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Warner Norcross + Judd LLP is a corporate law firm with over 230 attorneys serving clients in nine offices throughout Michigan. Among the largest law firms in Michigan, Warner works in virtually all areas of business law.

Michigan Law Firm - Warner Norcross + Judd LLP

As the COVID-19 crisis introduced a wide array of regulations and orders, Warner attorneys provided clarification and guidance to our clients and the business community in the form of eAlerts which announced recent legal updates, and webinars which provided further clarity on specific issues and topics. As questions emerged during the crisis, Warner published a Question of the Day, to offer more timely responses to the pressing issues faced by businesses during COVID-19. The following is a compilation of those questions and accompanying answers, listed by date and practice area. We hope you find this information helpful and urge you to contact your Warner attorney directly or email us at covid@wnj.com if you would like to discuss your specific legal needs.

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The information provided below in these Q&amp;As is intended for general information purposes only, is not intended to provide legal advice on any specific facts and circumstances, and does not give rise to an attorney-client relationship. The information is current as of the time the question is posted and subject to change. If you have questions regarding the application of this information to you or your business, contact your Warner attorney directly.

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White Collar Criminal Defense and Investigations

What can I do if I cannot file my complaint, counter-complaint or cross claim before the statute of limitations expires?

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April 22 2020 Appellate and Supreme Court

In Administrative Order 2020-3, the Michigan Supreme Court delayed “all deadlines applicable to the commencement of all civil and probate case[s]” in Michigan courts, including “any statutory prerequisites” to filing an initial pleading, initial responsive pleading, or motion raising a defense or objection to an initial pleading. The practical effect of this Order is to delay all deadlines (including, ostensibly, all statutes of limitations) for filing a complaint, answer, motion or objection related to an initial pleading in civil and probate matters in Michigan courts until after the state of emergency is over. This extension does not apply to criminal matters. In Executive Order 2020-58, the Governor ratified the Supreme Court's extension of the statutes of limitation and time for fulfilling statutory prerequisites for filing a new action. But, we anticipate that after the pandemic is over, the Michigan Supreme Court and the Governor's authority to extend statutes of limitation will be challenged. So we recommend, if at all possible, to file complaints, counter-complaints and cross claims without regard to the Michigan Supreme Court’s extension. For more information, please contact <a href="/people/matthew-t-nelson">Matt Nelson</a> or <a href="/people/brandon-j-cory">Brandon Cory</a>.

I am a creditor holding a mortgage on a significant and sizeable piece of commercial real estate. Unfortunately, the borrower is in default, and workout and forbearance attempts have failed.

Unlike with consumer mortgages, there are currently no prohibitions on foreclosing a commercial mortgage. To the extent consistent with the default and remedies provisions of your mortgage, you may proceed to foreclose by advertisement or judicially. However, there is another option. Under the newly enacted Uniform Commercial Real Estate Receivership Act, MCL 554.1011, you may be able to have a receiver appointed over the commercial real estate and any related personal property. Once appointed, the receiver may continue to run any related business on the property and collect rents. Ultimately, the receiver may sell the property at either a public or private sale. Such a sale is free and clear of junior liens and, most importantly, free and clear of the borrower’s statutory right of redemption, which is typically six months. As a creditor, you may bid at any public sale and offset against the purchase price part or all of the amount secured by your lien. Therefore, seeking a receivership under this Act may be a more efficient and economical way to realize upon your commercial real estate collateral by avoiding the traditional method of foreclosure and redemption.

For a more detailed look at the new Uniform Commercial Real Estate Receivership Act, please click <a href="https://www.wnj.com/News-and-Events/Events/Restructuring-and-Insolvency-Webinar-Series">here </a>and join us for a complimentary webinar on June 15 from 12:00 to 1:00 p.m. as Ralph Colasuonno and Rozanne Giunta discusses this Act and its consequences on the commercial real estate landscape. If you have any questions regarding this topic, please contact Ralph Colasuonno or any member of Warner’s Bankruptcy, Restructuring and Insolvency Practice Group.

I am a party to a contract for the sale of goods and the other party to the contract recently filed for bankruptcy. Can I terminate the contract assuming the other party will no longer perform?

