In a recent 5-4 decision, the Supreme Court, in Thole v. U.S. Bank N.A., 590 U.S. __ (2020), held that participants in defined benefit pension plans lack standing to sue plan fiduciaries for allegedly imprudent plan investments where the participants continue to receive their full benefits and no imminent risk that they will cease receiving their full benefits appears.

Defined benefit plans—once the staple of employer-sponsored retirement plans but now a diminishing share of that group—guarantee a monthly payment in retirement using a formula based on years of service and compensation. Sponsors set aside funding on an ongoing basis and assume the risk that bad investments or erroneous actuarial assumptions may require additional contributions in later years to ensure that payments continue to flow. No participant owns any particular interest in the fund that pays a defined benefits pension; rather, the participant gains the right to a periodic (usually monthly) payment in a defined amount according to the plan’s formula. This type of pension plan differs from defined contribution plans, such as 401(k) or 403(b) plans, where employees contribute a defined portion of their earnings to an individual investment account (and employers may contribute to individual employee investment accounts in a defined amount, matching some portion of employee contributions). In a defined contribution plan the value of the individual retirement account that an employee accumulates through contributions and investment growth determines what benefits will be available to the employee in retirement.

The Court, in Thole, held that defined benefit plan participants lack standing to sue over allegedly imprudent investments because they are “legally and contractually entitled to receive [the] same monthly payments for the rest of their lives” regardless of investment performance. The plan sponsor, rather than the participant, bears the risk of making additional contributions should plan assets drop below the level required to fund plan benefits.

Justice Kavanaugh, writing for the majority, further explained:

[Plaintiffs] have received all of their monthly benefit payments so far, and the outcome of this suit would not affect their future benefit payments. If [Plaintiff’s] were to lose this lawsuit, they would still receive the exact same monthly benefits that they are already slated to receive, not a penny less. If [Plaintiffs] win the lawsuit, they would still receive the exact same monthly benefits that they are already slated to receive, not a penny more. The plaintiffs therefore have no concrete stake in this lawsuit.

In a dissenting opinion, Justice Sotomayor applied traditional trust law principles to reach a different conclusion. She would have ruled that participants in an ERISA plan maintain an “equitable interest in the subject matter of the trust” that provides them with standing to sue over the alleged mismanagement of trust assets, even when they are experiencing no current loss. Thole thus marks an instance in which the Supreme Court has departed from common law principles of trust law to construe ERISA.

Thole involved a defined benefit pension plan that, while underfunded when the suit started, became fully funded (by additional employer contributions) during the course of the litigation. The case thus left unanswered whether standing for participants might exist if a fund faced an imminent funding crisis that might soon require a reduction in benefit payments. This unexamined hypothetical may be of particular interest to trustees of multiemployer defined pension plans who face decisions about partition or benefit reductions.

Defined benefit pension plan fiduciaries should welcome Thole as an important protection against disruptive litigation that second-guesses decisions that do not affect the participants’ retirement security. The decision, however, neither obviates the fiduciary duty to invest with care, skill, prudence, and diligence, nor eliminates potentially significant legal and financial consequences to a fiduciary for poorly investing plan assets. Although plan participants may not have standing to sue for imprudent investments, the Department of Labor has the authority to file an action on its own behalf. Moreover, plan sponsors remain responsible for making up any shortfalls in defined benefit plan funding.

New Jersey Governor Phil Murphy issued Executive Orders last week increasing the permissible number of attendees for indoor and outdoor gatherings, lifting part of a prior Executive Order that had directed residents to stay home, and setting a date and requirements for the reopening of outdoor pools and other outdoor entertainment and recreation.

Executive Order 152 – Expanding the Limits on Indoor and Outdoor Gatherings

On June 9, 2020, Gov. Murphy signed Executive Order 152 (“EO 152”), which effective immediately, permits an increased number of people at indoor and outdoor gatherings, under certain requirements.

Indoor public or private gatherings

Except for the face coverings requirements, the below rules do not apply to gatherings of 10 or fewer persons.

Public or private indoor gatherings must adhere to all of the following rules:

  • The number of individuals may not exceed 25% of the capacity of the room in which it takes place; regardless of room capacity, however, gatherings shall never be larger than 50 persons;
  • All attendees must wear face coverings at all times except where doing so would inhibit the individual’s health or where the individual is under two years of age;
  • Individuals organizing or maintaining the gathering (if any), must wear face coverings whenever feasible, and must wear face coverings whenever they are within six feet of another individual, except where doing so would inhibit the individual’s health;
  • All attendees are required to be six feet apart from others at all times, excluding immediate family members, caretakers, household members, or romantic partners, and excluding a limited number of individuals organizing or maintaining the gathering;
  • There may be no contact between attendees, excluding immediate family members, caretakers, household members, or romantic partners, and excluding a limited number of individuals organizing or maintaining the gathering;
  • Individuals organizing or maintaining the gathering (if any) should, where applicable, demarcate six feet of spacing in the area of the gathering to demonstrate appropriate spacing for social distancing, such as through the placement of cones, flags, or other markings;
  • Any physical items, including equipment, may not be shared by multiple attendees of the same gathering except for immediate family members, caretakers, household members, or romantic partners, unless such physical items are sanitized before and after use by different individuals; and
  • To the degree the gathering requires pre-payment, or seeks donations of any kind, contactless options for pre-payment or donation, such as online or by telephone, must be offered wherever feasible.

Outdoor public or private gatherings.

 The following rules do not apply to (i) gatherings of 25 or few persons or fewer; or (ii) the outdoor gathering is a religious service or political activity (such as a protest).

