FAQ’s: This is your brain on…… Coronavirus FAQ’S!!
Originally Published : March 14, 2020
HL Clients,
So fried. Talking about what’s to come, what to do now, how we’re going to make it through this and when it’s gonna end has left all of our brains completely fried. It’s a lot to process and it’s deeply emotional on so many levels. We are all in this together, so let us help you with the legal stuff so you can plan with some semblance of confidence. –David
The following FAQ’s are brought to you by Lee Jacobs and Megan Shaw for the Employment and Workplace issues, Joseph Levey for the Liquor issues, all with the assistance of Dana Lapan. A huge thank you to each and every one of them for busting their asses today!
As promised, we’ve made a running list of the questions received over the course of the day, as they specifically relate to how businesses should be responding to the COVID-19 crisis. Our responses have been drafted to be as detailed and cohesive as possible, with the understanding that the legal and regulatory landscape has continued to shift on an hour-to-hour basis. Please keep sending us your questions — you’ve helped us really understand the issues that you’re actually facing — but in order to help us field these as quickly as we can, please send them directly to [email protected]. We will continue tackling the most common questions in our regular email updates, but we are also triaging the more critical questions as quickly as possible. And, of course, if any questions are best addressed by phone, we will reach out and schedule a time to speak ASAP. Many of you have reached out to let us know that you want to share these updates with industry friends and/or partners. Please feel free to send our sign-up link to anyone interested in getting our updates moving forward: https://helbraunlevey.us17.list-manage.com/subscribe?u=363125870e1e07f1f98e80d7e&id=9e51f01418
As a preliminary note, and before we get to the questions you have asked, we are in the process of preparing a number of different templates and forms that you can use for the purposes of notifying your staff of any and all changes that you’ll be implementing in the coming days. We’re also preparing a few basic “scripts” for you to use as the basis for talking to your staff or holding one-on-one employee meetings. We know these conversations can be unbelievably difficult so we want to help you get through it as easily and professionally as possible. We will be sending these templates to you tomorrow through this email distribution list.
We’ve categorized your questions below by categories for ease of use, there is a lot of information here to digest so maybe take small bites.
WORKPLACE HEALTH & SAFETY
There is a confirmed case of COVID-19 in my restaurant. What do I have to do? Do I need to call anyone?
You are no longer required to contact any government agency after a confirmed (or even suspected) case of COVID-19. However, as a good corporate citizen, you should call 311 to alert them. After doing that you MUST clean and disinfect your shop in accordance with CDC recommendations, https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/cleaning-disinfection.htmlShould you remain open? As of now there is no requirement to fully close upon a positive diagnosis. You must clean and remediate your space. There is no requirement to do a deep clean.
However, the state has made very clear that any establishment that fails to maintain proper health and safety protocols can and will be closed. Even if there is no positive diagnosis, employing these steps is a good practice for many reasons in these perilous times.
What should I tell my employees?
Once an employee is confirmed to have COVID-19, employers must inform their staff of the possible exposure in the workplace, while maintaining confidentiality as required by law. You should inform them that you are following all CDC and local standards regarding remediation and are confident that you have taken all steps to continue to remain open without endangering them or your customers. Remind your employees that they are required to continue to maintain safe hygiene protocols. Wash their hands frequently. Cover their mouths when coughing, sneezing etc., with a tissue or elbow. Should they feel ill or become ill, they are to let you know immediately. Let them know that your priority remains ensuring a safe and happy workplace for them so that you can continue providing the best service to your customers and guests. Of course, should they have any questions or concerns, they should contact you. We are all in this together.
Can we require a doctor’s note or clearance to allow someone to work?
For many reasons, no. But this seems to be an impracticability. All media reports indicate that there is a shortage of tests. Some employees do not have health insurance or cannot afford paying for a doctor. Even still, someone may have the virus but not show any symptoms and therefore not even consider being tested. Best practices indicate sending home those that are showing any symptoms and pay them with cut/call-in pay to be supplemented with sick time—and then do not let them return to work until the symptoms have abated. The best thing we can do is to continue using best cleaning practices to prevent the transmission of the disease.
