News

At MacElree Harvey, the health and well-being of our clients and employees are of the utmost importance. We are still trying to understand the impacts of COVID-19 and the community’s efforts to flatten the curve of infection, but it appears clear that ‘social distancing’ will be the new normal for at least the next few weeks.  This will temporarily change the way we work with clients to prepare and sign estate planning documents, but it will not make drafting or changing a plan impossible.

Now more than ever, it is important to review your estate plan and confirm it still meets your present intentions. Although circumstances have changed, we are still working diligently to ensure our clients can get the critical estate planning documents they need, and we have invoked the use of phone and video conferencing to meet, review, and assist clients with executing documents.

As we invoke these temporary changes to assist clients over the next few weeks, it is important to understand the signing requirements for what we refer to as the critical estate documents. These documents include the following:

• Last Will and Testament
• Durable Power of Attorney for Finances
• Health Care Power of Attorney and Living Will

Last Will and Testament

In Delaware, a valid Will must be in writing and signed by the Testator in the presence of two credible witnesses. Delaware permits a beneficiary under the Will to sign as a Witness.  In Pennsylvania, a valid Will must be in writing and signed by the Testator at the end of the document, but witnesses are not required.

In both states, the Will may be made “self-proved” by a Self-Proving Affidavit of the Testator and two witnesses in front of a Notary Public, which simplifies the probate process.  However, if you are unable to access a Notary during this time, a valid Will can still be executed without a Self-Proving Affidavit.

Durable Power of Attorney for Finances

In Delaware, a Durable Power of Attorney must be in writing, signed by the Principal, dated, and signed in the presence of one disinterested witness and a Notary Public.  In Pennsylvania, a Durable Power of Attorney must be in writing, signed by the Principal, dated, and signed in the presence of two witnesses (who may not be the agent designated in the power of attorney) and a Notary Public.

Health Care Power of Attorney and Living Will

In both Delaware and Pennsylvania, a Health Care Power of Attorney and Living Will must be in writing, signed by the Principal, dated, and signed in the presence of two disinterested witnesses. Notarization is recommended but not required.

In addition to executing critical estate planning documents, we also encourage clients to review beneficiary designations on any life insurance policies and retirement assets.  These designations overrule the terms in a Will, so it is critical they be reviewed and updated accordingly as part of this process.

At this time, our Pennsylvania offices remain operational and we are assisting our clients virtually.  In addition, our Delaware office is open and available for in-person execution of these critical documents.  Alternatively, and to ensure everyone’s continued health and safety, we can prepare critical estate documents by phone, video conferencing, and email.  Once the documents are finalized, we can either email or mail the documents with signing instructions, and also be available by phone or video conferencing to oversee the signing to make sure the documents are signed according to law and become valid.

We will always recommend that critical estate planning documents be signed, witnessed, and notarized in our presence, but we understand that the next few weeks will present challenges, and those challenges should not preclude someone from having the opportunity to draft or change their estate plan.  We remain willing and ready to assist our clients and to provide peace of mind during this uncertain time. 

If you have questions or need assistance please contact Tara Stark  at [email protected] for any Delaware related questions or Stephen Porter at [email protected] for any Pennsylvania related questions.  Thank you.

The ongoing Coronavirus (COVID-19) pandemic has severely impacted domestic and international economies alike and threatens the continued viability of supply chains and business operations across various industries for the foreseeable future. 

As a result of the economic uncertainty and instability brought about by the current pandemic, companies of all sizes have been forced to grapple with the tangible reality that they may be unable to comply with existing contractual obligations.  Generally speaking, the failure to perform under a contract exposes the non-performing party to liability under the doctrines of contract law.  Nevertheless, exigent circumstances, such as those currently brought about by the Coronavirus (COVID-19) may present certain exceptions that may excuse or suspend a party’s obligation to perform under a contract.  Because of various disruptions to supply chains and business operations, companies have considered invoking the force majeure clauses contained in their contracts because it may not be possible for these companies to perform under their respective contracts for reasons beyond their control.   