Public or private outdoor gatherings must adhere to all of the following rules:

  • The number of attendees must be limited to 100 persons or fewer; however, no individual shall be considered in calculating the total number of attendees at any time in which that individual is in a vehicle, so long as that vehicle is either (i) closed, meaning that the windows, doors, sunroofs, and tops of the vehicle are all closed, or (ii) more than six feet from any other vehicle or individual;
  • All attendees at are required to be six feet apart from others at all times, excluding immediate family members, caretakers, household members, or romantic partners, and excluding a limited number of individuals organizing or maintaining the gathering;
  • There may be no contact between attendees, excluding immediate family members, caretakers, household members, or romantic partners, and excluding a limited number of individuals organizing or maintaining the gathering;
  • Individuals organizing or maintaining the gathering (if any), should, where applicable, demarcate six feet of spacing in the area of the gathering to demonstrate appropriate spacing for social distancing, such as through the placement of cones, flags, or other markings;
  • Any physical items, including equipment, may not be shared by multiple attendees of the same gathering except for immediate family members, caretakers, household members, or romantic partners, unless such physical items are sanitized before and after use by different individuals;
  • Open-air rain tarps, tents, and other outdoor structures shall be allowed solely for the purpose of protecting against foul weather or for shade;
  • All attendees should wear face coverings at all times where other social distancing measures are difficult to maintain, in accordance with CDC recommendations, except where doing so would inhibit the individual’s health or where the individual is under two years of age, and all attendees must wear such face coverings where required by another Executive Order; and
  • To the degree the gathering requires pre-payment, or seeks donations of any kind, contactless options for pre-payment or donation, such as online or by telephone, must be offered wherever feasible.

Nothing in EO 152 will prevent a person at a gathering from coming within six feet of another person, coming into contact with another person, going indoors, or leaving their vehicles, if it is done to protect an individual’s health or safety.  Furthermore, it is permissible for a person at a gathering to momentarily remove their mask to place or receive an item in their mouth, including food or beverage, or if done for religious purposes or for their health or safety.

EO 152 expressly permits gatherings at State Parks and Forests, county and municipal parks, public and private beaches, boardwalks, lakes, and lakeshores.  Relatedly, available parking at all State Parks and Forests at all county and municipal parks may reopen to their full maximum capacity.  EO 152 reiterates that, pursuant to prior Executive Orders, counties and municipalities may continue to impose additional restrictions at county and municipal parks in response to COVID-19.

Finally, EO 152 supersedes certain prior Executive Orders to the extent they are inconsistent, including the portion of Executive Order 107 (“EO 107”) that prohibited gatherings.

Executive Order 153 – Lifting the Stay At Home Order, and Setting a Date and Requirements for Opening Pools and Certain Outdoor Recreational and Entertainment Business

Also on June 9, 2020, Gov. Murphy signed Executive Order 153 (“EO 153”), which lifts his prior “stay at home” and sets the date and requirements for opening outdoor pools and other outdoor entertainment and recreational businesses (with several exceptions).

Lifting the Prior Stay at Home Order

On March 21, 2020, Gov. Murphy issued Executive Order 107 (“EO 107”), which, among other things, required residents to stay at home unless engaging in certain specific activities that were then permissible (e.g., obtaining goods and services from limited essential businesses, or obtaining medical care).  Recognizing that more businesses and activities have recently been permitted to reopen, in EO 153, Gov. Murphy rescinds the “stay at home” portion of EO 107 (and expressly rescinds or supersedes portions of other prior Executive Orders that are inconsistent with EO 153).  Of note, however, it continues to be the governor’s directive that work that can be done from home (e.g., office work) should continue to be done from home

Outdoor Swimming Pools and Certain Outdoor Entertainment and Recreational Businesses

Effective 6:00 a.m., Monday, June 22, 2020, outdoor swimming pools are permitted to open, provided that the pool facility complies with all standards issued by the New Jersey Department of Health (“DOH”), which can be found here.   EO 153 permits pool facilities to open for lifeguard training and swimming lessons prior to June 22, 2020.

In addition, EO 153, with limited exception (discussed below), permits  the reopening of all outdoor recreational and entertainment businesses and spaces that were previously closed to the public by EO 107, provided that such businesses adopt policies that include, at minimum, the following requirements:

  • The public is permitted only in such outdoor spaces, except that members of the public may enter the indoor premises of the recreation business when entering or exiting the establishment in order to access the outdoor area, or to use the restroom;
  • Limit total capacity to a number that ensures that all individuals can remain six feet apart;
  • Open-air rain tarps, tents, and other outdoor structures shall be allowed solely for the purpose of protecting against foul weather or for shade;
  • Require that reservations, cancellations and pre-payments be made via electronic or telephone reservation systems to limit physical interactions (with the caveat that such policies shall, wherever possible, consider populations that do not have access to internet service or credit cards);
  • Install a physical barrier, such as a shield guard, between visitors and employees wherever feasible or otherwise ensure six feet of distance between those individuals, except at the moment of payment;
  • Limit the use of equipment rented or otherwise provided by the business to one person at a time, excluding immediate family members, caretakers, household members, or romantic partners, and sanitize such equipment before and after use;
  • Demarcate and post signs that denote six feet of spacing in all commonly used and other applicable areas or where people may form a line;
  • Require infection control practices, such as regular hand washing, coughing and sneezing etiquette, and proper tissue usage and disposal;
  • Provide employees break time for repeated handwashing throughout the workday;
  • Provide sanitization materials, such as hand sanitizer and sanitizing wipes, to staff and customers;
  • Limit occupancy in restrooms that remain open to avoid over-crowding and maintain social distancing through signage and, where practicable, attendants to monitor capacity;
  • Require frequent sanitization of high-touch areas including, at minimum, the following cleaning protocols:
    1. Routinely clean and disinfect all high-touch areas in accordance with DOH and CDC guidelines, particularly in spaces that are accessible to staff, customers, or members, or other individuals, including, but not limited to, restroom and locker facilities, counter tops, hand rails, door knobs, other common surfaces, safety equipment, and other frequently touched surfaces including employee used equipment, and ensure cleaning procedures following a known or potential exposure in compliance with CDC recommendations;
    2. Clean and disinfect equipment that is rented in accordance with CDC and DOH guidelines; and
    3. Train and equip employees to perform the above protocols effectively and in a manner that promotes the safety of the visitors and staff.
  • Place additional restrictions on areas of the business, as necessary, to limit person-to-person interactions and to facilitate appropriate social distancing;
  • Immediately separate and send home workers who appear to have symptoms consistent with COVID-19 illness upon arrival at work or who become sick during the day;
  • Promptly notify workers of any known exposure to COVID-19 at the worksite, consistent with the confidentiality requirements of the Americans with Disabilities Act and any other applicable laws;
  • Clean and disinfect the worksite in accordance with CDC guidelines when a worker at the site has been diagnosed with COVID-19 illness; and
  • Continue to follow guidelines and directives issued by the DOH, the CDC and the Occupational Health and Safety Administration, as applicable, for maintaining a clean, safe and healthy work environment.