Now that this has been declared a pandemic. Can we ask an employee to stay home or leave work if they exhibit symptoms of the COVID-19 coronavirus or the flu?
Yes, the CDC states that employees who exhibit symptoms of influenza-like illness at work during a pandemic should leave the workplace. So if someone is exhibiting symptoms, even cold like symptoms, you can ask them to return or stay home. If they have reported to work and you are cutting them, you will have to pay them call-in/cut pay. If an employee has any accrued sick time under the New York City Sick and Safe Time Act they are eligible to use those hours. Otherwise, as of now, you are under no obligation to pay them any compensation. This may change as new rules are enacted by the government. During the H1N1 pandemic, the Equal Employment Opportunity Commission (EEOC) stated that advising workers to go home is not disability-related if the symptoms present are akin to the seasonal influenza or the H1N1 virus. Therefore, an employer may require workers to go home if they exhibit symptoms of the COVID-19 coronavirus.
Can I take an employee’s temperature at work to determine whether they might be infected?
While the answer to this question is technically now yes, we think that this may just ultimately provide you with a false sense of security. Under normal circumstances, taking an employee’s temperature may be unlawful if it is not job-related or considered a business necessity. However, the EEOC’s position during a pandemic is that employers should rely on the latest CDC and state or local public health assessments to determine whether the pandemic rises to the level of a “direct threat.” Now that the COVID-19 coronavirus has become widespread in our community, employers may take an employee’s temperature at work. However, as a practical matter, an employee may be infected with the COVID-19 coronavirus without exhibiting recognized symptoms such as a fever, so temperature checks may not be the most effective method for protecting your workforce.
EMPLOYEES & STAFF REDUCTIONS
Is the minimum wage being reduced? What about the tip credit?
No. Minimum wage remains at $15.00/hour. The tip credit remains at $5.00/hour ($2.50/hour for delivery drivers and service employees) for ALL New York City Employers. For those employers that are currently availing themselves of the tip credit, please remember that your employees must be reaching that full $15.00 minimum wage threshold for all hours worked. If, at any point, tips don’t make up that difference, you must make up the shortfall.
The President and Vice President just announced paid family leave, do you have more information?
This is literally breaking news, but we know that these bills are working their way through Congress. Once we have more details, you will be the first to know. We can tell you that it appears that the government is requiring that any and all employees affected by COVID-19 will be compensated for 80 hours of paid sick leave. Who is actually paying for this? And how is that money being paid? We hate to say it, but we still don’t know the answer to this. We understand the extreme impact that this will have on your business and we are closely monitoring this issue.
Can I furlough, layoff, or terminate my employees? Can I remain open with limited staff? Can I reduce the number of hours?
Yes. Please see https://helbraunlevey.wpengine.com/coronavirus/ for more information. It’s important to remember that a decision to “close” for business does not necessarily mean that your business has to shutter its doors forever. While each situation is different, and you would need to consult with one of our attorneys before you change your employees’ status, we are advising that you make adjustments of a temporary nature, usually in the form of a temporary lay off. This gives you flexibility to react to any forthcoming changes without hopefully having to start from scratch.
Can I cut my manager’s salaries?
Yes. However, if you do, you must provide your manager (or any employee whose wages are changing) with all required notifications under law about the change in their pay. As a reminder all exempt employees must make a minimum of $1,125.00/week in order to be exempt from overtime requirements. If an exempt employee’s salary falls below that minimum threshold, you must convert them to an hourly employee and then pay them all applicable overtime.
Can I switch everyone over to direct deposit?
No. Under current law, you cannot require your employees to be paid via direct deposit. You also cannot terminate an employee that won’t agree to be paid by direct deposit. As a reminder, you must pay every employee for all hours worked.
Can I terminate some employees and not others?
