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Since our last post on COVID-19 and force majeure earlier this month, the number of coronavirus cases has quintupled across the world, causing major disruptions to global shipping networks as governments imposed lockdowns on entire cities, regions, and countries. While transportation providers continue to move large shipments of goods by ocean, air, rail, and truck, many offices and retail locations have closed. Consequently, it may be time for transportation and logistics providers to revisit the credit terms offered to customers, particularly importers that handle goods sold at retail locations. 

Coronavirus Disruptions for Importers and Retailers

Many companies in the transportation industry offer credit terms to shippers and importers based on business credit reports generated when they first became a customer and, in some cases, long-standing business relationships. While there is always a risk that a customer won’t pay, business credit checks and a history of timely payments allow transportation and logistics providers to mitigate that risk and others while offering competitive terms in the shipping industry.

Unfortunately, the coronavirus pandemic, as well as measures to contain it, have caused abrupt changes in consumer behavior, companies’ productivity, and in turn, companies’ financial solvency. According to The Wall Street Journal, “[a]bout half of [U.S.] states have imposed lockdown measures restricting gathering and social contact, disrupting the lives of more than 100 million people and suspending the operations of thousands of businesses.” The Wall Street Journal also reports that nearly 50,000 major retail stores and restaurants were closed as of March 25, 2020. Even as the White House and Senate are pushing for a $2 trillion emergency stimulus package, some experts have reported that the risk of bankruptcy and default for high-yield companies doubled over the past several weeks. For transportation providers, this means that some customers may not be able to pay shipping costs pursuant to the agreed credit terms. Although carriers should have contractual language permitting them to exercise liens on goods in their possession, and auction them as a last resort, this can be an expensive proposition with unreliable returns.

Review and Update Your Credit Terms

The first questions are whether your company offers credit terms to shipping customers and, if so, whether that is reflected in a contractual agreement. If it is not subject to an agreement, you may simply wish to cease offering these credit terms for the near future unless you have good reason to believe the customer will be able to pay if the coronavirus lockdowns continue. 

If those credit terms are reflected in a credit agreement, you should review the agreement and determine whether you have the contractual right to discontinue providing service on credit and whether there are limitations on your rights in that regard. Again, if you do have the right to terminate your offers to provide a service on credit, you should determine whether you are in a position to offer credit and whether the customer poses a safe credit risk in today’s environment. The same considerations should apply if a new customer asks for credit terms. 

As you are probably aware, you may be assuming obligations to other carriers and transportation providers in the event that your customer proves insolvent. Thus, even if a small number of your customers begin to default, the cascading costs of demurrage, detention, warehousing, and collection can accumulate quickly, impacting your company’s liquidity. 

Transportation and logistics providers continue to move needed goods (including emergency medical supplies) during these challenging times, and it is important that they insulate themselves as much as possible from the coronavirus’s effect on shippers and importers. 

If you have any questions about credit terms or issues of non-payment related to the coronavirus, please contact Brendan Collins (bcollins@gkglaw.com; 202.342.6793) or Oliver M. Krischik (okrischik@gkglaw.com; 202.342.5266).

On March 18, 2020, Congress passed, and the President signed, the Families First Coronavirus Response Act (FFCRA), which requires most employers with fewer than 500 employees to provide paid leave to employees affected by the COVID-19 pandemic. The FFCRA actually consists of two separate acts that provide paid leave to employees. The first act, the Emergency Paid Sick Leave Act (EPSLA), amends the Fair Labor Standards Act (FLSA) and provides paid short-term leave of up to 80 hours for reasons related to COVID-19. The second, the Emergency Family and Medical Leave Expansion Act (EFMLEA), amends the Family Medical Leave Act (FMLA), and provides longer term leave of up to 12 weeks, 10 of which are paid. However, as discussed below, EFMLEA leave is only provided in certain limited circumstances. The FFCRA becomes effective on April 1, 2020 and terminates on December 31, 2020.
 
