

“These were tough decisions for Mayor Bowser and Governors Hogan and Northam resulting in immediate business and economic hardships,” said Jack McDougle, President and CEO of the Greater Washington Board of Trade. “No leader wants to disrupt daily life and close doors for local businesses. It’s important that we all work together to protect the public health of our residents and workforce, and similarly important to proactively address the huge economic impacts affecting our region.”

For most leaders in the Greater Washington region, the COVID-19 situation is new territory—a challenge with far-reaching consequences. What we know from the 2018-2019 government shutdown, which also created widespread financial instability, is that our resilience stems from our ingenuity, generosity, and compassion. By working together, we can avert a public health disaster while protecting businesses, workers, and their families.

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About the Greater Washington Board of Trade

The Greater Washington Board of Trade is a nonpartisan business organization and has represented all industry sectors in the District of Columbia, suburban Maryland, and Northern Virginia since 1889. The Board of Trade works collaboratively to advance polices, practices, and actions that benefit its members and improve the business environment and quality of life across the region. Learn more at www.bot.org.

Media Contact

Lindsey Longendyke
Cell: 980-322-9904
[email protected]