Yes. See https://helbraunlevey.wpengine.com/coronavirus for more information. That being said, as you determine which employees are being retained, laid off, or terminated, be sure that your decision-making process is something that can be easily understood by your staff. It must be clear to your employees that your decisions are being made not for inappropriate reasons (i.e., race, sex, playing favorites), but for the right ones (i.e., seniority, essential to operations).
What is the best way to continue to pay floor staff? Can I co-mingle tip pools? Subsidize BOH with FOH tips?
You must continue all regular payroll practices. There are no changes to your current payroll practices. You cannot alter or modify your tip pools beyond what is permitted under law.
Should I pay my staff in cash?
This is never a good idea. However, in very limited circumstances like these, you can pay them in cash as long as they are being paid for all hours worked and you provide them with a paystub that includes all information mandated by law. You must also be sure to have your employee acknowledge receipt of the cash payment, signing off specifically on the exact amount of cash that was paid.
Have there been any changes to Unemployment Insurance?
Yes. The exact details are being fleshed out, but we expect the government to waive measures like work search requirements or waiting periods for those individuals that have either been diagnosed with COVID-19 or have lost their jobs as a result of the pandemic. We also expect that the government will require you to provide a notice to your affected employees about their unemployment insurance rights. The specific nature of the notice is still essentially undefined, but we expect to have some answers for you in the coming days. Unemployment claims can be filed online through this link. Additional information can be found here.
BUSINESS & OPERATIONAL CONCERNS
We are a 50-seat restaurant. How many similar restaurants in your client list have closed?
All of our clients, regardless of size, are dealing with this crisis in different ways and reacting accordingly to their specific needs. Many of our clients are continuing to operate with reduced staffing, hours, and/or menu offerings. Others are moving to delivery only models. Some are temporarily closing. Please reach out to us to help you find the path that works best for you and your business.
Governor Cuomo announced that the legal capacity of any venue which seats less than 500 people must be reduced by 50%, which went into effect at 3:00 pm on March 13, 2020. So, what does “legal capacity” mean in this situation?
Based on the Governor’s speech and clarification thereafter, this reduction applies ONLY to your seating count. It does NOT apply to the total number of persons permitted in your establishment. So if you are a 50-seat restaurant, you are now expected to only fill 25 of those seats. How is this being enforced? What are the penalties for failing to comply? Another unknown. But some food for thought: if, somehow, a spread of infection is ultimately traced back to your place, and you failed to comply with the mandate, we can imagine that notoriety of some sort will follow. As your attorneys, we cannot tell you to disregard rules or laws like these, but failure to comply with this rule may lead to all kinds of unintended consequences. No one wants to be restaurant zero.
Are there consequences if we don’t pay sales tax on March 20, 2020? Do we need to let any governmental agency know first? Is there a process for this?
As of now, there isn’t any guidance. As your lawyers, we must advise you to always pay your taxes. While we expect that NYS will give some level of an abatement in the future, know that the current penalty for failure to pay your taxes timely is 10% of the total tax and interest accrues at 6-7% on the balance due. So while our experience tells us that we can count on some relief for late filing, if you chose to file late as a cash flow decision, while justified and understandable, we cannot guarantee that the government will waive the penalty in the future.
Do you have any more information on the Small Business Loan offered from the City of New York or federal government?
We wish we did. But we do not. We are closely monitoring the guidance as it is released. The city still suggests businesses sign up for emails and to fill out a web based survey, linked here, to obtain additional information. Here is a link to the City’s website discussing the program. Practically at this point, we have no idea when this program will go live. While we hope this program will be up and running soon, you should not rely solely on this program if you need access to capital.
We have three different LLC’s that operate different entities so can we apply for the 75k loan per each LLC?
While there is no restriction at this time from doing so, we advise that once the program is fully operational to follow all requirements and rules. While we do not know the exact requirements, if your entities are joint employers, you do not want to be seen as double dipping into a fund reserved for small businesses.
Can I use space that I do not ordinarily use, e.g., my landlord’s backyard or a neighboring lot?
No. Your operation should continue to operate in conformance with the obligations you agreed to in your lease and represented to the city and other state agencies. Using space and equipment that you do not have permission to use may expose you to civil fines and penalties as well as other liabilities.