The Emergency Paid Sick Leave Act
EPSLA provides up to two weeks of sick pay for employees who miss work for certain reasons related to COVID-19. Below is a summary of the material provisions of this act:

Which employers are covered?
EPSLA applies to private employers who have 500 or fewer employees, and any public employer with at least one employee.
 
Which employees are covered?
All full- and part-time employees are eligible for EPSLA paid leave, regardless of how long they have been employed with the organization.

How is part-time employee coverage calculated?
Part-time employees are also covered under EPSLA, however, they receive paid leave for the number of hours they work, on average, over a two-week period.
 
What events trigger coverage?
EPSLA provides paid sick leave for employees who are unable to work (or telework) for the following reasons:

(1)The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;

(2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
 
(3) The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
 
(4) The employee is caring for an individual who is subject to a local quarantine or isolation order or has been advised by a health care provider to self-quarantine;
 
(5) The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the childcare provider of such son or daughter is unavailable, due to COVID-19 precautions; or
 
(6) The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.

How much do employees get paid?
The amount a person is paid depends on several factors. If sick leave is being taken for reasons (1)-(3) above, employees are entitled to their regular pay, up to $511 per day, or $5,110 in the aggregate. If sick leave is being taken for reasons (4)-(6) above, they are entitled to either two-thirds pay or minimum wage, whichever is higher. Employers are only required to pay a maximum of $200 per day, or $2,000 in the aggregate.
 
How do you provide this information to employees?
Each employer must post a notice in conspicuous places on the premises, where notices are customarily posted, setting forth the requirements of the EPSLA. A copy of a sample notice can be located here. Additionally, employers should modify their employee handbooks to include this leave.
 
Can my employer require an employee to use other paid leave before FLSA?
Employers cannot require an employee to use other paid leave prior to using EPSL.
 
Can EPSLA leave be carried over for payment upon termination?
EPSLA leave cannot be carried over to the following year. Additionally, such paid leave does not need to be paid out when an employee leaves his/her employment or is terminated.
 
Are there any exemptions to this law?
EPSLA gives the Department of Labor (DOL) the right to exempt small businesses with fewer than 50 employees when it “would jeopardize the viability of the business as a going concern”.
 
Can you take negative employment action against an employee who takes this leave?
An employer cannot retaliate against an employee who takes EPSL.
 
What are the penalties if an employer does not comply with this act?
Any employer who fails to pay required sick leave under this act shall be in violation of the FLSA. The DOL’s Wage and Hour Division has the authority to investigate and enforce compliance with the FFCRA.

The Emergency Family and Medical Leave Expansion Act
EFMLEA amends the FMLA to provide up to 12 weeks of leave, 10 of which are paid at two-thirds pay.
 
It requires employers with fewer than 500 employees to provide this leave to employees who are unable to work because the employee’s child’s school or care center is closed, or the child’s care provider is unavailable due to COVID-19.
 
Who is eligible?
Unlike FMLA, EFMLEA covers employees who work for employers with fewer than 500 employees and who have been on the job for a minimum of 30 days.
 
What circumstances trigger EFMLEA Leave?
Coverage under EFMLEA is triggered only when the employee is unable to work (or telework) because the employee’s child’s school or care center is closed, or the child’s care provider is unavailable due to COVID-19. The child must be under the age of 18. This leave is not available if the employee is sick with COVID-19.
 
What type of paid leave is available?
EFMLEA provides 12 weeks of leave. While the first two weeks of this leave are unpaid, paid leave will likely be available to an employee under EPSLA during this time period. After the first two weeks, the employee will receive two-thirds of his/her usual pay, with a cap at $200 per day.
 