Many contracts include clauses stating that a party can terminate the contract when the other party files for bankruptcy, and so you may think that the answer is a clear “yes.” However, when a company files for bankruptcy, the bankruptcy laws provide that an “automatic stay” immediately takes effect. The automatic stay is very broad and it generally prohibits unilateral termination of contracts even if the applicable contract specifically authorizes termination upon a bankruptcy filing. So the answer to your question is generally “no,” you cannot unilaterally terminate a contract based on the other party filing for bankruptcy. If you do terminate and violate the automatic stay, you could be subject to sanctions by the Bankruptcy Court.

Although unilateral termination of the contract is generally prohibited, it may be possible to obtain Bankruptcy Court approval to obtain “relief from the automatic stay” to allow you to t<a href="/people/jonathan-e-lauderbach">erminate the contract. Whether you can obtain relief from the automatic stay by the Bankruptcy Court will depend upon the facts and circumstances of your case and the statutory requirements. Please contact Jon Lauderbach</a> or <a href="/people/gordon-j-toering">Gordon Toering</a> for more information.

What Michigan counties have implemented required screening measures for Michigan businesses that remain open?

March 29 2020 Business and Corporate

The following counties have implemented required screening and social distancing measures for open businesses. Open businesses must post a copy of the order at the entrances to the facilities. Any special provisions for individual counties are noted below:

Allegan County: The Allegan County Health Department has not adopted required procedures, but has published recommendations. Link:&nbsp;<a href="/wp-content/uploads/2022/04/Allegan-County-Recommendations.pdf" target="_blank" rel="noreferrer noopener">Allegan County Recommendations</a>

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Benzie and Leelanau Counties: Effective April 28, 2020, at 12:00 a.m. through May 15, 2020, at 11:59 p.m. Link:&nbsp;<a href="/wp-content/uploads/2022/04/Benzie-and-Leelanau-County-Order.pdf" target="_blank" rel="noreferrer noopener">Benzie and Leelanau Counties Order</a>

Central Michigan Counties (Arenac, Clare, Gladwin, Isabella, Osceola, Roscommon): The Central Michigan Counties Health Department has not adopted required procedures, but has published recommendations. Link:&nbsp;<a href="/wp-content/uploads/2022/04/Central-Michigan-Counties-Recommendations.pdf" target="_blank" rel="noreferrer noopener">Central Michigan Counties Recommendations</a>

Bay County: Effective April 3, 2020 at 12:00 a.m., no end date listed. Order just has to be visible to all employees. Applies only to critical infrastructure workers, specifically: (a) healthcare workers, (b) first responders, (c) corrections officers, (d) municipal and community water treatment, (e) wastewater, and (f) energy workers. Link:&nbsp;<a href="/wp-content/uploads/2022/04/Bay-County-Order.pdf" target="_blank" rel="noreferrer noopener">Bay County Order</a>

District 4 (Alpena, Cheboygan, Montmorency, Presque Isle): Effective April 6, 2020 at 12:00 p.m. through April 13, 2020 at 11:59 p.m.&nbsp;(EXPIRED)&nbsp;A copy of the order must be distributed to all critical infrastructure workers. Link:&nbsp;<a href="/wp-content/uploads/2022/04/District-4-Counties-Celia-Kaechele-Q-of-the-Day.pdf" target="_blank" rel="noreferrer noopener">District 4 Counties Order</a>

Ingham County: Effective April 13, 2020 at 12:00 p.m. through April 30, 2020 at 11:59 p.m. Employees who answer in the affirmative to screening questions can be allowed to remain at work if asymptomatic. Link:&nbsp;<a href="/wp-content/uploads/2022/04/Ingham-County-Order_1.pdf" target="_blank" rel="noreferrer noopener">Ingham County Order</a>

Ionia County: Effective March 23, 2020, until rescinded or the State Emergency Order is lifted. Order only applies to childcare facilities. Link:&nbsp;<a href="/wp-content/uploads/2022/04/Ionia-County-Order.pdf" target="_blank" rel="noreferrer noopener">Ionia County Order</a>

Kent County: Effective March 22, 2020, until rescinded or the State Emergency Order is lifted. Order only applies to childcare facilities. Link:&nbsp;<a href="/wp-content/uploads/2022/04/Kent-County-Order.pdf" target="_blank" rel="noreferrer noopener">Kent County Order</a>

Lenawee County: Effective April 13, 2020 at 11:59 p.m. through April 30, 2020 at 11:59 p.m.. Link:&nbsp;<a href="/wp-content/uploads/2022/04/Lenawee-County-Order.pdf" target="_blank" rel="noreferrer noopener">Lenawee County Order</a>