A. What is a “force majeure” and how does it impact contractual relationships?

A “force majeure” is an event that can neither be anticipated or controlled, especially an unexpected event that prevents someone from doing or completing something that he or she had agreed to do.  The term includes both acts of nature (such as floods and hurricanes) and acts of people (such as riots, strikes, and wars).  In the business context, a force majeure provision excuses or suspends a party’s performance under the agreement to the extent that the failure to perform is due to certain extreme circumstances such as Acts of God, hurricanes, earthquakes, epidemics, pandemics, and other events outside that party’s control.  Indeed, in order to invoke a force majeure event as a basis for non-performance of a contractual obligation, the alleged event must have been beyond the non-performing party’s control and not due to any fault or negligence of the non-performing party. 

B. What does a force majeure provision contain?

While force majeure provisions vary, these provisions typically contain language which excuses one or both of the parties from performing under the contract when one of the force majeure events, specified in the contract, comes to fruition.  Due to the fact that parties to a contract typically negotiate as to what constitutes a force majeure event, the list of events excusing performance will vary by contract. 

Further, in order for the party impacted by the force majeure event to be excused from performance under the contract, the force majeure provision may contain language requiring the impacted party to notify the other party of the occurrence of a contractually-specified force majeure event.  Alternatively, the force majeure provision may contain language obligating the impacted party to take reasonable steps to mitigate the effects of the force majeure event when it occurs.   

Moreover, force majeure provisions may contain language providing a remedy, such as the ability of the non-impacted party to terminate the agreement, without subjecting itself to liability for breaching the contract, if the force majeure event lasts for a certain period of time, for example.

C. What if the force majeure provision is broadly worded to include any unforeseen event?

Nevertheless, there are instances where a force majeure provision is drafted to include “open-ended” or “catch-all” language, which is designed to capture a vast array of unforeseeable events that are not specifically set forth in the contract.  For example, a provision could provide that force majeure events “include, but are not limited to, hurricanes, wars, or tornadoes.”  Here, while a “pandemic” is not specifically listed, the inclusion of the phrase “includ[ing], but not limited to,” potentially allows a “pandemic” to form the basis of excusable non-performance under the contract.    

In circumstances, such as that demonstrated above, the court will ordinarily determine whether the force majeure provision is ambiguous as a matter of law.  In the case of an “open-ended” or “catch-all” provision, ambiguity can become an unlikely asset for an impacted party.  In fact, absent a finding that a contractual provision (such a force majeure provision) is ambiguous, the court will only look to the language of the contract to determine the outcome of a contract dispute.  If a court determines that a contractual provision is ambiguous, the court will interpret that ambiguous provision in light of the extrinsic evidence offered by the parties in support of their respective interpretations.      

D. What if my contract does not contain a force majeure provision?

Absent a force majeure provision, a party impacted by an unforeseen event may consider invoking the doctrines of impossibility or impracticability of performance to excuse non-performance under a contract. 

Generally speaking, when promised performance becomes impracticable because of some extreme or unreasonable difficulty, expense, injury, or loss, the doctrine of impossibility is available to excuse non-performance.  For example, section 2-615(a) of the Uniform Commercial Code (UCC) excuses a seller for untimely delivery or non-delivery of goods where the seller’s performance has become impracticable by, among other things, the occurrence of an event that the contract assumed would not occur.  In Pennsylvania, section 2-615 of the UCC has been adopted at 13 Pa.C.S. § 2615.

E. Conclusion

As companies navigate increasingly unchartered territory in light of the Coronavirus (COVID-19) pandemic, the viability of continued business operations will depend, in large part, on a company’s ability to adapt to rapidly-changing supply chain and market conditions.  Evaluation of force majeure provisions will prove to be an invaluable part of any company’s risk mitigation strategy during the current health crisis. 