Does an employer have to hold a person’s job open during this leave?
Generally, employees who take EFMLEA leave are entitled to be restored to the position they held before leave was taken. However, for employers who have fewer than 25 employees, an employer does not need to return the employee to his/her position if:

• The position held by the employee when the leave commenced does not exist due to economic conditions or other changes in operating conditions that affect employment, and were caused by COVID-19;
• The employer makes reasonable efforts to restore the employee to a position equivalent to the position the employee held when the leave commenced, with equivalent employment benefits, pay, and other terms and conditions of employment; and
• If the reasonable efforts of the employer to restore the employee to an equivalent position fails, the employer makes reasonable efforts during the “contact period” to notify the employee if an equivalent position becomes available. The EFMLEA states that the “contact period” is the one-year period beginning with the date on which the qualifying need related to a public health emergency concludes; or the date that is 12 weeks after the date on which the employee’s leave commences.

Are there any exemptions to this law?
The Secretary of Labor has the authority to exempt small businesses with fewer than 50 employees from the bill’s paid leave requirements if those requirements would jeopardize the viability of the business.
 
Tax Credits for Employers
The FFCRA provides tax credits to employers to offset the costs associated with the paid leave. These tax credits will offset the employer’s share of social security taxes. These credits are only available to those employers that are required to offer these benefits under the FFCRA.

What should employers do next?
Employers should amend their employment policies now so that they adhere to these new laws. They should also post proper notices in the workplace as soon as possible. Currently, many offices are closed or working with minimal staff. Therefore, we recommend that employers e-mail the FFCRA notice to all employees.
 
If you need any assistance in drafting your leave policies or notice, we recommend contacting your attorney. Finally, many states are considering providing additional paid leave to employees. Make sure you are continuing to comply with state and  local leave requirements.

If you have any questions regarding the FFCRA, please contact GKG Law Principal Rich Bar or Principal Katie Meyer.

On March 25, 2020, the Senate passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a $2 trillion stimulus bill. The House of Representatives is expected to approve the legislation, and President Trump has indicated he will quickly sign the bill into law. In addition to general loan programs for small and mid-size businesses that are made available, the CARES Act contains provisions that will benefit general aviation specifically. The business aviation community should take note of the following provisions included in the CARES Act:

• Relief from the 7.5% air transportation federal excise tax for general aviation commercial operations (including flights operated under FAR Part 135), and from the commercial fuel tax through December 31, 2020 (This will not apply to amounts paid for transportation on or before the date of enactment of the CARES Act.);
   
• Loans and grants to passenger and cargo air carriers, including
  • $25 billion in direct loans and loan guarantees for FAR Part 135 Operators providing passenger operations and an additional $25 billion for wages, salaries and benefits for employees;
  • $4 billion in direct loans and loan guarantees for FAR Part 135 Operators providing air cargo operations and an additional $4 billion for wages, salaries and benefits for employees;
     
• $25 billion in loans and loan guarantees for Part 145 maintenance facilities;
   
• $10 billion for airport grants, with $100 million specifically allocated to general aviation airports.

Note that companies receiving loan and loan guarantees under the CARES Act will be subject to certain requirements, such as maintaining March 24, 2020 employment levels to the extent practicable through the end of September and limits on employment level cuts, limits on executives’ compensation and stock buybacks, and the Department of Transportation would have authority until March 1, 2022 to order any carrier accepting federal assistance to maintain certain air routes.

Please do not hesitate to contact a member of our Business Aviation team with your CARES Act questions or concerns in the days to come.

Several companies have inquired whether forwarders and customs brokers are prohibited from continuing to provide services during this period in view of various Shelter-In-Place orders issued by state or local agencies. To a certain extent, the answer to that will depend upon the wording of the specific order, so it would be prudent to review any order that is issued covering your facilities.

However, based upon the Order to Shelter in Place issued by the Public Health Officer of Alameda County, California two days ago (see PDF below), it would seem that the activities of forwarders and customs brokers would fall within the exemption provided, as those activities are essential to keep goods moving in commerce. Sections 10(f) (x), (xv)-(xvii) of the Alameda County order specifically exempts shipping services, companies that supply other essential businesses with supplies necessary to operate or that ship goods or services to residences, and companies that are engaged in public transportation from the shelter in place requirements. Indeed, given the current economic situation, it would be hard to imagine any government official taking the position that although the ports are open, intermediaries are somehow not permitted to facilitate the movement of goods into or out of the ports or warehouses to customers.