Any news on insurance carriers’ evaluations of business interruption coverage with regard to COVID19?
Nothing yet as we don’t believe any claims have been filed. Once they are or guidance is provided, we will of course let you know.
LEASES & BUSINESS CONTRACTS
I get that force majeure clauses are all different, but I don’t understand what my options are under my lease. What can I do?
Remember that force majeure provisions in leases very rarely fully release you of your obligation to pay rent. We know that this seems counterintuitive – and it frankly seems to defeat the whole purpose of a force majeure protection – but these terms are unfortunately pretty straightforward: irrespective of whether this pandemic constitutes a force majeure event under your lease, you cannot, under any circumstances, stop paying your rent or otherwise delay any payments to your landlord.
What about my vendor agreements?
First, please keep in mind that the vast majority of vendor agreements contain a PERSONAL guaranty. So despite the fact that the business is facing financial issues or might ultimately close, you are on the hook for whatever terms are in the agreement. You may have the ability to suspend your obligations – or delay payment – as long as you properly notify the vendor of your decision to invoke your rights under the force majeure clause. Remember that this will likely cut both ways. Your vendors are likely well within their rights to stop providing you with their goods and/or services. Here, it’s important to ensure that they have properly given you advance notice of any change they plan to implement.
My landlord has agreed to abate my rent. Do I need to do anything?
Yes. Make sure the agreement is in writing. A “handshake” agreement in these times is certainly not allowed. Ideally it must be reduced to a written agreement, but in the meantime, make sure its at least in an email acknowledged by your landlord.
My vendors have agreed to change my payment terms. Do I need to do anything?
Yes. Same rules apply. Handshakes are not allowed. Get it in writing.
LIQUOR LICENSE IMPLICATIONS
Can I provide alcohol for takeout or delivery service?
Yes, but this is legally limited to Beer only (but in any format), and you must have a way to prove that the recipient is 21 years of age or older.
What should I do with my liquor license if I’m going to close for good?
If you are going to close permanently, you can surrender your liquor license and receive a pro rata refund for unused time left on the license (takes months to actually receive).
What should I do with my liquor license if I’m going to close temporarily or look to sell my business?
If you’re going to be closed on a temporary basis or you’re going to look to sell your business or move your business, you should place your liquor license into “Safekeeping” with the State Liquor Authority. This is the correct way to handle things if you are not currently open, but do not want to surrender your license for some reason. The SLA keeps it “safe” for you while you figure things out, and you are in no danger of accruing violations for being closed and in no danger of losing your license during this period.
I need to change/modify my concept/layout to survive, what do I do?
There is an SLA application and process to effectuate any and all changes to a licensed premise. And none of them happen instantaneously. We have spoken to the SLA brass, and they’ve indicated a willingness to work with licensees throughout this difficult time. Does that mean that you can convert your restaurant to a nightclub with no recourse? No. But it does mean that they will be likely to expedite applications for licensees looking to be compliant and stay in business. And you will likely see less enforcement during this period. We’re available to help you navigate these types of things. Just email or call.
I have a deadline with a city or state agency related to an application that I filed. I won’t be able to comply due to circumstances out of my control. What are my options?
We’ve spoken to most all City and State agencies that restaurant and bar owners have to deal with, and they’re all willing to be flexible. As a general rule for everything in times like this, it is much better to ask for permission rather than forgiveness. Therefore, it is much preferred to let them know in advance that you cannot comply and need an extension, than to just default or miss your deadline. All agencies have indicated that they are granting extensions of deadlines in a more liberal fashion than they normally do. It is easier for them to do, however, if they are notified BEFORE the deadline.
Can the SLA suspend the COD requirements for late payments to alcohol distributors to allow us to work out payment plans and stay open in the interim?
We recommend dealing directly with the distributors for now. The SLA only renders you COD if a distributor reports you to them. We are tracking this issue and will get back to you.