Restaurants, cafeterias, dining establishments, food courts, bars, concessions, snack bars, and food trucks (with or without a liquor license) that are located at pool facilities and recreational businesses, may operate, provided that they comply with the requirements applicable to food and beverage establishments set forth in  Executive Order 150, which we wrote about here.

EO 153 makes clear that any type of event at an outdoor recreational and entertainment business that involves individuals who are there at a specific time and for a common reason, such as a movie, a concert, a sporting event, or a trip on a chartered vessel, must comply with the rules and restrictions on outdoor gatherings in EO 152 (summarized above).

Further, the rules set forth in EO 153 apply to public and private social clubs, as well as any recreational and entertainment businesses that were already permitted to reopen their outdoor spaces to the public, including outdoor archery ranges, batting cages, golf courses, golf driving ranges, shooting ranges, tennis clubs, and chartered vessels.

The following however, remain closed to the public at pool facilities and all recreational businesses:

  • Aquatic recreation facilities (i.e., water parks);
  • Indoor recreational areas;
  • Playgrounds; and
  • Recreational water fountains (not those for drinking).

However, a business may operate an amusement game outdoors, such as a game on a boardwalk, provided the game does not take place in an amusement park and an employee is present and adheres to all of the requirements of EO 153, including sanitizing all equipment before and after each use.

Finally, EO 153 provides that total capacity at State Parks and Forests, as well as county and municipal parks, shall be limited to a number that ensures that all individuals can remain six feet apart.

As featured in #WorkforceWednesday:  Mobile technologies, including contact tracing and screening apps, will help safely bring employees back to work. However, there are a range of employment law and privacy concerns to consider before implementing these technologies. Attorneys Adam S. Forman and Karen Mandelbaum tell us more. You can also read more in a recent Law360 article.

Video: YouTubeVimeoMP4Instagram.

On June 9, 2020, Governor Ralph Northam announced that Northern Virginia and Richmond will join the rest of the state in entering Phase Two on June 12, 2020, taking the next step to reopening the region.  Governor Northam’s Executive Order 65 further eased temporary restrictions throughout most of the Commonwealth of Virginia, initiating the “Safer at Home: Phase Two” strategy on June 5, 2020.

As we previously wrote, the Northern Virginia Region and Richmond entered Phase One on May 29, 2020.  In Phase Two, most of the restrictions remain fairly similar to Phase One reopening guidelines, with the most notable changes allowing for more indoor activities and increasing the size of permissible social gatherings from 10 to 50 individuals.

  • Foodservice Establishments may operate delivery, take-out, indoor and outdoor dining, and beverage services, provided they:
    • do not exceed 50% of the lowest occupancy load on the certificate of occupancy;
    • limit all parties, whether seated together or across multiple tables, to 50 patrons or less;
    • position tables six feet apart, unless the tables cannot be moved, in which case the parties must be seated at least six feet apart from other parties;
    • staff buffets with servers, and remove self-service food (except beverages), including condiments (which should be removed from tables and dispensed by employees);
    • use only self-service beverage areas that have equipment designed to dispense by a contamination-free method;
    • close bar seats and congregating areas to patrons except for through-traffic;
    • require employees working in customer-facing areas to wear face coverings; and
    • conduct a thorough cleaning and disinfection of frequently contacted surfaces every 60 minutes during operation, and clean tabletops, chairs, and credit card/bill folders in between patrons.
  • Nonessential Retail Establishments must:
    • limit occupancy to no more than 50% of the lowest occupancy load on the certificate of occupancy; and
    • require employees working in customer-facing areas to wear face coverings.
  • Fitness and Exercise Facilities may reopen for indoor and outdoor activities so long as:
    • patrons, members, and guests remain at least ten feet apart during all activities, including any group activities;
    • the total number of attendees in all group exercise and fitness classes does not exceed the lesser of 30% of the minimum occupancy load or 50 patrons, members, and guests;
    • hot tubs, spas, slash pads, spray pools, and interactive play features remain closed;
    • outdoor swimming pools are open for lap swimming, diving exercise, and instruction only and must be limited to three people per lane with at least ten feet of distance per swimmer;
    • employees working in customer-facing areas wear face coverings;
    • employers clean and disinfect shared equipment after each use;
    • facilities prohibit the use of any equipment that cannot be thoroughly disinfected between uses; and
    • businesses provide hand sanitizer stations or hand washing stations for patrons, members, and guests.
  • Personal Care and Personal Grooming services, which include beauty salons, barbershops, spas, massage centers, tanning salons, and tattoo shops, may reopen so long as:
    • occupancy does not exceed 50% of the lowest occupancy load on the certificate of occupancy;
    • there is at least six feet of physical distancing between work stations and only two appointments per service provider at a time;
    • service providers and employees working in customer-facing areas wear face coverings;
    • customers are provided with coverings or customers are asked to bring a face covering with them, which they must wear during the service;
    • services provided are limited to those that can be completed without clients removing their face coverings; and
    • a thorough cleaning and disinfection of frequently-contacted surfaces is conducted every 60 minutes in operation, and all personal care and grooming tools are cleaned and disinfected, or discarded, after each use.
  • Recreational and Entertainment Businesses, including outdoor performing arts venues, outdoor concert venues, outdoor sports venues, outdoor movie theaters, museums, aquariums, zoos, and botanical gardens may reopen so long as the business:
    • limits the total number of attendees (including attendees and participants) to the lesser of 50% of the occupancy load of the venue or 50 persons;
    • installs visible markers for queue lines that separate people by six feet of physical distance;
    • creates a guest flow plan of modified queue lines into and within the facility, determining any areas likely to become bottlenecks or pinch points and adjusting guest flow accordingly;
    • performs a thorough cleaning and disinfection of frequently-contacted surfaces, including digital ordering devices, check presenters, self-services areas, tabletops, bathroom surfaces, and other common touch areas, every 60 minutes during operation;
    • where possible, installs sneeze guards in front of commonly used point-of-sale or guest service stations;
    • requires employees working in customer-facing areas to wear face coverings; and
    • provides hand sanitizer stations or hand washing stations for patrons, members, and guests.
  • Indoor Shooting Ranges may reopen with limitations similar to the above restrictions.