Mid-Michigan Counties (Clinton, Gratiot, Montcalm): Effective April 6, 2020, no end date listed. Link:&nbsp;<a href="/wp-content/uploads/2022/04/Mid-Michigan-Counties-Order.pdf" target="_blank" rel="noreferrer noopener">Mid-Michigan Counties Order</a>

Northwest Michigan Counties (Antrim, Charlevoix, Emmet and Otsego): Effective April 10, 2020 at midnight through May 15, 2020, at 11:59 p.m. A copy of the order must be distributed to all critical infrastructure workers. Link:&nbsp;<a href="/wp-content/uploads/2022/04/Northwest-Michigan-Counties-Order.pdf" target="_blank" rel="noreferrer noopener">Northwest Michigan Counties Order</a>

Oakland County: Effective April 14, 2020, at 12:01 a.m. through the expiration of the Michigan Emergency Order. (Michigan EO 2020-42 was rescinded by EO 2020-59 on April 24, 2020, so the Oakland County Order has technically&nbsp;EXPIRED.) Link:&nbsp;<a href="/wp-content/uploads/2022/04/Oakland-County-Order-Celia-Kaechele-Q-of-the-Day.pdf" target="_blank" rel="noreferrer noopener">Oakland County Order</a>

Saginaw County: Effective April 3, 2020 at 12:00 a.m.&nbsp;until rescinded. Link:&nbsp;<a href="/wp-content/uploads/2022/04/Saginaw-County-Order.pdf" target="_blank" rel="noreferrer noopener">Saginaw County Order</a>

Washtenaw County: Effective April 14, 2020 at 12:00 a.m. through April 30, 2020 at 11:59 p.m. Link:&nbsp;<a href="/wp-content/uploads/2022/04/Washtenaw-County-Celia-Kaechele-Q-of-the-Day.pdf" target="_blank" rel="noreferrer noopener">Washtenaw County Order</a>

Wayne County: Effective March 26, 2020 at 7:00 p.m. There is no termination date. The Order does not apply to childcare businesses. Link:&nbsp;<a href="/wp-content/uploads/2022/04/Wayne-County-Order.pdf" target="_blank" rel="noreferrer noopener">Wayne County Order</a>

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Are there any required screening or other measures in place for Michigan businesses that remain open?

March 27 2020 Business and Corporate

Yes.&nbsp; The Michigan Executive Order contemplates that any employer who is bringing employees back to work will adopt protocols to ensure employee safety. It would be prudent for employers to provide information detailing in-office safety measures to employees designated as critical infrastructure workers or minimum basic operations employees along with the notice of that designation. For practical advice, review the&nbsp;<a href="https://www.wnj.com/Publications/Practical-Tips-to-Make-Your-Workplace-Safe-for-Cri">tips</a>&nbsp;from our Labor and Employment Practice Group. In addition, the Oakland County Health Department has implemented required screening and social distancing measures for open businesses effective as of 12:00PM on March 25, 2020 until April 13, 2020. Open business must post a copy of the order at the entrance of the facility. The complete order can be found here:&nbsp;<a href="/wp-content/uploads/2022/04/Washtenaw-County-Health-Department-Order.pdf">Emergency Order 2020-5 for Control of Pandemic</a>. Likewise, the Washtenaw County Health Department has implemented required screening and social distancing measures for open businesses effective as of 6:00PM March 26, 2020, through 11:59PM on April 13, 2020. Open businesses must post a copy of the order at all facility entrances. The complete order can be found here:&nbsp;<a href="/wp-content/uploads/2022/04/Health-Order-for-screening-at-businesses-2020-05.pdf">Public Health Emergency Order</a><a href="iwl:dms=WNJDMS&amp;&amp;lib=WNJDMS&amp;&amp;num=19825589&amp;&amp;ver=1&amp;&amp;latest=1">.</a>&nbsp;Warner recommends that employers adopt written protocols and is ready to assist you. In addition, your Warner team will provide updates in the COVID-19 Resource Center if additional screening measures are implemented in Michigan.&nbsp;

Does an employee need any written authorization to travel to work if he/she is designated as a Critical Infrastructure Worker or is necessary for Minimum Basic Operations?