That’s it for tonight folks. We will be back at you tomorrow with any breaking news and some good forms for you. Hang in there and keep the faith. We will get through this and someday, we will all share a drink or four and just get drunk.
Lee, Megan, Dana, Joseph and David
| HL Clients, So fried. Talking about what’s to come, what to do now, how we’re going to make it through this and when it’s gonna end has left all of our brains completely fried. It’s a lot to process and it’s deeply emotional on so many levels. We are all in this together, so let us help you with the legal stuff so you can plan with some semblance of confidence. –David The following FAQ’s are brought to you by Lee Jacobs and Megan Shaw for the Employment and Workplace issues, Joseph Levey for the Liquor issues, all with the assistance of Dana Lapan. A huge thank you to each and every one of them for busting their asses today! As promised, we’ve made a running list of the questions received over the course of the day, as they specifically relate to how businesses should be responding to the COVID-19 crisis. Our responses have been drafted to be as detailed and cohesive as possible, with the understanding that the legal and regulatory landscape has continued to shift on an hour-to-hour basis. Please keep sending us your questions — you’ve helped us really understand the issues that you’re actually facing — but in order to help us field these as quickly as we can, please send them directly to [email protected]. We will continue tackling the most common questions in our regular email updates, but we are also triaging the more critical questions as quickly as possible. And, of course, if any questions are best addressed by phone, we will reach out and schedule a time to speak ASAP. Many of you have reached out to let us know that you want to share these updates with industry friends and/or partners. Please feel free to send our sign-up link to anyone interested in getting our updates moving forward: https://helbraunlevey.us17.list-manage.com/subscribe?u=363125870e1e07f1f98e80d7e&id=9e51f01418 As a preliminary note, and before we get to the questions you have asked, we are in the process of preparing a number of different templates and forms that you can use for the purposes of notifying your staff of any and all changes that you’ll be implementing in the coming days. We’re also preparing a few basic “scripts” for you to use as the basis for talking to your staff or holding one-on-one employee meetings. We know these conversations can be unbelievably difficult so we want to help you get through it as easily and professionally as possible. We will be sending these templates to you tomorrow through this email distribution list. We’ve categorized your questions below by categories for ease of use, there is a lot of information here to digest so maybe take small bites. WORKPLACE HEALTH & SAFETY There is a confirmed case of COVID-19 in my restaurant. What do I have to do? Do I need to call anyone? You are no longer required to contact any government agency after a confirmed (or even suspected) case of COVID-19. However, as a good corporate citizen, you should call 311 to alert them. After doing that you MUST clean and disinfect your shop in accordance with CDC recommendations, https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/cleaning-disinfection.htmlShould you remain open? As of now there is no requirement to fully close upon a positive diagnosis. You must clean and remediate your space. There is no requirement to do a deep clean. However, the state has made very clear that any establishment that fails to maintain proper health and safety protocols can and will be closed. Even if there is no positive diagnosis, employing these steps is a good practice for many reasons in these perilous times. What should I tell my employees? Once an employee is confirmed to have COVID-19, employers must inform their staff of the possible exposure in the workplace, while maintaining confidentiality as required by law. You should inform them that you are following all CDC and local standards regarding remediation and are confident that you have taken all steps to continue to remain open without endangering them or your customers. Remind your employees that they are required to continue to maintain safe hygiene protocols. Wash their hands frequently. Cover their mouths when coughing, sneezing etc., with a tissue or elbow. Should they feel ill or become ill, they are to let you know immediately. Let them know that your priority remains ensuring a safe and happy workplace for them so that you can continue providing the best service to your customers and guests. Of course, should they have any questions or concerns, they should contact you. We are all in this together. Can we require a doctor’s note or clearance to allow someone to work? For many reasons, no. But this seems to be an impracticability. All media reports indicate that there is a shortage of tests. Some employees do not have health insurance or cannot afford paying for a doctor. Even still, someone may have the virus but not show any symptoms and therefore not even consider being tested. Best practices indicate sending home those that are showing any symptoms and pay them