Campgrounds, public beaches, racetracks, and public and public and private social clubs may also reopen under Phase Two, and recreational sports activities may begin.

Employers should remain cognizant of Executive Order No. 63, which details the requirements for wearing face coverings inside buildings.  While these requirements predominantly apply to patrons, the order specifically requires employees of essential retail businesses to wear face coverings whenever working in customer-facing areas.

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As Northern Virginia moves into the next phase of reopening, businesses should continue revising their written plans to meet the new, more lenient requirements.  Developing a comprehensive reopening and safety plan that evolves as reopening in the area continues is a best practice that will aid employers in setting expectations for employees, addressing employee safety concerns, and limiting liability.  Employers should also train their staff on the plan and its requirements.

As every jurisdiction opens at different rates, businesses should be mindful of the changing requirements and ensure that their policies and practices evolve to meet these requirements.  Epstein Becker & Green, P.C. continues to monitor developments in the DMV and throughout the country.  Readers may contact the authors or their EBG attorney with any questions or needs for assistance in reopening or addressing any other COVID-19-related issue.

Along with many European countries, the COVID-19 pandemic has affected employers and employees in Luxembourg.  On March 17, 2020, the Government of Luxembourg issued a State of Emergency until June 25, 2020 and implemented several measures and guidance to prevent the spread of COVID-19.  Luxembourg’s population of approximately 625,000, reportedly has 4,040 confirmed cases of COVID-19, 110 COVID-19 fatalities and 3,901 individuals who have recovered from the coronavirus.

Similar to other European jurisdictions, Luxembourg provides employers and employees with “short-time” working opportunities in various circumstances, including due to cyclical economic problems, structural economic problems, in the event of force majeure and due to economic dependence.

Generally, short-time working schemes are public programs that allow employers that are experiencing economic difficulties to reduce the hours worked temporarily while providing employees with income support from the State for the hours not worked.  Short-time work can involve either a partial reduction in the number of hours worked for a limited period (e.g., a partial suspension of the employment contract) or a temporary redundancy (e.g., a full suspension of the employment contract).  In each case, the employment contract continues and is not broken.  Short-time work is intended to help employers achieve flexibility during periods of temporary economic downturn without resorting to redundancies.  For employers, this strategy has the added benefit of retaining trained labor as opposed to recruiting untrained staff when economic activities increase.  For employees, short-time work enables them to remain in the labor market, even at a reduced level of working time and pay, while avoiding a decline in their skills.

In addition, and in response to the COVID-19 pandemic, the Government of Luxembourg implemented short-time working in the event of force majeure in relation with the coronavirus from March 18, 2020 through June 30, 2020.  This short-time working scheme provides an accelerated procedure for all employers that had to completely or partially stop their activities because of the decisions taken by the government.  During the short-time working period, the State covers the compensatory allowance up to 80% of the salaries.  Of particular interest to employers hoping to participate in this short-time working scheme, on June 4, 2020, the Government of Luxembourg extended the period for employers to apply for short-time working in the event of force majeure in relation with the coronavirus from May 31, 2020 until June 15, 2020.

Finally, a new application form currently is being prepared for short-time working for July 2020.  Such form is expected to be available on or around June 20, 2020.

As we have previously reported, since June 2019, the Massachusetts Department of Family and Medical Leave (the “DFML”) has proposed and adopted several “technical changes” and clarifications to the Massachusetts Paid Family and Medical Leave Law (the “PFML”). Our analysis of these proposals and revisions may be found here, here, and here. As part of the ongoing “technical changes,” the DFML recently published new proposed amendments (“New Proposed Amendments”) to the regulations governing the PFML (the “Regulations”). The New Proposed Amendments incorporate new definitions of key terms and provide, among other things, guidance regarding the requirements for private plan exemptions. Additionally, the New Proposed Amendments present information pertaining to applications for benefits, exclusions, and requirements under the law.

As a reminder, PFML benefits will become available beginning on January 1, 2021, with full benefits available by July 1, 2021. The following summary contains details of significant substantive changes provided in the New Proposed Amendments.

Identifying When a 1099-MISC Contractor is a ‘Covered Individual’

The PFML requires Massachusetts employers to report their total workforce count to the DFML, but only employers with 25 or more “covered individuals” need to withhold and remit contributions to the PFML program. The New Proposed Amendments seek to codify the DFML’s October 2019 guidance regarding whether an independent contractor is a “covered individual” for the purposes of meeting the headcount threshold. Thus, if the New Proposed Amendments are adopted, employers would not count properly classified self-employed individuals or contract workers as part of an employer’s workforce. Accordingly, the definition of a “covered contract worker” would be amended to include individuals (1) for whom the employer is required to report payment for services on IRS Form 1099-MISC; (2) for whom an employer is required to remit contributions to the Family and Employment Security Trust Fund as required by the PFML; (3) who performs services as an individual entity in Massachusetts; (4) who resides in Massachusetts; and (5) who is not classified as an independent contractor pursuant to the Massachusetts unemployment statute.

Applications and Requirements for Private Plan Exemptions

Employers that currently provide paid leave benefits to their workers may apply for an exemption to the contribution requirement to make contributions for medical leave coverage, family leave coverage, or both. The New Proposed Amendments clarify that an employer may not apply for an exemption that only covers a portion of its covered workforce. Thus, in order to qualify for an exemption from the PFML contribution requirements, all covered individuals must be included in an employer’s private plan.