Because force majeure provisions, like countless other contractual provisions, present various complexities that require consideration of numerous business and legal factors, it is imperative that a company evaluating a force majeure provision consult with experienced corporate counsel.  In instances where a contract does not contain a force majeure provision, the need for experienced legal counsel is even greater. 

For further information regarding the various business continuity issues presented by the Coronavirus (COVID-19) pandemic, contact MacElree Harvey, Ltd.’s COVID-19 response team at [email protected].

¹ See FORCE MAJEURE, Black’s Law Dictionary (11th ed. 2019).

² Id.

³ Force Majeure Clauses: Key Issues, Practical Law Practice Note 5-524-2181

⁴ See Martin v. Com., Dep’t of Envtl. Res., 120 Pa.Cmwlth. 269, 273, 548 A.2d 675, 678 (Pa. Cmwlth. 1988).

⁵ STI Oilfield Servs., Inc. v. Access Midstream Partners, 2017 WL 889541, at *12 (M.D. Pa. Mar. 6, 2017) (citing Hutchison v. Sunbeam Coal Corp., 519 A.2d 385, 390 (Pa. 1986)).

⁶ Driscoll v. Arena, 2019 PA Super 190, 213 A.3d 253, 259 (Pa. Super. 2019).

⁷ STI Oilfield Servs., Inc. v. Access Midstream Partners, 2017 WL 889541, at *12 (M.D. Pa. Mar. 6, 2017) (citing Sanford Inv. Co. v. Ahlstrom Machinery Holdings, Inc., 198 F.3d 415, 421 (3d Cir. 1999)).

⁸ Albert M. Greenfield & Co., Inc. v. Kolea, 475 Pa. 351, 355, 380 A.2d 758, 759 (Pa. 1977)

⁹ Force Majeure Clauses: Key Issues, Practical Law Practice Note 5-524-2181.

As we all know, Pennsylvania’s Governor, Tom Wolf, ordered all “non-life sustaining” businesses to be closed effective 8:00pm on Thursday, March 19, 2020.  Although the list of “life-sustaining” businesses was expanded late on Friday, March 20^th, the reality of the situation is that most businesses are required to close, there is a hard deadline for closures beginning Monday, March 23, 2020, and business owners that do not adhere to this order could be subject to fines, loss of business licenses, criminal penalties, and the ability to file for and receive disaster aid.

A common question clients are asking is whether or not insurance coverage is a viable mechanism to recover lost profits.  Business interruption insurance, also known as business income insurance, is a type of insurance that covers the loss of income that a business may suffer after a disaster.  Although some business insurance policies do include this coverage, it is usually not automatically contained in every policy and the coverage provided varies widely from policy to policy. Every business owner will have to review their individual policy to determine what may be covered.

Business income policies usually require physical damage to qualify for loss of business income. For example, if a business was to suffer a fire loss that business could also make a claim for loss of income as the property is being rebuilt.  The issue with COVID-19 is that a virus in and of itself does not typically constitute physical damage, although there is some case law supporting the notion that “harmful substances” at or on a property can constitute “property damage.”  See Gregory Packaging, Inc. v. Travelers Prop. Cas. Co. of Am., 2014 WL 6675934 (D.N.J. Nov. 25, 2014).  This may not be helpful for businesses that are closed simply for the threat of spreading a virus, and don’t necessarily have the virus present and a contamination issue.  In addition, many insurance policies often include specific exclusions for viruses and other biological agents from standard coverage. So, even if the coronavirus was to constitute physical damage, recovery could still be precluded by the policy itself.

While it may seem as though the possibility of recovery is slim; all may not be lost.  Some states are proposing legislation to assist businesses seeking coverage.  New Jersey, for instance, has proposed legislation to override the “virus” exclusion contained in many policies and we understand that Pennsylvania’s legislature may look at similar changes.