In our view, accordingly, while we don’t have similar orders for other states or regions at this point, we believe that forwarders and customs brokers (and other intermediaries, as well as carriers) would be permitted to provide forwarding and customs broker services to the extent necessary to keep goods moving in commerce. Having said that, it is still necessary to minimize potential interpersonal contact by taking the social distancing and other precautions that are widely being recommended in an attempt to flatten the curve on further spreading of this virus.

Again,  it would be helpful to review the local public health advisory or order covering each of your company’s facilities, but it would be surprising to find some agency coming to a different conclusion. 

For additional and more specific guidance on Shelter-in-Place orders, please contact Edward Greenberg at egreenberg@gkglaw.com or (202) 342-5277.

Final Order to Shelter in Place

The FTC recently weighed in on two significant pending healthcare bills advancing through the legislatures in Ohio and Kansas. Both pieces of legislation seek to expand the scope of practice of Advanced Practice Registered Nurses (APRNs), primarily by eliminating the requirements of collaborative practice agreements. Additionally and perhaps most notable, the proposed Kansas bill would shift regulatory control of APRNs from the Kansas Board of Nursing to the physician-controlled Kansas Board of Healing Arts.

Ohio House Bill 177 and Kansas House Bill 2412 both propose eliminating the requirement of a formal written agreement with a licensed physician as a general precondition of APRN practice, opting to allow APRNs to independently provide primary care services in accordance with their education and certification. In addition, both states’ bills would allow APRNs to prescribe drugs and therapeutic devices, removing the requirement of a collaborative agreement with a physician to do so.

In its written comments, the FTC expressed support for expanding the scope of practice of APRNs by eliminating written collaborative practice agreements for several reasons. First, independent practice by APRNs may protect patients by improving access to healthcare. Citing a 2014 FTC staff policy paper, Policy Perspectives: Competition and the Regulation of Advanced Practice Registered Nurses, the FTC opined that state-mandated supervision of APRN practice raises competitive concerns and may impede access to care, especially in rural and underserved areas. Expanded APRN practice, conversely, would potentially alleviate provider shortages in areas where access to primary care is limited. Second, the FTC argued that reducing or eliminating regulatory hurdles in APRN practice will lower overall healthcare costs for patients and third-party payors. Third, the FTC suggests that rigid supervision of APRNs and collaborative practice requirements stifle innovation by discouraging new models of collaboration and team-based care. Removing such requirements may facilitate experimentation with delivering care across different facilities and settings. For these reasons, the FTC strongly supported the expansion of scope of APRN practice set forth in both Kansas H.B. 2412 and Ohio H.B. 177.

Despite its support for reducing restrictions on the practice of APRNs, the FTC opposed the Kansas legislation’s attempt to shift oversight of APRN practice and prescribing to the Board of Healing Arts, which is primarily controlled by physicians. Despite its recognition of the State’s prerogatives in designating regulatory oversight for healthcare professionals in Kansas, the FTC suggested that shifting authority to regulate APRN practice to a board controlled by medical physicians raises concerns about potential biases and conflicts of interest. Specifically, the risk of a physician-controlled Board making decisions that serve the private economic interests of its members may deter competition. A similar issue was addressed in 2015 by the Supreme Court in North Carolina State Board of Dental Examiners v. FTC. In that decision, a dentist-dominated board sought to exclude non-dentists from providing teeth-whitening services. The issue in the case related to whether an independent regulatory board could raise a defense to federal antitrust allegations. However, the Court also addressed the concern that professional biases could cause one group of professionals to exclude another based on financial incentives. Referencing the Supreme Court’s opinion, the FTC did not support the shift in regulatory oversight proposed in Kansas H.B. 2412.

Both Ohio H.B. 177 and Kansas H.B. 2412 are currently in Committee. We will continue to follow and report on any new legislative developments. In the meantime, please contact GKG Law Principal Richard Bar (rbar@gkglaw.com / (202) 342-6787) with any questions.