Further, the New Proposed Amendments provide three additional requirements for an employer to qualify for an exemption from the PFML requirement to collect, remit, and pay contributions. The additional exemption requirements include:

  • The employer must provide for an appeals process with the private plan administrator before the employee may appeal directly to the DFML. The individual appeals process must afford the individual at least 10 calendar days to submit an appeal, and must extend the appeals filing period if the individual establishes that circumstances outside of their control prevented the filling of an appeal within the required time period. Whether the extenuating circumstances warrant an extension for filing the appeal will be determined at the DFML’s discretion.
  • As part of any determination regarding a covered individual’s entitlement to benefits under a private plan, the employer must provide a notice of rights under both the private plan and the PFML.
  • Notwithstanding the financial eligibility requirements to receive PFML benefits, the private plan must calculate a covered individual’s weekly benefit amount based on the wages or qualified earnings earned with the employer at the time of an application for benefits.

Applications for Benefits and Approval Process

Under the New Proposed Amendments, a covered individual will be required to give not less than 30 days’ notice of the anticipated start date of their leave to their employer. Proof of the notice to the employer must be provided to the DFML. If a delay occurs as the result of circumstances beyond a covered individual’s control, notice must be given as soon as practicable. The New Proposed Amendments further provide that the DFML will not accept an application for benefits unless notice to the employer has been provided. Unlike previous iterations of the PFML Regulations, the New Proposed Amendments would allow, but not require, employers to apply for benefits on behalf of employees. Employers who choose this option must abide by the requirements and timelines dictated by the PFML.

Additionally, the current PFML Regulations provide that no PFML benefits are payable during an initial seven-day waiting period. The New Proposed Amendments clarify that the seven-day waiting period for family or medical leave benefits starts on the first day of leave taken for an approved application and runs for seven consecutive calendar days. The foregoing consecutive-day waiting period also applies even in cases of applications for intermittent leave. The New Proposed Amendments further provide for an exception to the mandatory seven-day waiting period for medical leave during pregnancy or recovery from a childbirth, if supported by a healthcare provider’s documentation that the medical leave is immediately followed by family leave.

Benefit Reductions and Paid Leave Reimbursements

The New Proposed Amendments expand upon the permissible reductions in weekly benefits amounts and/or leave allotments for covered individuals.  As currently written, the PFML Regulations state that a covered individual’s weekly benefit amount will be reduced by the amount of wages that they receive through unemployment insurance, workers’ compensation, or disability benefits programs (such as Social Security benefits).  Under the New Proposed Amendments, weekly benefit amount reductions, including leave allotment, will also be made for any benefits that the covered individual receives from their employer through an exempt private plan, or any wages received from another employer or through self-employment.

Furthermore, the New Proposed Amendments provide that an employer may qualify for reimbursement from the DFML for benefits it provides to covered individuals pursuant to the employer’s private paid temporary disability, family, or medical leave policy. Employers will not, however, be eligible for reimbursement for payments made to a covered individual who elects to use other accrued benefits, such as sick leave or vacation time.

Retaliation Presumption Narrowed

As currently drafted, the PFML Regulations state that any negative change to an employee’s status or adverse employment action during or within six months of a leave taken pursuant to the PFML creates a presumption of retaliation. The New Proposed Amendments narrow the presumption, and clarify that subjectively perceived inconveniences that affect de minimis aspects of an employee’s work will not be considered a negative change under the PFML.

Get Involved and Stay Alert

Employers wishing to submit comments on the New Proposed Amendments can do so online. The DFML has also announced that it will hold public hearings on June 11, 2020. The public hearing(s) will either be online or in person, depending on the status of the Massachusetts COVID-19 response and emergency orders. Online registration to attend the public hearings is now open. Massachusetts employers should also continue to monitor the DFML’s website for important updates.

Child care centers, day camps, some organized sports, outdoor dining and indoor non-essential retail are the latest business and activities that soon can start reopening (with limitations) pursuant to two Executive Orders signed last week by New Jersey Governor Phil Murphy.

Executive Order 149 – Child Care Centers, Day Camps, Organized Sports

On May 29, 2020, Gov. Murphy signed Executive Order 149 (“EO 149”) , to allow the re-opening (with restrictions and guidelines) of all child care centers and other child care facilities, day camps and the operation of non-contact organized sports.  EO 149 rescinds Executive Order 110 (“EO 110”) (which closed most childcare centers) and supersedes all prior executive and administrative orders to the extent they conflict with EO 149.

Child Care Centers

Since April 1, 2020, pursuant to EO 110, child care centers and other child care facilities (collectively, “child care centers”) have been limited to providing care only to children of essential personnel, such as health care workers and law enforcement personnel.  EO 149 permits, as of 6:00 a.m., June 15, 2020, the reopening of child care centers for all clients, provided that they comply with the COVID-19 Child Care and Youth Summer Camp Standards and other applicable statutes, regulations, and Executive Orders. Specifically, all child care centers (including those that have been operating pursuant to EO 110), must submit an attestation to the Department of Children and Family (“DCF”) no later than 24 hours prior to the anticipated opening date, or in the case of currently operating emergency child care centers, within fourteen days of May 29, 2020, attesting that it will follow all applicable health and safety standards in the COVID-19 Child Care and Youth Summer Camp Standards (“COVID -19 Child Care & Camp Standards”), which is currently under development.  On May 29, 2020, however, the DCF issued  “Guidance For New Jersey Child Care Facilities On COVID-19 Related Health and Safety Requirements,” which can be found here, and directs:

  • Screening children and staff each day, prior to entry; anyone exhibiting symptoms or with a fever over 100.4 must be prohibited from entering;
  • Limiting the size of classes and groups, and spacing them out throughout the center; staff members may not move between groups;
  • Requiring staff to wear cloth masks, and encouraging them for children over the age of 2, whenever feasible; however, masks are prohibited during nap time for children under the age of 2, due to suffocation risks; and.
  • Enhanced cleaning and sanitation practices.

EO 149 expressly permits child care centers to engage in pre-operational activities prior to June 15, 2020.

Of note, the reopening of child care centers may impact the availability of COVID-19 related federal and state paid sick leave for employees who have been unable to work due to prior government mandated closures of child care facilities for non-essential workers.