with cut/call-in pay to be supplemented with sick time—and then do not let them return to work until the symptoms have abated. The best thing we can do is to continue using best cleaning practices to prevent the transmission of the disease. Now that this has been declared a pandemic. Can we ask an employee to stay home or leave work if they exhibit symptoms of the COVID-19 coronavirus or the flu? Yes, the CDC states that employees who exhibit symptoms of influenza-like illness at work during a pandemic should leave the workplace. So if someone is exhibiting symptoms, even cold like symptoms, you can ask them to return or stay home. If they have reported to work and you are cutting them, you will have to pay them call-in/cut pay. If an employee has any accrued sick time under the New York City Sick and Safe Time Act they are eligible to use those hours. Otherwise, as of now, you are under no obligation to pay them any compensation. This may change as new rules are enacted by the government. During the H1N1 pandemic, the Equal Employment Opportunity Commission (EEOC) stated that advising workers to go home is not disability-related if the symptoms present are akin to the seasonal influenza or the H1N1 virus. Therefore, an employer may require workers to go home if they exhibit symptoms of the COVID-19 coronavirus. Can I take an employee’s temperature at work to determine whether they might be infected? While the answer to this question is technically now yes, we think that this may just ultimately provide you with a false sense of security. Under normal circumstances, taking an employee’s temperature may be unlawful if it is not job-related or considered a business necessity. However, the EEOC’s position during a pandemic is that employers should rely on the latest CDC and state or local public health assessments to determine whether the pandemic rises to the level of a “direct threat.” Now that the COVID-19 coronavirus has become widespread in our community, employers may take an employee’s temperature at work. However, as a practical matter, an employee may be infected with the COVID-19 coronavirus without exhibiting recognized symptoms such as a fever, so temperature checks may not be the most effective method for protecting your workforce. EMPLOYEES & STAFF REDUCTIONS Is the minimum wage being reduced? What about the tip credit? No. Minimum wage remains at $15.00/hour. The tip credit remains at $5.00/hour ($2.50/hour for delivery drivers and service employees) for ALL New York City Employers. For those employers that are currently availing themselves of the tip credit, please remember that your employees must be reaching that full $15.00 minimum wage threshold for all hours worked. If, at any point, tips don’t make up that difference, you must make up the shortfall. The President and Vice President just announced paid family leave, do you have more information? This is literally breaking news, but we know that these bills are working their way through Congress. Once we have more details, you will be the first to know. We can tell you that it appears that the government is requiring that any and all employees affected by COVID-19 will be compensated for 80 hours of paid sick leave. Who is actually paying for this? And how is that money being paid? We hate to say it, but we still don’t know the answer to this. We understand the extreme impact that this will have on your business and we are closely monitoring this issue. Can I furlough, layoff, or terminate my employees? Can I remain open with limited staff? Can I reduce the number of hours? Yes. Please see https://helbraunlevey.wpengine.com/coronavirus/ for more information. It’s important to remember that a decision to “close” for business does not necessarily mean that your business has to shutter its doors forever. While each situation is different, and you would need to consult with one of our attorneys before you change your employees’ status, we are advising that you make adjustments of a temporary nature, usually in the form of a temporary lay off. This gives you flexibility to react to any forthcoming changes without hopefully having to start from scratch. Can I cut my manager’s salaries? Yes. However, if you do, you must provide your manager (or any employee whose wages are changing) with all required notifications under law about the change in their pay. As a reminder all exempt employees must make a minimum of $1,125.00/week in order to be exempt from overtime requirements. If an exempt employee’s salary falls below that minimum threshold, you must convert them to an hourly employee and then pay them all applicable overtime. Can I switch everyone over to direct deposit? No. Under current law, you cannot require your employees to be paid via direct deposit. You also cannot terminate an employee that won’t agree to be paid by direct deposit. As a reminder, you must pay every employee for all hours worked. Can I terminate some employees and not others? Yes. See https://helbraunlevey.wpengine.com/coronavirus for more information. That being said, as you determine which employees are being retained, laid off, or terminated, be sure that your decision-making process is something that can be easily understood by your staff. It