Medical, dental and other professional practices, like many US small business that rely on in-person encounters, have been dramatically impacted by the COVID-19 pandemic.
Federal and state public health and public emergency directives and orders have forced them to close since mid-March, 2020 for all but essential emergency visits.
While Medicare and many state commercial insurers have been subject to emergency orders requiring payment for telehealth remote visits, such visits are not an option for dental and other licensed health professions that require hands on treatment, and will not make up for the substantial loss of income for closed medical and behavioral health practices.
Practice owners are now left with unprecedented and previously unimaginable questions and challenges. How do I preserve and provide for our staff when we are completely or substantially closed for clinical operations? What if the necessary period of closure to bend the apex of the pandemic goes on for months? How can I cover my overhead if revenues are dwindling and already not enough to cover my overhead? What if I cannot pay my rent or mortgage? Will I be able to survive this crisis?
Under guidance from the Massachusetts Dental Society (“MDS”) and Center for Disease Control (“CDC”), and the Governor’s Order Assuring Continued Operation of Essential Services in the Commonwealth, Closing Certain Workplaces, and Prohibiting Gatherings of More than 10 People (the “Governor’s Order”), dental offices should be closed to any patients seeking elective and non-urgent care, and can only remain open to see patients for emergency treatments; all other appointments must be rescheduled.
All practices should ensure that they have a line of credit available from their banking institution. The Commonwealth is also working on developing small business assistance funds through both the Massachusetts Emergency Management Agency (“MEMA”) and the Massachusetts Growth Capital Corporation (“MGCC”).
Federal legislation titled the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) also provides potential working capital for businesses looking for alternatives to workforce reduction. Some of the highly publicized relief options are the Emergency Economic Injury Grants (“EEIG”) and Economic Injury and Disaster Loans (“EIDL”), and the Paycheck Protection Program (“PPP”).
EEIG’s provide an emergency advance of up to $10,000 to small businesses impacted by the public health emergency within three days of applying. The $10,000 advance does not have to be repaid for any reason, and can be used for payroll, sick leave, rent or mortgage payments.
EIDL’s are lower interest loans of up to $2 million that have principal and interest deferral options, which may be used to pay for expenses that could have been met had the pandemic not occurred. Employers are eligible for EIDL’s if they have 500 or fewer employees and are sole proprietors, with or without employees, independent contractors, cooperatives, employee owned businesses, or tribal small businesses.
The PPP loan provides federally guaranteed loans to employers for the purpose of maintaining their workforce during the public health emergency. The program will allow businesses to borrow money for a variety of costs related to employee compensation and benefits, including payroll costs, continuation of health care benefits, employee wages up to $100,000, mortgage interest, and rent and utilities for the eight week period after the loan commences. Businesses under 500 employees can apply for these loans through any SBA lender.
PPP loan amounts can be for up to two months of a business’s average monthly payroll costs plus an additional 25%, subject to a $10 million cap. Businesses will only owe money when the loan becomes due if the money is used for expenses other than payroll costs, mortgage interest, rent and utilities over the eight week period following receipt of the loan funds. Employers must retain their full-time staff headcount, maintain at least 75% of any employee’s salary that made under $100,000 in annualized wages in 2019, and restore all full-time staff and salary levels, which had otherwise been reduced between February 15 and April 26, 2020, by no later than June 30, 2020. These loans do not require a personal guarantee. The interest rate for any portion of the loan that is not forgiven will be 1%. All payments are deferred for six months, and loans must be paid in full within two years.
Businesses should try to only borrow an amount that is forgivable, if possible.
Unfortunately, many Massachusetts businesses and professional practices cannot wait for federal or state assistance, and have already implemented temporary layoffs due to the mandated office closures. You should review your insurance policy and ask your insurance advisor to determine if your practice has business interruption coverage.
At the moment, many insurance carriers are denying coverage. Pierce & Mandell attorneys are experienced in reviewing and analyzing insurance policies, and in insurance coverage disputes. Please feel free to contact us if your insurance provider has denied coverage or if you would like us to review your policy.
The three primary or major expenses of any dental practice are likely to be: leases, loans, and labor.
Small businesses should proactively open an immediate dialogue with their landlord to explore potential compromise measures, including the possibility of rent deferral, partial rent payments, landlord loans, or extending the term of the lease in exchange for rent abatement. Some leases contain what is referred to as a force majeure clause which may excuse a party's performance under a contract when certain circumstances arise beyond that party's control. Every lease is different, and you should review yours immediately to determine if it provides any basis for relief from the obligation to pay rent.
