The U.S. Supreme Court, in a historic 6-3 decision, held that an employer who fires an individual merely for being gay or transgender violates Title VII of the Civil Rights Act of 1964, which, among other things, prohibits employment discrimination “because of … sex.”

The argument before the Supreme Court in Bostock v. Clayton County, Georgia (an opinion that consolidated three different cases raising the same issue) was simple and straightforward, leaving little room for nuance (or, remarkably, a single footnote in the Court’s majority opinion).  Indeed, the employers in all three cases “d[id] not dispute that they fired the plaintiffs for being homosexual or transgender.”  Thus, the only question before the Court was whether an employer is permitted by federal law to terminate an employee who is homosexual or transgender—for no reason other than that employee’s homosexuality or transgender status.  In answering that question, the Court observed that “homosexuality and transgender status are inextricably bound up with sex.”  To that end, the Court held that Title VII’s message is “simple and momentous: An individual’s homosexuality or transgender status is not relevant to employment decisions.  That’s because it is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual based on sex.”

But what about sex-specific bathrooms and dress codes?  None of those issues were considered.  The Court raised them, briefly, but then just as quickly punted for another day by noting: “[W]e do not purport to address bathrooms, locker rooms, or anything else of the kind.  The only question before us is whether an employer who fires someone simply for being homosexual or transgender has discharged or otherwise discriminated against that individual ‘because of such individual’s sex.’  … .  Whether other policies and practices might or might not qualify as unlawful discrimination or find justifications under other provisions of Title VII are questions for future cases, not these.”  Similarly, the Court noted that issues of religious liberty were not considered: “[W]hile other employers in other cases may raise free exercise arguments that merit careful consideration, none of the employers before us today represent in this Court that compliance with Title VII will infringe their own religious liberties in any way.”

So what, exactly, is the takeaway here?  Although Bostock will certainly be hailed as a watershed moment for LGBTQ+ rights, the actual holding—while profound—is quite narrow.  Employers should obviously take note that homosexual and transgender employees are now members of a federally protected class when it comes to firing (and, by extension, hiring).  But what effect this decision will have on “lesser” employment issues (e.g., the impact of sex-specific dress codes on transgender employees) remains to be seen.

Opinion here:

During this unprecedented time of disruption and change due to the COVID-19 pandemic, lending institutions are seeking to provide much needed relief to their customers with respect to their mortgage and other loan payments, but the process is complex.  Regulatory guidance on processing loan modifications and other relief options is being updated almost daily, and the passage and implementation of the Coronavirus Aid, Recovery and Economic Security Act (the “CARES Act”) and other state mandated orders have impacted the way lenders can provide relief. This article provides a summary of the current regulatory response to COVID-19 with respect to forbearance, loan modifications, and other relief options related to mortgage and home equity loans.

  • Joint Statement on CRA Consideration for Activities in Response to COVID-19

On March 19, the Federal Reserve Board, FDIC, and OCC released a joint statement encouraging financial institutions to work with affected customers and communities, particularly those that are low- and moderate-income. The agencies stated that they will, pursuant to the Community Reinvestment Act (CRA), provide “favorable consideration of certain retail banking services, retail lending activities, and community development activities” related to the COVID-19 crisis.  The agencies emphasized that “prudent efforts to modify the terms on new or existing loans” for affected low- and moderate-income customers and small businesses “will receive CRA consideration and [will also] not be subject to examiner criticism.”

  • Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus

On March 22, 2020, the Federal Reserve Board, FDIC, NCUA, CFPB, OCC and State Banking Regulators issued a joint interagency statement on loan modifications and reporting, encouraging financial institutions to work constructively with borrowers affected by COVID-19 and providing additional information regarding loan modifications and troubled debt restructurings (“TDRs”).  In essence, the statement provides that prudent efforts to adjust or alter terms on existing loans in affected areas will not be subject to examiner criticism.  According to the statement, the participating agencies “will not criticize institutions for working with borrowers and will not direct supervised institutions to automatically categorize all COVID-19 related loan modifications as troubled debt restructurings (TDRs).”  Additionally, agencies “will not criticize financial institutions that mitigate credit risk through prudent actions consistent with safe and sound practices” and “will not criticize institutions that work with borrowers as part of a risk mitigation strategy intended to improve an existing non-pass loan.”

Accounting for Loan Modifications

According to the statement, the agencies have confirmed with the Financial Accounting Standards Board (FASB) that “short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not to be considered TDRs.”  These short-term (e.g., six months) modifications include “payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.”

Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.  Examiners will exercise judgment in reviewing loan modifications, including TDRs, and will not automatically adversely risk rate credits that are affected by COVID-19, including those considered TDRs. Regardless of whether modifications result in loans that are considered TDRs or are adversely classified, agency examiners will not criticize prudent efforts to modify the terms on existing loans to affected customers.

Residential Mortgage Loans and Risk Based Capital Rules

Efforts to work with borrowers of one-to-four family residential mortgages, “where the loans are prudently underwritten, and not past due or carried in nonaccrual status, will not result in the loans being considered restructured or modified for the purposes of their respective risk-based capital rules.”  Although NCUA’s Risk-Based Capital rule does not go into effect until January 1, 2022, the NCUA agrees with the guidance regarding working with borrowers of one-to-four family residential mortgages.