We are recommending that all business owners review their insurance policies carefully to determine if they have coverage. It will also be important to know the answer to that question if you are going to seek any state or federal grants or emergency aid because most applications for state and federal relief programs, including the SBA Emergency Loan Program, will ask if you have coverage. 

We are happy to assist businesses with reviewing and analyzing what their policies cover.  As circumstances continue to evolve regarding COVID-19, we will continue to monitor this issue and will provide updates as they are available.

Please send an email to [email protected] and we will direct your question to the appropriate attorney.

– MacElree Harvey COVID-19 Response Team

We are sure many of you are aware that yesterday Congress passed a COVID-19 relief bill
which includes funding for the SBA’s Economic Injury Disaster Loan Program. Those funds are
targeted for businesses which have been adversely impacted by the COVID-19 pandemic.
We have been in touch with elected officials and local SBA lenders and wanted to provide our
clients with some more detailed information about the SBA Economic Injury Disaster Loan
program, including who qualifies, loan terms and application requirements.

Locally, the SBA Emergency Loans are available to small businesses and nonprofits operating
in Chester and Delaware County, Pennsylvania (we believe other Pa. counties are included, but
that is not reflected yet on the PA website), the State of Delaware, the Maryland counties that
are immediately contiguous with Delaware and Chester County and Gloucester and Salem
County, New Jersey. Any small business or non-profit which cannot meet its ordinary and
necessary financial obligations due to COVID-19 can apply for a working capital loan.
SBA Emergency Loans cannot be used to refinance existing debt. We will issue a separate
COVID-19 Response Team update on payment deferments for existing SBA Loans, but the
guidance on those deferments is still evolving.

Under the SBA Emergency Loan program, the maximum loan amount available is $2,000,000
(although we expect most loans will be much smaller) and the maximum interest rate for
businesses is 3.75% and 2.75% for non-profits. The loan term can be as long as 30 years. The
amount of the loan is a function of the economic injury incurred and may be affected by other
emergency loans granted by the SBA in our area. The rate and term are based on the financial
condition of each borrower.

Loan approvals are based on credit history and repayment ability. We do not know how
repayment ability will be assessed given the dynamic nature of this situation, but we hope that
the SBA will be flexible when approving loans. The loans will be secured by collateral and a
personal guaranty will be required.

Small businesses which have defaulted on their SBA loans are not be eligible for the SBA
Emergency Loan Program.

You can apply for an SBA Emergency Loan online and by mail. While we strongly encourage
you to apply online, we have attached a link to the application so you can see the type of
information that will be required by the SBA.

When you apply, you will be required to provide your business and personal tax returns,
insurance information and a personal financial statement. You will also be asked if you have
Business Interruption Insurance, so check with your insurance broker to be sure business
interruption coverage is not available before you apply.

You can apply for an SBA Emergency Loan online here: https://disasterloan.sba.gov/ela/
You can apply by mail or see the type of information that you will be asked to provide here: https://disasterloan.sba.gov/ela/Documents/Disaster%20Business%20Loan%20Application%20
(SBA%20Form%205).aspx

If you have questions about the SBA Emergency Loan Program, or would like assistance with
your application, please send an email to [email protected].

On March 18, 2020, the President signed the Families First Coronavirus Response Act, an economic stimulus plan aimed at addressing the impact of the COVID-19 outbreak on Americans and introducing paid sick leave and an expanded family and medical leave act to the nation’s employers.

While the law includes some stimulus items, the key components of the law contain provisions which apply to employers, such as paid sick leave for employees impacted by COVID-19 and those serving as caregivers for individuals with COVID-19. 

The employment-related aspects of the law are divided into 2 components: First, there is an entirely new law—The Emergency Paid Sick Leave Act (“EPSLA”)—that temporarily mandates workers be paid their full wages for up to 2 weeks when they are unable to report to work for coronavirus-related reasons. The second component is The Emergency Family and Medical Leave Expansion Act (“EFMLEA”)- an emergency expansion of the Family Medical Leave Act (“FMLA”).