Day Camps

New Jersey youth summer day camps (“camps”) are permitted to operate on or after July 6, 2020, provided they comply with the COVID-19 Summer COVID -19 Child Care & Camp Standards and other applicable statutes, regulations, and Executive Orders. To operate, camps , must submit; (a)  an attestation to the New Jersey Department of Health (“DOH”) no later than 24 hours prior to the anticipated opening date, attesting that they will follow all applicable health and safety standards, as detailed in the COVID-19 Camp Standards., and (b) an application to the DOH for a certificate of approval, or renewal thereof, to operate the camp, as required by N.J.S.A. 26:12-6 and -7 at least 14 days prior to the camp start date; for camps wishing to open on July 6, the application must be submitted by June 15, 2020. (See here for DOH guidance regarding Youth Camps). Day camps may engage in pre-operational activities prior to July 6, 2020.

Residential and overnight camps remain prohibited from operating. EO 149 does not, prohibit youths from stay overnight in recreational campgrounds as permitted by prior Executive Order 148  (which allows private recreational campgrounds to reopen to the public, with restrictions

Organized/Youth Sports

Effective June 22, 2020, outdoor sporting activities, including organized sporting activities, are permitted settings only, provided they do not involve person-to-person contact or routinely entail individuals interacting within six feet of one another.  In addition, all activities must comply with all applicable laws, regulations, and Executive Orders, including restrictions on gatherings in place at the time the sporting activities occur. Prior to June 22, 2020, the DOH Commissioner will issue health and safety standards regarding permissible sporting activities.

As of June 30, 2020, high school sporting activities under the jurisdiction of the New Jersey State Interscholastic Athletic Association (“NJSIAA”) may resume in accordance with reopening protocols issued by NJSIAA, which shall consider DOH guidance in issuing these protocols.

Executive Order 150 – Outdoor Dining and Indoor Non-Essential Retail

Outdoor Dining

Pursuant to Executive Order 150 (“EO 150”) effective 6:00 a.m., June 15, 2020, New Jersey food and beverage establishments may offer in-person service in outdoor areas, provided that the establishment complies with the following requirements:

  • Ensure all areas designated for food or beverage consumption are in conformance with applicable local, State, and Federal regulations;
  • Limit capacity to a number that ensures all patrons can remain six feet apart from all other patrons at all times, except for those patrons with whom they are sharing a table;
  • Satisfy all health and safety standards for use by food or beverage establishments to serve patrons that shall be issued by the DOH consistent with Executive Order 150;
  • Ensure that tables seating individual groups are six feet apart in all directions and that individual seats in any shared area that is not reserved for individual groups, such as an outdoor bar area, are also six feet apart in all directions;
  • Prohibit patrons from entering the indoor premises of the food or beverage establishment, except to walk through such premises when entering or exiting the food or beverage establishment in order to access the outdoor area, or to use the restroom (or to place an order for or pick up take out);
  • Require patrons to wear a face covering while inside the indoor premises of the food or beverage establishment, unless the patron has a medical reason for not doing so or is a child under two years of age; and
  • Prohibit smoking in any outdoor areas designated for the consumption of food or beverages (the smoking restriction will automatically sunset once food or beverage establishments are permitted to offer in-person service in indoor areas

EO 150 also reopens public picnic areas and pavilions at all State Parks and Forests.

In addition, EO 150 permits municipalities to use their existing authority to allow food or beverage establishments to expand their footprint to outdoor areas, both within their property and among municipally-governed areas, including but not limited to sidewalks, streets, or parks. However, if a municipality seeks to close off a roadway for which it would need county or State approval, it still must obtain that approval.   EO 150 instructs municipalities that make outdoor, shared spaces available for use by food or beverage establishments to equitably divide these spaces among those food or beverage establishments that can feasibly use it.

Indoor Non-Essential Retail

As of 6:00 a.m., June 15, 2020, the brick-and-mortar premises of non-essential retail businesses that were closed to the public by Executive Order 107 may reopen to the public, provided that the businesses adopt policies that include, at minimum, the requirements that were applied to essential retail businesses in Paragraph 1 of  Executive Order 122  (“EO 122”) (which we wrote about here).  To summarize, those requirements are as follows:

  • Limit occupancy at 50% of the stated maximum store capacity, if applicable, at one time;
  • Establish hours of operation, wherever possible, that permit access solely to high-risk individuals, as defined by the CDC;
  • Install a physical barrier, such as a shield guard, between customers and cashiers/baggers, wherever feasible or otherwise ensure six feet of distance between those individuals, except at the moment of payment and/or exchange of goods;
  • Require infection control practices, such as, regular hand washing, coughing and sneezing etiquette, and proper tissue usage and disposal;
  • Provide employees break time for repeated handwashing throughout the workday;
  • Arrange for contactless pay options, pickup, and/or delivery of goods wherever feasible and, wherever possible, consider populations that do not have access to internet service;
  • Provide sanitization materials, such as hand sanitizer and sanitizing wipes, to staff and customers;
  • Require frequent sanitization of high-touch areas such as restrooms, credit card machines, keypads, counters and shopping carts;
  • Place conspicuous signage at entrances and throughout the store, if applicable, alerting staff and customers to the required six feet of physical distance;
  • Demarcate six feet of spacing in check-out lines to demonstrate appropriate spacing for social distancing; and
  • Require workers and customers to wear cloth face coverings while on the premises, except where doing so would inhibit that individual’s health or where the individual is under two years of age, and require workers to wear gloves when in contact with customers or goods.

In addition, as provided in EO 122, businesses must provide, at their expense, the mandated face coverings and gloves for their employees. In addition, if a customer refuses to wear a  cloth face covering for non-medical reasons and if such covering cannot be provided to the individual by the business at the point of entry, then the business must decline entry to the individual, unless the business is providing medication, medical supplies, or food, in which case the business policy should provide alternate methods of pickup and/or delivery of such goods. When an individual declines to wear a face covering on store premises due to a medical condition that inhibits such usage, neither the essential retail business nor its staff may require the individual to produce medical documentation verifying the stated condition.