must be clear to your employees that your decisions are being made not for inappropriate reasons (i.e., race, sex, playing favorites), but for the right ones (i.e., seniority, essential to operations). What is the best way to continue to pay floor staff? Can I co-mingle tip pools? Subsidize BOH with FOH tips? You must continue all regular payroll practices. There are no changes to your current payroll practices. You cannot alter or modify your tip pools beyond what is permitted under law. Should I pay my staff in cash? This is never a good idea. However, in very limited circumstances like these, you can pay them in cash as long as they are being paid for all hours worked and you provide them with a paystub that includes all information mandated by law. You must also be sure to have your employee acknowledge receipt of the cash payment, signing off specifically on the exact amount of cash that was paid. Have there been any changes to Unemployment Insurance? Yes. The exact details are being fleshed out, but we expect the government to waive measures like work search requirements or waiting periods for those individuals that have either been diagnosed with COVID-19 or have lost their jobs as a result of the pandemic. We also expect that the government will require you to provide a notice to your affected employees about their unemployment insurance rights. The specific nature of the notice is still essentially undefined, but we expect to have some answers for you in the coming days. Unemployment claims can be filed online through this link. Additional information can be found here. BUSINESS & OPERATIONAL CONCERNS We are a 50-seat restaurant. How many similar restaurants in your client list have closed? All of our clients, regardless of size, are dealing with this crisis in different ways and reacting accordingly to their specific needs. Many of our clients are continuing to operate with reduced staffing, hours, and/or menu offerings. Others are moving to delivery only models. Some are temporarily closing. Please reach out to us to help you find the path that works best for you and your business. Governor Cuomo announced that the legal capacity of any venue which seats less than 500 people must be reduced by 50%, which went into effect at 3:00 pm on March 13, 2020. So, what does “legal capacity” mean in this situation? Based on the Governor’s speech and clarification thereafter, this reduction applies ONLY to your seating count. It does NOT apply to the total number of persons permitted in your establishment. So if you are a 50-seat restaurant, you are now expected to only fill 25 of those seats. How is this being enforced? What are the penalties for failing to comply? Another unknown. But some food for thought: if, somehow, a spread of infection is ultimately traced back to your place, and you failed to comply with the mandate, we can imagine that notoriety of some sort will follow. As your attorneys, we cannot tell you to disregard rules or laws like these, but failure to comply with this rule may lead to all kinds of unintended consequences. No one wants to be restaurant zero. Are there consequences if we don’t pay sales tax on March 20, 2020? Do we need to let any governmental agency know first? Is there a process for this? As of now, there isn’t any guidance. As your lawyers, we must advise you to always pay your taxes. While we expect that NYS will give some level of an abatement in the future, know that the current penalty for failure to pay your taxes timely is 10% of the total tax and interest accrues at 6-7% on the balance due. So while our experience tells us that we can count on some relief for late filing, if you chose to file late as a cash flow decision, while justified and understandable, we cannot guarantee that the government will waive the penalty in the future. Do you have any more information on the Small Business Loan offered from the City of New York or federal government? We wish we did. But we do not. We are closely monitoring the guidance as it is released. The city still suggests businesses sign up for emails and to fill out a web based survey, linked here, to obtain additional information. Here is a link to the City’s website discussing the program. Practically at this point, we have no idea when this program will go live. While we hope this program will be up and running soon, you should not rely solely on this program if you need access to capital. We have three different LLC’s that operate different entities so can we apply for the 75k loan per each LLC? While there is no restriction at this time from doing so, we advise that once the program is fully operational to follow all requirements and rules. While we do not know the exact requirements, if your entities are joint employers, you do not want to be seen as double dipping into a fund reserved for small businesses. Can I use space that I do not ordinarily use, e.g., my landlord’s backyard or a neighboring lot? No. Your operation should continue to operate in conformance with the obligations you agreed to in your lease and represented to the city and other state agencies. Using space and equipment that you do not have permission to use may expose you to civil fines and penalties as well as other