Below are answers to anticipated questions regarding both aspects of the legislation.

THE EMERGENCY PAID SICK LEAVE ACT

What is the applicability of the EPSLA? The EPLSA allows an eligible employee to take paid sick leave because the employee is: 

1. subject to a federal, state or local quarantine or isolation order related to COVID-19; 
2. advised by a health care provider to self-quarantine due to COVID-19 concerns; 
3. experiencing COVID-19 symptoms and seeking medical diagnosis; 
4. caring for an individual subject to a federal, state or local quarantine or isolation order or advised by a health care provider to self-quarantine due to COVID-19 concerns;
5. caring for the employee’s child if the child’s school or place of care is closed or the child’s care provider is unavailable due to public health emergency; or
6. experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

What employers are subject to the EPSLA? The EPSLA will apply only to businesses with fewer than 500 employees and will apply to all employees—regardless of whether they are full-time or part-time.

How much will employers need to pay employees who need to take leave under the EPSLA? The employer is required to provide up to two weeks of paid sick leave for full-time and part-time employees (at the employee’s regular rate and regardless of the employee’s duration of employment prior to leave) who need time off for any of the coronavirus-related qualifying reasons listed in 1, 2 or 3 listed above or two-thirds the employee’s regular rate to care for qualifying reasons 4, 5, or 6 listed above.

How much EPSLA leave can an employee take under the EPSLA? Full-time employees are entitled to take up to 80 hours of leave. Part-time employees are entitled to leave based on the average number of hours they work in a given two-week period. If the part-time employee’s hours change from week to week, employers must determine the average number of hours worked during the prior 6 months and provide leave equal to the number of hours they typically work in a two-week period. If EPSLA leave is no longer needed by the employee, benefits cease on the next regularly scheduled payday.

Will employers be repaid for providing these benefits? Yes. Employers will be repaid in the form of certain dollar for dollar tax credits. The legislation allows for refundable tax credits in “an amount equal to 100% of the qualified” sick leave paid by the employer for each calendar quarter. The credit can be taken against the employer’s portion of the Social Security taxes. However, there are some caps and limits. Specifically, the refund for sick leave is capped at $511/day for qualifying events 1-3 above and at $200/day for qualifying events 4-6 above. There will effectively be a two week cap on the credit for sick leave (which comports with the fact that the statute only provides for two weeks of paid sick leave).

What is the applicability of my existing sick leave policy? The EPSLA takes precedence over all existing policies and may be in addition to any paid sick leave currently provided by employers. The employer is not allowed to require employees to utilize existing policies in lieu of EPLSA benefits.

Is there a cap on sick leave benefits? Yes. Paid sick leave wages are limited to $511 per day up to $5,110 total per employee for their own use and to $200 per day up to $2,000 total to care for others.

Am I able to require my employee to use accrued Paid Time Off (“PTO”) or vacation pay in lieu of benefits under the EPSLA? No. The law is specifically designed to ensure employees will not be required to use PTO or vacation time to deal with coronavirus-related leave.

Am I allowed terminate an employee because they seek leave under the EPSLA? No. The EPSLA specifically contains provisions that prohibit employers from terminating an employee seeking EPSLA benefits.

Will there be required postings that must be displayed? Yes. A model poster will be released soon by the Secretary of Labor, and it will need to be posted in a conspicuous place.

What if I fail to comply with the EPSLA? Employers who fail to comply with the EPSLA will be deemed to have violated the minimum wage requirements of the Fair Labor Standards Act and will be subject to fines and penalties. For those employers that willfully violate the EPSLA, they will be subjected to liquidated damages.

What is the effective date and expiration date of the EPSLA? The EPSLA will become effective on April 1, 2020 and remain in effect until December 31, 2020. 