Citing the continuing need to protect the New Jersey residents from COVID-19 (even as the state ramps up its reopening), on June 4, 2020, New Jersey Governor Phil Murphy signed Executive Order 151 (“EO 151”) , extending the state’s Public Health Emergency by thirty days, i.e., until July 4, 2020. Pursuant to EO 151, all Executive Orders and actions taken by any Executive Branch departments and agencies (including Administrative Orders) that were adopted in whole or in part based on the current Public Health Emergency will remain in full force and effect. A declared public health emergency gives Gov. Murphy and state department leaders expanded authority to respond to a crisis such as COVID-19.

Gov. Murphy initially declared both a State of Emergency and a Public Health Emergency on March 9, 2020, in Executive Order 103.  While the State of Emergency will stay in place indefinitely until lifted, the Public Health Emergency automatically terminates after thirty  days, unless specifically extended.  EO 151 is the third such extension, with the first having been issued on April 7, 2020, in Executive Order 119 and the second on May 6, 2020, in  Executive Order 138.

Much ink has been spilled in recent weeks about how some recipients of Paycheck Protection Program (“PPP”) relief obtained their loans through mistakes or false pretenses. Now banks are coming under fire for their lending practices in connection with this hastily prepared and implemented program, which left them grappling with how to properly issue loans in the face of procedural and substantive gaps in the law. Many lenders tried to fill these gaps by supplementing the PPP application to address practical concerns not covered in the law. Two recent cases, however, demonstrate that banks may face legal exposure for supplementing the applicant eligibility requirements published by the Small Business Association (“SBA”). Prudent lenders would do well to consider with counsel the best ways to avoid becoming entangled in such matters.

Background on the PPP

As part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), the SBA was authorized to establish a new loan program to assist small businesses adversely impacted by the COVID-19 emergency. P.L. 116-2. Section 1102 of the CARES Act amended the Small Business Act, 15 U.S.C. § 636, to establish the Paycheck Protection Program (“PPP”). The PPP authorizes participating lenders to make loans to eligible small businesses. See P.L. No. 11-136, § 1102(a)(2).

Initially, a pool of $349 billion was established to fund the program, but it was quickly depleted and replenished with an additional $310 billion on April 24, 2020. The amount of any one loan is capped at $10 million per applicant. The program is meant to provide funding on a first come, first served basis. 13 C.F.R. Part 120.

The legislation financially incentivizes banks’ participation in the PPP by providing participating lenders with processing fees of five percent on loans up to $350,000, three percent on loans in amounts between $350,000 and $2 million, and one percent on loan exceeding $2 million. See PPP Lenders Information Sheet, (last visited May 21, 2020).

PPP Eligibility Requirements

PPP borrower eligibility requirements are comparatively less stringent than those of typical business loans. To qualify for a PPP loan, an applicant need only show that it has 500 or fewer employees (or is a small business concern as defined in section 3 of the Small Business Act (15 U.S.C § 632)); was in operation on February 15, 2020 and either had employees for whom salaries and payroll taxes were paid, or independent contractors. Applicants also must certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant, [and] the funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments…” SBA Form 2484, (last visited May 21, 2020). Finally, at least currently, applicants must also certify that they have not received another PPP loan. Id.

Lenders Add Criteria

A number of lenders added additional eligibility criteria typical of other commercial loans that they process. For example, in addition to the SBA mandated requirements, some banks have required applicants to have a business checking account in that bank as of a previous date certain. Similarly, other lenders have required applicants to have had as of a previous date certain either a small business checking or credit relationship with the bank, or a small business checking account and no business credit or borrowing relationship with another lender. Criticism of these additional criteria has emerged because of concerns that it gives unfair priority to the banks’ customer over non-customers and thereby, among other things, disproportionally makes loans less available to otherwise qualified minority and women owned businesses.

Senators Assail Banks’ Augmented Eligibility Requirements

Sen. Marco Rubio (R. Fla.) chairs the Senate’s Committee on Small Business and Entrepreneurship, which oversees all legislation and issues relating to the SBA. On April 3, 2020, he tweeted the following:

The requirement that a #Small Business not just have a business account but also a loan or credit card is NOT in the law we wrote and passed or in the regulations.

He went on, stating that the condition is bank-added “not a govt one,” and asserted that banks “should drop it” because “[t]his money is 100% guaranteed by the fed govt.” Marco Rubio (@MarcoRubio), Twitter (Apr. 3, 2020), url here.

Sen. Ben Cardin (D-Md.), the ranking member of the committee also released a statement about the PPP that day:

I am deeply troubled by reports of financial institutions turning away small businesses that desperately need capital through the Paycheck Protection Program. The small business provisions in the CARES Act were written to get funds into the hands of American small business owners as quickly as possible so they can keep employees on payroll and avoid financial ruin while we work to combat COVID-19. Creating artificial barriers that block businesses from much-needed capital is redlining by another name.

See Cardin Statement on Launch of Paycheck Protection Program (Apr. 3, 2020).

In the same vein, on April 9, 2020, Senators Kaine, King and Coons wrote to the President and CEO of the American Bankers Association, advising:

We have heard from many constituents that because they do not have a preexisting account or because their lender is not accepting applications, that they are unable to apply for relief through this vital program. Unfortunately, many of these same customers that do not have preexisting relationships are those most likely to be already struggling to pay their bills and keep their businesses afloat. We are calling for your member banks with the resources to do so to open up applications for new customers urgently.

See Letter from Senators Kaine, King, and Coons to Rob Nichols (Apr. 9, 2020).

Banks are Sued By Loan Applicants

On the heels of these developments, two recent lawsuits challenge banks’ augmenting statutorily-express PPP eligibility requirements, as summarized below.

Profiles, Inc. v. Bank of America Corp.

In Profiles, Inc. v. Bank of America Corp., 1:20-cv-00894-SAG (D. Md.), a group of small businesses took Bank of America (“BoA”) to task for allegedly implementing, “a loan process that unlawfully prioritized their existing borrowing clients by barring their depository clients and other small businesses from even applying for funds from the governmental loan programs.” Second Amended Compl., ¶ 4, Apr. 7, 2020, ECF No. 5. Plaintiffs further allege that after their lawsuit was filed, BoA “revised its policy on April 4, 2020, by allowing depository-only clients to apply for PPP loans but imposed an additional illegal requirement – that depository-only clients must have no credit card or loan with any other bank.” Id. at ¶ 5.