March 26 2020 Business and Corporate

Under the Executive Order, employers are required to designate and provide written notice to “Critical Infrastructure” and “Basic Minimum Operations” employees by March 31, 2020. The Executive Order does not require that designated employees retain a copy of that notice on their person. In other words, this is an obligation on employers, not employees. However, as a best practice, we have been recommending to clients that their employees have a copy of the notice with them, in case they are asked to produce it.

Are state-legal marijuana operations eligible businesses to qualify for PPP? (Updated on April 14, 2020)

No. Because federal law prohibits the distribution and sale of marijuana, financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity. Therefore, businesses that derive revenue from marijuana-related activities or that support the end-use of marijuana may be ineligible for SBA financial assistance.

Whether a business is eligible is determined by the nature of the business’s specific operations. The following businesses are ineligible:

(a) “Direct Marijuana Business” – a business that grows, produces, processes, distributes or sells marijuana or marijuana products, edibles or derivatives, regardless of the amount of such activity. This applies to recreational use and medical use even if the business is legal under local or state law where the applicant business is or will be located.

(b) “Indirect Marijuana Business” – a business that derived any of its gross revenue for the previous year (or, if a start-up, projects to derive any of its gross revenue for the next year) from sales to Direct Marijuana Businesses of products or services that could reasonably be determined to aid in the use, growth, enhancement or other development of marijuana. Examples of Indirect Marijuana Businesses include businesses that provide testing services, or sell or install grow lights, hydroponic or other specialized equipment, to one or more Direct Marijuana Businesses; and businesses that advise or counsel Direct Marijuana Businesses on the specific legal, financial/accounting, policy, regulatory or other issues associated with establishing, promoting or operating a Direct Marijuana Business. However, for purposes of illustration, SBA does not consider a plumber who fixes a sink for a Direct Marijuana Business or a tech support company that repairs a laptop for such a business to be aiding in the use, growth, enhancement or other development of marijuana.

Indirect Marijuana Businesses also include businesses that sell smoking devices, pipes, bongs, inhalants or other products if the products are primarily intended or designed for marijuana use or if the business markets the products for such use. For more information, contact <a href="/people/matthew-d-johnson">Matt Johnson</a>.

We’d like to apply for a loan under the Main Street Lending Program. What are the loan terms?

First and foremost, it is important to understand that unlike a PPP loan, loans made under the Main Street Lending Program are not forgivable. Additionally, the Main Street Lending Program is actually made up of three different programs: (1) the Main Street New Loan Facility (“Facility”); (2) the Main Street Expanded Loan Facility (MSELF); and (3) the Main Street Priority Loan Facility (MSPLF). Each program has slightly different loan terms. However, loans under all three programs have the following characteristics: (1) four year maturity; (2) amortization of principal and interest deferred for one year; and (3) adjustable interest rate of LIBOR (one or three month) plus 300 bps. Amortization of principal varies based on which facility the loan is made under, as does minimum loan size ($500,000 for Facility and MSPLF loans, but $10 million for MSELF loans). Loans under all three programs are also subject to origination and transaction fees. For more information about loan terms and eligibility under the Main Street Lending Programs, contact <a href="/people/rob-m-davies">Rob Davies</a>, <a href="/people/malaina-j-weldy">Malaina Weldy</a> or your Warner attorney.

Our business is looking for other sources of funds to sustain us during the duration of COVID-19 pandemic. What other loans might we qualify for under the Main Street Lending Program? And can we get a loan even if we already received a PPP loan?

Receiving a PPP loan does not disqualify otherwise eligible borrowers from receiving a loan under the Main Street Lending Program. However, the borrower must be able to meet several conditions in order to be eligible, including, among others, that the business: (1) has 15,000 or fewer employees or 2019 annual revenues of $5 billion or less; (2) is created and organized in the United States or under the laws of the United States; and (3) has significant operations in and a majority of its employees based in the United States. A borrower must also make several attestations in order to receive a loan, including that it will: (1) comply with the compensation, stock repurchase and capital distribution requirements of the Coronavirus Aid, Relief and Economic Security Act (CARES Act); (2) that it will not seek to cancel or reduce its outstanding lines of credit with any lender; and (3) that it will make commercially reasonable efforts to maintain its payroll and retain its employees during the period the loan is outstanding. For more details about eligibility requirements under the various Main Street Lending Programs, contact <a href="/people/rob-m-davies">Rob Davies</a>, <a href="/people/malaina-j-weldy">Malaina Weldy</a> or your Warner attorney.

