Because the COVID-19 crisis is substantially different from any other event in living memory, your business needs to be ready to address a variety of possible issues on an emergency basis. As the economy continues to slow down because of business closures and social distancing, and as people run out of money to pay their ongoing bills and obligations, businesses absolutely need to understand what their worst-case scenario could be, and prepare to either meet, or do their utmost to avoid, that outcome.
Whatever else you may do, now is the time to carefully evaluate the following issues in order to anticipate and prepare for any problems which may arise during this crisis.
- Compliance with emergency laws and regulations. Stay subscribed to GLLG’s newsletter to get regular alerts and updates on new laws and regulations being implemented for COVID-19 relief. Things are changing rapidly and you need to know how these laws and regulations will affect your bottom line (for example, “when am I obligated to offer paid sick leave to my employees?” or “if I am laying people off but plan to rehire them after the crisis, what kind of obligations do I have to them in the meantime?”). Remember, if your business remains open, you need to comply with Governor Brown’s Executive Order No. 20-12, which requires, among other things, that you need to designate an employee or officer to establish, implement, and enforce social distancing policies.
- Accessing emergency relief funds. The federal government has made billions of dollars in low-interest disaster relief loans available to small businesses which do not otherwise have access to capital. Very few businesses will come through this crisis unscathed. We recommend that every business owner take a sober-eyed look NOW at upcoming cash-flow needs, and evaluate whether disaster relief financial assistance may be needed. We expect that the demand for these loans will be at an all-time high and that accessing funds may be substantially delayed because of the volume of applications. If you have any inkling that you may need this type of assistance, the time is now to speak to a trusted advisor and begin the loan application process.
- Landlord-Tenant and mortgage payment issues. The world may have stopped, but banks still expect mortgages to be paid, and landlords will demand rent. We have already seen some large chain businesses taking the position that rent payments will not be made for the month of April. If your business has closed or even just slowed down due to the pandemic, you may want to explore whether you can defer rent or mortgage payments until a later time. Conversely, if you are a landlord or lender, you may need legal advice about your rights and obligations to your non-paying tenant(s).
- Accessing insurance proceeds. IMPORTANT: If your business has business insurance, you may be able to access coverage if your business loses income or sustains other losses as a result of COVID-19. Because we have never experienced a pandemic of this nature in modern history, many or even most commercial insurance policies may be silent as to (and therefore cover by default) losses stemming from COVID-19. In other words, you may be insured for these losses and not even know it. Insurance proceeds can help you cover operating expenses, temporary relocation, payroll, taxes, and loan payments, among other things. Without exaggeration, every single business owner should: 1) request their complete insurance policy from their broker; 2) document absolutely everything (how business decisions are made, how much money you’re losing, etc); and 3) make a claim – you often have a limited time do make a claim, it doesn’t take much time, and what have you got to lose? If you never make a claim, you’ll definitely never get paid.
The biggest take-away we can leave you with is that this will get much worse, and you need to prepare for it to get much worse. The best way you can prepare for what is coming is to speak with one of our lawyers to make sure you have a working survival plan to get you through.