Plaintiffs’ legal claims are premised on alleged breaches of the CARES Act and the SBA’s 7(a) loan program (meant to help startup and existing small businesses obtain loans when they might not otherwise be able to obtain funding), specifically that BoA illegally created “unlawful requirements to apply for a PPP loan from it…” Id. at ¶¶ 101, 111. They also allege unjust enrichment based upon the allegation that by prioritizing BoA clients with BoA debt or no other bank debt, BoA enhanced its credit risk profile.

Shortly after filing their Second Amended Complaint, the Profile plaintiffs moved for a temporary restraining order and preliminary injunction, seeking to enjoin the aforementioned conduct. See Motion for Temporary Restraining Order, 1:20-cv-00894-SAG (D. Md.), Apr. 7, 2020, ECF No. 7. In denying the application, the Court focused primarily on the likelihood of success prong of the TRO analysis, finding that based on its plain language there was no implied private right of action under the CARES Act. See Memorandum Opinion, Apr. 13, 2020, ECF No. 17. The Court further held that even if the Act provided applicants with some statutory right to apply for a PPP loan through a lender of choice, nothing in the Act evidenced Congress’s intent to enable PPP loan applicants to bring civil suits against PPP lenders to enforce those rights. Id. at 13. Moreover, assuming there was an implied private right of action, the court found that the CARES Act does not prohibit banks from considering other information or dictate the order in which a bank must process the applications it accepts. Id.

Scherer v. Wells Fargo

A similar lawsuit was filed against Wells Fargo in the U.S. District Court for the Southern District of Texas. In Scherer v. Wells Fargo, 4:20-cv-01295 (S.D. Tex.), a self-employed small business owner and a sole proprietor alleged that the bank was “refusing to accept PPP loan applications unless the small business applicant had an established business checking account with Wells Fargo as of February 15, 2020” and as a consequence was “unlawfully prioritizing these existing customers who had a ‘Wells Fargo business checking account as of February 15, 2020.’, and shutting out other businesses who qualify equally under the PPP and CARES Act.” Second Amended Compl., ¶ 6., May 12, 2020, ECF No. 25.

The Scherer action asserts broader legal claims than those advanced in Profile. In addition, to violations of the CARES Act and the SBA’s 7(a) loan program (15 U.S.C. 636(a)), the Scherer plaintiffs allege negligence, common law fraud, unjust enrichment, and violation of twenty-four states consumer protection statutes.

Like the plaintiffs in the Profile matter, the Scherer plaintiffs moved for a temporary restraining order. See Motion for Temporary Restraining Order, Scherer v. Wells Fargo, 4:20-cv-01295 (S.D. Tex.), Apr. 22, 2020, ECF No. 9. On April 29, 2020, the court denied the motion on the grounds that the TRO was unjustified because plaintiffs had not experienced a substantial threat of irreparable injury since there were 4,975 other lenders to whom they could have applied for a PPP loan. Id. at 3. The court, unlike the judge in the Profile case, did not opine on the legal merits of plaintiffs’ claims.

Neither bank is out of the woods yet, however, as both cases now proceed to discovery.

New Jersey May Be Fertile Ground For Lawsuits Against Lenders

New Jersey is home to scores of banks that participate or have participated in the PPP. See Lenders Participating in PPP by State (available here). Further, notwithstanding the Profiles court’s finding that the CARES Act appears to not have an implied private right of action, lenders should not ignore that New Jersey is also home to a very broad and powerful consumer rights statute.

The New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 et seq. (“CFA”), makes it unlawful for a “person” to use “unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression, or omission of any material fact with the intent” that someone else rely on the foregoing, “in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby.” N.J.S.A. 56:8-2. The term “advertisement” includes “the attempt…to induce directly or indirectly any person to enter or not enter into any obligation or acquire any title or interest in any merchandise or to increase the consumption thereof or to make any loan.” N.J.S.A. 56:8-1(a)(emphasis added). Among other things, the CFA entitles prevailing plaintiffs to triple damages and attorneys’ fees.

Of importance, the CFA is not limited to righting wrongs against individuals. Under certain circumstances, a business may be considered a “person” under the act and may sue to enforce their rights under this statute. Coastal Group, Inc. v. Dryvit Systems, Inc., 274 N.J. Super. 171, 179-180 (App. Div. 1994). Moreover, lending is one of the activities that falls within the CFA’s broad purview. Gonzalez v. Wilshire Credit Corporation, 207 N.J. 557, 564 (2011); Lemelledo v. Beneficial Management Corp. of America, et al., 150 N.J. 255, 266 (1997).

Consequently, to avoid the risk of liability under the CFA, banks should be sure to carefully word all advertising and loan application documents to assure that they cannot arguably be said to misrepresent or inaccurately represent eligibility requirements of the PPP to applicants and potential applicants. Such measures are important in addition, because as demonstrated by the Scherer lawsuit, CFA claims are often accompanied by state common law claims.

Takeaways

Irrespective of the business reasons for banks wishing to require PPP applicants to have a loan/banking relationship to be eligible for a PPP loan and the legal arguments that may permit them to impose such additional requirements, there are enough cross-winds stirring for banks to be concerned and to take steps to reduce the risk of suit and potential exposure.

Similarly, as plaintiffs and politicians argue that the rationale for the PPP is to get needed money into the hands of as many impacted small businesses as possible as quickly as possible, the practice of requiring additional eligibility requirements will be further called into question. Such conduct will be argued to violate some “first come, first served” element of the program, placing it squarely in the cross-hairs of the CFA and other State’s consumer protection statutes. It is clear that there is currently a taste to sue lenders for how they process PPP loans. Until more cases wind their way through the pipeline and the parameters of liability becomes more defined or Congress immunizes lenders for participating in the PPP, banks certainly will face litigation risk related to these issues, as well as the burden of lost time and expense that goes with it.