I received a Paycheck Protection Program loan with a principal amount under $2 million. Does that mean I am in no danger of an audit by the SBA?

No, just receiving a loan under $2 million does not mean that the SBA will not later audit your application. However, the SBA, in consultation with the Department of the Treasury, has created a safe harbor that will apply to the SBA’s review of PPP loans under $2 million. Any borrower that, together with its affiliates, received PPP loans less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith. In other words, the SBA is currently assuming for loans under $2 million that due to the current economic uncertainty, any such loan was necessary to support the ongoing operations of the applicant. This safe harbor only applies to the certification that the “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant” and does not exclude the entire loan from review.

Because of the evolving nature of the Paycheck Protection Program and the potential changes to the above safe harbor, please contact <a href="/people/matthew-m-crowe">Matthew Crowe</a>, <a href="/people/rob-m-davies">Rob Davies</a>, <a href="/people/matthew-d-johnson">Matthew Johnson</a>,<a href="/people/timothy-hillegonds"> Timothy Hillegonds</a>, <a href="/people/ford-j-h-turrell">Ford Turrell</a> or your Warner attorney for questions about the interpretation of the Paycheck Protection Program certification requirements or how to demonstrate the basis for your certification to the SBA.

I received a Paycheck Protection Program loan and would like to seek forgiveness of the loan. Could there be a reduction with regards to the amount forgiven? If so, for what reasons?

The SBA Interim Final Rule states that the amount of loan forgiveness can be up to the full principal amount of the loan and any accrued interest. With regards to forgiveness, there are three types of loan forgiveness reductions as follows, all of which are generally measured based on the eight-week period beginning on the date that you receive the PPP loan proceeds: 1) the use of more than 25% of the loan proceeds for non-payroll costs; 2) a reduction in employee headcount; and 3) a reduction in employee pay level. The first is the simplest calculation. Note that we don’t have any guidance on the sequence in which these types of reductions should be calculated. Because of the evolving nature of the Paycheck Protection Program, contact <a href="/people/ford-j-h-turrell">Ford Turrell</a> , <a href="/people/rob-m-davies">Rob Davies</a>, <a href="/people/matthew-m-crowe">Matthew Crowe</a>, <a href="/people/timothy-hillegonds">Tim Hillegonds</a> or your Warner attorney if you have questions about the interpretation of the Paycheck Protection Program forgiveness requirements, in particular, requirements related to the amount that may be forgiven and how to calculate the forgiveness reductions.

I received a Paycheck Protection Program loan. How do I know I am compliant with the requirements of the SBA related to the Paycheck Protection Program? Where do I find the latest guidance from the SBA on the Paycheck Protection Program?

The Paycheck Protection Program is a new and evolving program. The SBA is issuing new guidance and changing prior guidance related to the Paycheck Protection Program that can affect a recipient’s use of funds received from the program. The SBA has been issuing and changing this guidance by releasing interim final guidance documents and updates to the SBA’s frequently asked questions several time per week. These guidance documents and revised FAQs are available on the SBA’s Paycheck Protection Program website, available here. The SBA does not give advance notice of when the SBA will be releasing such updates. In addition, each update may give new guidance or modify earlier guidance provided by the SBA. Because of the evolving nature of the Paycheck Protection Program, please contact <a href="/people/ford-j-h-turrell">Ford Turrell</a>, <a href="/people/rob-m-davies">Rob Davies</a>, <a href="/people/matthew-m-crowe">Matthew Crowe</a>, <a href="/people/timothy-hillegonds">Tim Hillegonds</a> or your Warner attorney if you have questions about the interpretation of the Paycheck Protection Program requirements, in particular, requirements related to allowable uses of the loan proceeds and reductions to the amount that may be forgiven.

Can a business apply for both a loan under the Paycheck Protection Program (PPP) and an Economic Injury Disaster Loan (EIDL)?