liabilities. Any news on insurance carriers’ evaluations of business interruption coverage with regard to COVID19? Nothing yet as we don’t believe any claims have been filed. Once they are or guidance is provided, we will of course let you know. LEASES & BUSINESS CONTRACTS I get that force majeure clauses are all different, but I don’t understand what my options are under my lease. What can I do? Remember that force majeure provisions in leases very rarely fully release you of your obligation to pay rent. We know that this seems counterintuitive – and it frankly seems to defeat the whole purpose of a force majeure protection – but these terms are unfortunately pretty straightforward: irrespective of whether this pandemic constitutes a force majeure event under your lease, you cannot, under any circumstances, stop paying your rent or otherwise delay any payments to your landlord. What about my vendor agreements? First, please keep in mind that the vast majority of vendor agreements contain a PERSONAL guaranty. So despite the fact that the business is facing financial issues or might ultimately close, you are on the hook for whatever terms are in the agreement. You may have the ability to suspend your obligations – or delay payment – as long as you properly notify the vendor of your decision to invoke your rights under the force majeure clause. Remember that this will likely cut both ways. Your vendors are likely well within their rights to stop providing you with their goods and/or services. Here, it’s important to ensure that they have properly given you advance notice of any change they plan to implement. My landlord has agreed to abate my rent. Do I need to do anything? Yes. Make sure the agreement is in writing. A “handshake” agreement in these times is certainly not allowed. Ideally it must be reduced to a written agreement, but in the meantime, make sure its at least in an email acknowledged by your landlord. My vendors have agreed to change my payment terms. Do I need to do anything? Yes. Same rules apply. Handshakes are not allowed. Get it in writing. LIQUOR LICENSE IMPLICATIONS Can I provide alcohol for takeout or delivery service? Yes, but this is legally limited to Beer only (but in any format), and you must have a way to prove that the recipient is 21 years of age or older. What should I do with my liquor license if I’m going to close for good? If you are going to close permanently, you can surrender your liquor license and receive a pro rata refund for unused time left on the license (takes months to actually receive). What should I do with my liquor license if I’m going to close temporarily or look to sell my business? If you’re going to be closed on a temporary basis or you’re going to look to sell your business or move your business, you should place your liquor license into “Safekeeping” with the State Liquor Authority. This is the correct way to handle things if you are not currently open, but do not want to surrender your license for some reason. The SLA keeps it “safe” for you while you figure things out, and you are in no danger of accruing violations for being closed and in no danger of losing your license during this period. I need to change/modify my concept/layout to survive, what do I do? There is an SLA application and process to effectuate any and all changes to a licensed premise. And none of them happen instantaneously. We have spoken to the SLA brass, and they’ve indicated a willingness to work with licensees throughout this difficult time. Does that mean that you can convert your restaurant to a nightclub with no recourse? No. But it does mean that they will be likely to expedite applications for licensees looking to be compliant and stay in business. And you will likely see less enforcement during this period. We’re available to help you navigate these types of things. Just email or call. I have a deadline with a city or state agency related to an application that I filed. I won’t be able to comply due to circumstances out of my control. What are my options? We’ve spoken to most all City and State agencies that restaurant and bar owners have to deal with, and they’re all willing to be flexible. As a general rule for everything in times like this, it is much better to ask for permission rather than forgiveness. Therefore, it is much preferred to let them know in advance that you cannot comply and need an extension, than to just default or miss your deadline. All agencies have indicated that they are granting extensions of deadlines in a more liberal fashion than they normally do. It is easier for them to do, however, if they are notified BEFORE the deadline. Can the SLA suspend the COD requirements for late payments to alcohol distributors to allow us to work out payment plans and stay open in the interim? We recommend dealing directly with the distributors for now. The SLA only renders you COD if a distributor reports you to them. We are tracking this issue and will get back to you. That’s it for tonight folks. We will be back at you tomorrow with any breaking news and some good forms for you. Hang in there and keep the faith. We will get through this and someday, we will all share a drink or four and just get drunk. Lee, Megan, Dana, Joseph and David |