THE EMERGENCY FAMILY AND MEDICAL LEAVE EXPANSION ACT

What employers are subject to the EFMLEA? The EFMLEA will apply only to businesses with fewer than 500 employees and will apply to all employees—regardless of whether they are full-time or part-time who have been employed by the employer for at least 30 days prior to the designated leave. However, the Act now includes language allowing the Secretary of Labor to exclude healthcare providers and emergency responders from the definition of employees who can take such leave, and to exempt small businesses with fewer than 50 employees if the required leave would jeopardize the viability of their business. 

What are the types of events that will trigger the EFMLEA?  Any individual employed by the employer for at least 30 days (before the first day of leave) may take up to 12 weeks of job-protected leave to allow an employee, who is unable to work or telework, to care for the employee’s child (under 18 years of age) if the child’s school or place of care is closed or the childcare provider is unavailable due to a public health emergency.

What are the pay requirements for employees taking leave under the EFMLEA?  The first 10 days (rather than 14 days) of EFMLEA may be unpaid. During this 10-day period, an employee may elect to substitute any accrued paid leave (like vacation or sick leave) to cover some or all of the 10-day unpaid period, however, the employer cannot require the employee to substitute paid leave. After the 10-day period, the employer is required to pay full-time employees at two-thirds the employee’s regular rate for the number of hours the employee would otherwise be normally scheduled. The new Act limits this pay entitlement to $200 per day and $10,000 in the aggregate per employee.  

How do I calculate pay for Part- Time employees?  Employees who work a part-time or an irregular schedule are entitled to be paid based on the average number of hours the employee worked for the six months prior to taking leave under the EFMLEA. Employees who have worked for less than six months prior to leave are entitled to the employee’s reasonable expectation at hiring of the average number of hours the employee would normally be scheduled to work. 

Will I have to hold the employee’s job open for them until they return? With some limited exceptions, yes. The regular rules under the FMLA will apply to job reinstatement. Employers with 25 or more employees will have the same obligation as under traditional FMLA to return any employee who has taken EFMLEA leave to the same or equivalent position upon the return to work. However, employers with fewer than 25 employees are generally excluded from this requirement if the employee’s position no longer exists following the EFMLEA leave due to an economic downtown or other circumstances caused by a public health emergency during the period of EFMLEA leave. This exclusion is subject to the employer making reasonable attempts to return the employee to an equivalent position and requires an employer to make efforts to return the employee to work for up to a year following the employee’s leave.

What is the effective date and expiration date of the EFMLEA? The EFMLEA will become effective on April 1, 2020 and remain in effect until December 31, 2020. 

Tax Credits for Paid Sick and Paid Family and Medical Leave under the EPSLA and EFMLEA

There are a series of refundable tax credits available to employers who are required to provide paid sick leave and emergency paid family and medical leave. The tax credits are allowed against the employer portion of Social Security taxes. If the tax credits exceed the employer portion of Social Security taxes, employers will be reimbursed if their costs for qualified sick leave or qualified family leave wages exceed the taxes they would owe.

Employers are entitled to a refundable tax credit equal to 100% of the qualified sick leave wages paid by employers for each calendar quarter. The qualified sick leave wages are capped at $511 per day ($200 per day if the leave is for caring for a family member or child) for up to 10 days per employee in each calendar quarter. 

Employers are entitled to a refundable tax credit equal to 100% of the qualified family leave wages paid by employers for each calendar quarter in accordance with the EFMLEA. The qualified family leave wages are capped at $200 per day for each individual up to $10,000 total per calendar quarter. Only those employers who are required to offer EPSLA and EFMLEA may receive these credits.

If an employer cannot afford the payments, their only options at this point seem to be borrowing the money or petitioning the Secretary of Labor for an exemption from the new law based on there being a substantial risk that you will go out of business if you are forced to comply with this new law.

If we can assist you with determining how EPSLA or EFMLEA apply to you or your business, please send an email to [email protected].