In some circumstances, common law doctrines of impossibility and/or impracticability that may be asserted to seek relief from performance of a lease when doing so becomes impossible or commercially impractical.
Any compromise measures agreed to by the parties should be memorialized in writing.
Some banks are offering pay holidays for their small business clients. If you have outstanding loans, you should immediately contact your lender to request a deferral of your next two to three monthly payments without being defaulted. Any agreement between the business and lender regarding payment deferrals should be memorialized in writing.
All practices need to create a comprehensive emergency staffing plan.
To the extent you need to institute workforce reduction measures, including permanent or temporary layoffs, or furloughs, Unemployment Insurance (“UI”) may be available for your employees. UI may also be available for employees in instances where employees remain with the employer but have their hours and/or pay reduced. Please note that UI benefits for an employee working reduced hours or at a reduced rate of pay may be affected by the amount of their continued earnings. If you have had to initiate emergency reductions in your workforce, you must refer your employees to Massachusetts Office of Unemployment Assistance and provide them with information on filing for unemployment insurance.
The Massachusetts Legislature has enacted emergency legislation waiving the one-week waiting period for filing unemployment, and has opened benefits to any and all workers impacted by the COVID-19 public health emergency, regardless of whether they have found themselves out of work on a short-term temporary basis. The Massachusetts Department of Unemployment Assistance (“DUA”) recently received some guidance from the federal government on portions of the CARES Act and is acting quickly to add an additional $600 to the weekly benefits received by unemployment claimants, retroactive to March 29, 2020. The DUA is waiting for additional guidance from the federal government on Pandemic Unemployment Assistance under the CARES Act which will make UI benefits available to individuals who are self-employed, have exhausted their unemployment benefits, and other individuals not covered under the general unemployment regulations. You should check the DUA website for updates on the availability of the application for this program.
If you terminate employees, whether it is permanent, temporary, or through a furlough, you must provide them with their final paycheck on their last day of service. This paycheck must include all accrued but unused paid time-off under the policy in your handbook. If for unforeseen circumstances you cannot deliver an employee a check on their last day of service, then it is best practice to build in a few extra days of payment so they are paid through the date they receive their check. Any non-exempt employees, i.e., hourly employees, working from home and available on-call, must be paid at their regular rate.
Exempt employees, i.e., associates and contracted professionals, must be treated differently. Associate contracts need to be reviewed and followed unless an amendment is agreed to and signed by both parties. Many businesses are converting terms for essential employees, such as their office manager and some associates, to be available and paid on an hourly or reduced pay basis during temporary closures.
You should also be reviewing and keeping in mind your obligations and options concerning your group health insurance programs, if any.
Businesses with under 500 employees will be subject to the new Paid Sick Leave and Family and Medical Leave pursuant to the federal Families First Coronavirus Response Act, which goes into effect on April 1, 2020 through December 31, 2020. The law mandates two weeks of paid sick leave for any employee impacted by COVID-19, which can be offset with tax credits for the business. The law also provides for up to ten weeks of additional paid leave at two thirds of an employee’s pay in order to provide care to a family member or child, including for childcare purposes related to school closures. These requirements, however, will not apply to those workers laid off prior to the effective date of April 1, 2020. You can find more information about the Paid Sick Leave and Family and Medical Leave requirements in our blog on those topics.
Employers with less than 50 employees or “health care” employers, a term which excludes dental practices, can file for an exemption from the requirements of the Families First Coronavirus Response Act. For businesses under 50 employees, it appears the exemption will be allowed only if the requirements would "jeopardize the viability of the business as a going concern." The Department of Labor (“DOL”) has issued guidance indicating that a small business may claim this exemption if an authorized officer of the business has determined that:
- The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
- The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
- There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.
We caution that the DOL is likely to interpret the applicability of these leave laws under the Families First Coronavirus Response Act broadly and in favor of employees, and thus provide exemptions only when requiring an employer to provide leave will likely result in the cessation of the business.
Please note well that all laws and regulations surrounding the COVID-19 pandemic are evolving on a daily basis. You should contact Pierce & Mandell’s experienced business and employment attorneys if you have any questions whatsoever regarding your business operations, or your rights and obligations with respect to your workforce.