HEROES + HEALS = ?????: COVID Relief 3.0 Is A Mystery

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This is like watching sausage being made – it isn’t pretty. The House passed its $3 Trillion COVID rescue package (the HEROES Act) about a month ago. But the Senate’s HEALS Act is still a work in progress with an unpredictable future. And of course the internally split Senate must negotiate final legislation with the House. In the meantime, workers and businesses are forced to battle the virus, navigate challenging re-openings, and handle employment complications without much comfort as to future relief. Franchisors and franchisees are clearly not immune from this conundrum.

My crystal ball is no clearer than anyone else’s, but sifting through the various reports, opinions and rumors surrounding the fate of COVID Relief 3.0 suggests some features that are likely to appear in a compromise bill, including:

*          Permitting second PPP loans to certain businesses dependent on the level of revenue loss experienced by a business over a set period of time – although both the revenue loss level and the applicable period of time remain matters of debate (some Senators supporting a second round only if a business demonstrates a revenue loss of at least 50% while other supporting a lower threshold).

*          Forgiving PPP loans under $150,000 on the borrower’s attestation of use.

*          Expanding permissible uses of PPP funds to restart necessities, e.g., PPE, cleaning, etc.

*          Expanding the deadline for borrowers to apply for PPP loans (already extended over the short term).

*          Making direct payments to low income Americans, although the amount of the payment is undecided.

Note that I did not refer to putting more money into the PPP pot. The House provided for additional funds, but thus far, the Senate has not. That’s just one of many items that’s undetermined, and it’s a big one – will there be more PPP money or not?! Admittedly, there’s money left from PPP 2.0, but will there be more funds to help businesses bear the costs of preparing for a return to business, or will it be a first-come, first-served rush (similar to the experience with the initial PPP loans) to use what’s left?

While the Senate resists adding money for small business (and many franchisee) PPP loans, the HEALS bill in its present form reflects some traditional Republican policies, e.g., tax credits for certain COVID-related expenses (e.g., PPE) and PPP expenses being deductible. These ex post facto changes don’t really help a business financially bear the expenses in the first place.

Two key battlegrounds affecting businesses broadly, franchise and non-franchise, big and small, are the continuation of expanded unemployment benefits and COVID liability protection for businesses (and medical providers). Even within the Senate, these items are still being debated.

The House HEROES act generally extends current enhanced unemployment benefits, including the $600 sweetener, through December 31st. The Senate extends unemployment benefits generally, but is not sanguine with the $600 enhancement, arguing that it discourages a return to the workplace. It looks like the Senate is debating a few approaches to the $600 enhancement issue – no enhancement, a $200 enhancement, or a scaled enhancement based on average salaries in each state. As some commentators have observed, anything other than a continuation of the $600 enhancement would result in a delay in payments to workers, as state payment systems would need to readjust to the new amount. The scaled enhancement approach would result in the longest delay; it would require Congress to explain the scaling method to states, and then states to perform and implement the change. Still, this debate is along lines familiar to legislators – money.

Business liability protection is a far more complex argument. The Senate and the administration are insistent on broad immunity for businesses and medical providers for COVID claims, establishes gross negligence as the only basis for recovery, preempts state law standards of liability, and proposes a cap on damage awards. The House HEROES act does not include business immunity provisions. The philosophical divide is a sharp one – will immunity dissuade businesses from compliance with what may be expensive COVID protections for employees and guests, or will the absence of immunity dissuade businesses from reopening at all? Is there room somewhere in the middle for narrow business immunity, perhaps measured against known, authoritative and accepted standards? It’s worth noting that many states have already enacted some form of business immunity from COVID suits, but getting the Senate and House to bridge this divide will be a good trick.

This sausage is not even mixed; it won’t go on the grill until the House and Senate can negotiate its ingredients. And there’s little to no indication of imminent meaningful negotiations. Congress appears to agree that COVID Relief 3.0 is needed, but given the divisions in the Senate and the chasm between House and Senate, the answer to our heading may be:

HEROES + HEALS = a messy stew.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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