April 04 2020 Commercial Finance

Yes, subject to the following limitations. Businesses may receive a loan under the PPP and an EIDL loan so long as the business applies the loans to different items. For example, a business may receive a loan under the PPP loan for payroll assistance and an EIDL for working capital. An applicant that already received EIDL from January 31, 2020 through April 3, 2020, can apply for a PPP loan. If the EIDL loan was not used for payroll costs, it does not affect eligibility for a PPP loan. If the EIDL loan was used for payroll costs, the PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan. However, since at least 75% of the PPP loan proceeds shall be used for payroll costs, the amount of any EIDL refinanced will be included in this calculation. For more information, contact <a href="/people/matthew-d-johnson">Matthew Johnson</a> or <a href="/people/ford-j-h-turrell">Ford Turrell</a>.

Because of the COVID-19 pandemic, I am unable to perform all or some of my contractual obligations. When and how should I notify the other party to the contract?

First, you should carefully review the contract’s notice requirements. Even if the contract’s force majeure clause does not specify the notice required, the contract may contain a separate provision governing notice. Under Michigan law, parties must provide notice of their failure to perform or delay in performance within the time period and manner specified in the contract. Therefore, if the contract requires “prompt” or “written” notice of non-performance or requires that you send notice to a particular address, you should abide by those terms and provide notice accordingly.

If the contract governs the sale of goods and does not contain any notice requirements, courts will use UCC 2-615 to fill the gaps of the contract. Pursuant to UCC 2-615(3), you must notify the other party “seasonably” of your failure to perform or delay in performance. If the contract does involve the sale of goods and is silent concerning notice, you should notify the other party of your failure or delay in performance as soon as reasonably practicable to preclude arguments about delay. Please contact <a href="/people/michael-g-brady">Michael Brady</a>, <a href="/people/homayune-a-ghaussi">Homayune Ghaussi </a>or <a href="/people/katelyn-d-crysler">Katelyn Crysler</a> for more information.

I am a party to a contract for the sale of goods and I am hearing rumors that the other party to the contract may soon file for bankruptcy. I want assurance that the party is not insolvent and will continue to perform its obligations under our contract. How can I get this information from the other side?

June 08 2020 Contracts, Supply Chain

You should begin by looking to your contract to determine when you may request assurances. Absent a contractual provision on point, when a contract is for the sale of goods, Uniform Commercial Code (UCC) Section 2-609 provides a way for a party to demand adequate assurance of performance from the other side when the requesting party has “reasonable grounds for insecurity.” The reasonableness of a party’s insecurity is determined by commercial standards—there must be an objective basis for the insecurity, rather than a purely subjective fear that the party will not perform.

Insolvency of the contracting party by itself, may or may not be sufficient grounds for insecurity that would justify demanding adequate assurance of performance from the other party. The requesting party must look broadly at the circumstances surrounding the other side’s performance. If a party properly demands adequate assurance and the other party does not provide adequate assurance of performance on a timely basis, then that could justify termination of the contract. You must be careful, however, because termination when there are inadequate grounds for insecurity could be considered a breach by the requesting party. Please contact <a href="/people/homayune-a-ghaussi">Homayune Ghaussi </a>or <a href="/people/katelyn-d-crysler">Katelyn Crysler</a> for more information.

Due to COVID-19, I am unable to perform all or some of my contractual obligations, but my contract does not contain a force majeure clause. Am I still excused from performing?

June 06 2020 Contracts, Supply Chain

If your contract governs the sale of goods and does not contain a force majeure clause, courts will use UCC 2-615 to fill the gaps of the contract. Under UCC 2-615(a), a supplier’s delay in performance is excused if its performance “has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made.” Simply stated, your delay or non-delivery may be excused if an unforeseen event, not within the contemplation of the parties at the time the contract was entered into, has rendered your performance commercially impracticable.

If your contract is not for the sale of goods and does not contain a force majeure clause, the common law applies. Michigan’s common law recognizes a variety of equitable defenses that may excuse your performance, including impossibility, impracticability, and frustration of purpose. Please contact <a href="/people/michael-g-brady">Michael Brady</a>, <a href="/people/homayune-a-ghaussi">Homayune Ghaussi </a>or <a href="/people/katelyn-d-crysler">Katelyn Crysler</a> for more information.

As a result of the COVID-19 crisis, I am unable to perform all or some of my contractual obligations. What can I do?

June 03 2020 Contracts, Supply Chain

First, you should carefully review the contract for any provisions excusing your obligation to perform, including a force majeure, an excusable/justifiable delay or an excused non-performance clause. Force majeure contract provisions address circumstances in which performance becomes impossible or impracticable due to events that could not have been foreseen, and are not within a party’s reasonable control. If your contract contains a force majeure clause, look to its terms to see what qualifies as a force majeure event and what notice requirements must be met. If COVID-19 qualifies as a force majeure event under the contract and you adhere to its notice requirements, your obligation to perform for the duration of the event may be suspended or excused.

If your contract does not contain a force majeure provision, you may find recourse through the Uniform Commercial Code (UCC) for contracts governing the sale of goods or through common law equitable defenses—impossibility, impracticability and frustration of purpose—for contracts not involving the sale of goods. Please contact <a href="/people/michael-g-brady">Michael Brady</a>, <a href="/people/homayune-a-ghaussi">Homayune Ghaussi </a>or <a href="/people/katelyn-d-crysler">Katelyn Crysler</a> for more information.

When my manufacturing business is permitted by the state of Michigan to get back up and running, I will have limited production to satisfy my customers. How must I allocate my limited capacity?

April 29 2020 Contracts, Supply Chain

First, you should carefully review your customer contract and determine whether the contract addresses allocation of supply. If the contract addresses allocation of supply, you should abide by the terms of the contract and allocate accordingly.

If the contract does not address allocation of supply, the Uniform Commercial Code (UCC) fills in the gaps of a contract for the sale of goods. Under UCC 2-615, when the seller cannot perform at full capacity, the seller must allocate supply among their customers in a “fair and reasonable” manner, and must provide seasonable notice of the allocation decision. The UCC does not define what constitutes “fair and reasonable,” but it does require that the seller allocate among existing customers and the seller’s own needs. However, there is no requirement that supply be divided equally among customers, and past sales figures can be the basis for allocation. Regardless of the method of allocation you choose, you must be sure that there is a logical and credible basis for your decision. Register for our upcoming webinar titled <a href="/updates/webinar-business-update-managing-your-supply-chains-after-covid-19">Business Update: Managing Your Supply Chains After COVID-19</a>, on May 1, 2020. Please contact <a href="/people/michael-g-brady">Michael Brady</a>, <a href="/people/homayune-a-ghaussi">Homayune Ghaussi </a>or <a href="/people/katelyn-d-crysler">Katelyn Crysler</a> for more information.

Is there any economic relief available in Michigan for businesses and community development projects that previously received grants, loans or other economic assistance from the Michigan Strategic Fund?

April 27 2020 Economic Incentives

Under the Michigan Strategic Fund Awardee Relief Initiative, relief may be granted in the form of payment deferment, milestone extensions, maturity date adjustments or extensions, refinancing authorizations, scope reductions and deadline extensions. Details regarding eligibility are available&nbsp;<a href="https://www.michiganbusiness.org/about-medc/covid19/msf-awardee-relief-initiative/" target="_blank" rel="noreferrer noopener">here</a>. The Awardee Relief Guidance is available&nbsp;<a href="https://www.wnj.com/WarnerNorcrossJudd/media/files/uploads/Documents/CD-Awardee-Relief-Initiative-Guidance-04-17-2020.pdf">here</a>&nbsp;and the application can be accessed&nbsp;<a href="https://www.wnj.com/WarnerNorcrossJudd/media/files/uploads/Documents/CD-COVID-Relief-Application-April-2020.docx">here</a>. Please contact <a href="/people/jared-t-belka">Jared Belka</a> for more information.

Has the IRS issued any relief from the notarized/witnessed signature requirement for retirement plan payment elections in connection with the COVID-19 pandemic?

June 11 2020&nbsp;Employee Benefits

To facilitate the payment of plan distributions and loans during the COVID-19 pandemic, the IRS issued&nbsp;<a href="https://www.irs.gov/pub/irs-drop/n-20-42.pdf" target="_blank" rel="noreferrer noopener">Notice 2020-42</a>&nbsp;(Notice), which provides relief for any participant election that requires the signature of an individual to be witnessed in the physical presence of a notary or plan representative. This temporary relief covers the period January 1, 2020, through December&nbsp;31,&nbsp;2020.&nbsp;

The Notice does not eliminate witnessing entirely, rather it provides alternative electronic options, such as live audio-video technology (e.g., Zoom, WebEx, etc.), so that participants, spouses, notaries and plan representatives can continue to follow social distancing guidelines. Temporary relief from the physical presence requirement is provided for any participant election witnessed by a: (1) notary public of a state that permits remote electronic notarization, or (2) plan representative. Please read&nbsp;<a href="/updates/covid-19-relief-keeps-coming-irs-provides-remote-signature-relief-for-retirement-plans">here</a>&nbsp;for more details on the Notice. &nbsp; If you need assistance with implementing the temporary relief provided by the Notice or with implementing the Coronavirus Aid, Relief and Economic Security Act (CARES Act) retirement plan provisions, please contact&nbsp;<a href="/people/lisa-b-zimmer">Lisa Zimmer</a>,&nbsp;<a href="/people/brianna-richardson">Brianna Richardson</a>&nbsp;or any member of Warner’s Employee Benefits and Executive Compensation Practice Group.

April 24 2020&nbsp;Employee Benefits

Yes. There are two programs, one for employers and one for student loan borrowers.

Section 2206 (Exclusion for Certain Employer Payments of Student Loans)

An Educational Assistance Program is a separate written program that an employer may provide to help employees pay for their own educational expenses Eligible educational expenses&nbsp;include&nbsp;tuition, fees, books, supplies, and equipment and&nbsp;exclude&nbsp;meals, lodging, transportation, or education involving sports, games, or hobbies.&nbsp;An employee may receive a maximum of up to $5,250 in educational assistance each calendar year. Amounts received up to the limit are excluded from the employee’s gross income for that year.

The CARES Act adds student loan payments made before January&nbsp;1, 2021, as an eligible Educational Assistance Program expense. The employer may either pay the lender directly or reimburse the employee for any qualified educational loan payments incurred for the employee’s own education. This provision does not increase the annual $5,250 limit.

To take advantage of this relief, an employer without an educational assistance program will need to adopt one and an employer with an existing program will need to amend it.

If you have a client that is interested in offering this relief for employees, contact&nbsp;<a href="/people/norbert-f-kugele">Norbert Kugele</a>&nbsp;for assistance. Norbert can help the client with all the necessary documentation.

Section 3513 (Temporary Relief for Federal Student Loan Borrowers)

Under this provision, all loan payments for a loan held by the Department of Education are suspended from March 13, 2020, through September 30, 2020. During this period, no additional interest will accrue, no reports will be filed with any consumer reporting agency, and all involuntary collections (i.e., wage garnishment or tax refund offset) will be suspended. For more details, visit this website&nbsp;<a href="https://studentaid.gov/announcements-events/coronavirus#borrower-questions" target="_blank" rel="noreferrer noopener">here</a>.

Has the Department of Labor (DOL) extended the deadline for providing the annual funding notice (AFN) for defined benefit plans subject to ERISA?

April 23 2020&nbsp;Employee Benefits

No. Although the CARES Act allows the DOL to delay the AFN distribution deadline, the DOL has failed to do so. The AFN must be provided no later than 120 days after the end of each plan year. For pension plans with a calendar plan year, the 2020 deadline is April 29, 2020 (due to the leap year). The civil penalty for failure to provide the AFN on time is $110 per day, payable to each participant or beneficiary who did not receive the AFN. Please contact&nbsp;<a href="/people/lisa-b-zimmer">Lisa Zimmer</a>&nbsp;or&nbsp;Kent Sparks&nbsp;for more information.

How do I account for retirement plan contributions when calculating my payroll costs for a PPP loan?

April 19 2020&nbsp;Employee Benefits

Clearly any per payroll period or per month retirement plan contribution would be counted in the monthly average of a company’s payroll costs.&nbsp;The SBA has not directly addressed how retirement plan contributions that are made on a less frequent basis, such as a quarterly or annual contribution, should be taken into account, but they have said that for purposes of calculating the loan amount they are contemplating a gross number based on aggregating all payroll costs from the 12-month period.&nbsp;The FAQs that the SBA issued on April 6, 2020, do discuss employer contributions to defined-benefit or defined-contribution retirement plans as a payroll cost that is not subject to the $100,000 limit on includible compensation, so it is clear they expect retirement contribution to be included.&nbsp;We believe an applicant would have a good faith argument based on the available SBA guidance that an annual retirement contribution should be included in the 12-month aggregate payroll costs, and thus a portion of it in the monthly average payroll costs.&nbsp;For additional information, contact&nbsp;<a href="/people/justin-w-stemple">Justin Stemple.</a>

Our 401(k) plan permits participant loans; are there any new rules for loans from tax-qualified defined contribution plans?

COVID-19 Q&A Archive

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