Past Due Reporting

For loans not otherwise reportable as past due, “financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal loan documents. If a financial institution agrees to a payment deferral, this may result in no contractual payments being past due, and these loans are not considered past due during the period of the deferral.

Nonaccrual Status and Charge-Off

The Statement provides that financial institutions should “refer to the applicable regulatory reporting instructions, as well as its internal accounting policies, to determine if loans to stressed borrowers should be reported as nonaccrual assets in regulatory reports. However, during the short-term arrangements discussed in this statement, these loans generally should not be reported as nonaccrual. As more information becomes available indicating a specific loan will not be repaid, financial institutions should refer to the charge-off guidance in the instructions for the Consolidated Reports of Condition and Income.”

Discount Window Eligibility

Loans that have been restructured as described under the Interagency Statement will continue to be eligible as collateral at the FRB’s discount window based on the usual criteria.

  • Joint Statement Encouraging Responsible Small-Dollar Lending in Response to COVID-19

On March 26, 2020, the Federal Reserve Board, FDIC, CFPB, NCUA and OCC issued another interagency statement encouraging financial institutions to offer responsible small-dollar loans to both consumers and small businesses.  “Such loans can be offered through a variety of loan structures that may include, for example, open-end lines of credit, closed-end installment loans, or appropriately structured single payment loans.” Financial institutions may, but are not required to, consult with their primary federal regulator about small-dollar loan products that they offer or plan to offer to customers affected by COVID-19. The statement encourages financial institutions to “consider workout strategies designed to help borrowers who are experiencing financial difficulties, while mitigating the need to re-borrow.”  Financial institutions are reminded that, for all products, they should offer loans in a manner that is “consistent with safe and sound practices, provides fair treatment of consumers, and complies with applicable statutes and regulations, including consumer financial protection laws.”

  • Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

The CARES Act, which was passed was passed by the U.S. Senate on March 25, 2020, the U.S. House of Representatives on March 27, 2020 and signed by President Trump later that day, provides significant relief options to financial institutions hoping to help their customers through the COVID-19 pandemic.  The Act allows financial institutions to provide guaranteed loans to businesses and self-employed individuals through the U.S. Small Business Administration’s paycheck protection program, providing lenders an opportunity to assist members with payroll, benefits, and other eligible expenses.  The Act also offers relief from accounting requirements and impairments resulting from loan modifications for borrowers affected by the coronavirus pandemic.  Additionally, it provides temporary relief from the implementation of the FASB’s current expected credit losses methodology

Relief from Foreclosure

The CARES Act provides foreclosure relief for “federally-backed loans,” which means loans (for 1–4 family properties) purchased, securitized, owned, insured, or guaranteed by Fannie Mae or Freddie Mac, or owned, insured, or guaranteed by FHA, VA, or USDA.  About one-third of residential mortgages are not federally backed and thus not covered by the CARES Act. These homeowners (and tenants) will have to rely on future federal action or current and/or future state orders, or on voluntary actions by mortgage servicers.  For instance, On April 1, 2020, the Pennsylvania Supreme Court ordered that no state official may effectuate an eviction, ejectment, or other displacement from a residence for nonpayment of rent or a loan from March 19, 2020 through April 30, 2020.

Under Section 4022(a)(2) of the CARES Act, a servicer of federally backed mortgage loan may not initiate any judicial or nonjudicial foreclosure process, move for a foreclosure judgment, order a sale, or execute a foreclosure-related eviction or foreclosure sale.  The provision lasts for not less than the sixty-day period beginning on March 18, 2020. Importantly, this provision is not limited to borrowers with a COVID-19 related hardship.

Section 4022(b), (c)(1) of the CARES Act provides that homeowners with federally backed mortgage loans affected by COVID-19 can request and obtain forbearance from mortgage payments for up to 180 days, and then request and obtain additional forbearance for up to another 180 days. During a period of forbearance, no fees, penalties, or interest shall accrue on the borrower’s account beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract.  The covered period appears to be during the emergency or until December 31, 2020, whichever is earlier.

The CARES Act provides for different forbearance rights for owners of multi-family property (5 or more units), and also provides that tenants are protected from eviction if the owner seeks such forbearance (Section 4023).  Moreover, pursuant to Section 4024, during the 120-day period beginning March 27, 2020, the lessor of a “covered dwelling” may not file a court action for eviction or charge additional fees for nonpayment of rent.  After that 120-day period, the lessor cannot require the tenant to vacate until it gives the tenant a thirty-day notice to quit. A covered dwelling is one where the building is secured by a federally backed mortgage loan or participates in certain federal housing programs.

  • Mortgage Forbearance Relief

On March 18, 2020, the United States Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA) each ordered a 60-day moratorium on foreclosures and evictions for loans insured by the Federal Housing Administration or owned by Fannie Mae or Freddie Mac.  HUD followed that by issuing Mortgagee Letter 2020-04, which further explains that the moratorium applies to the initiation of foreclosures and to the completion of foreclosures in process. Evictions of persons from properties secured by FHA-insured Single Family mortgages are also suspended for a period of 60 days. Additionally, deadlines of the first legal action and reasonable diligence timelines are extended by 60 days.

Just as the Senate took up the CARES Act, Fannie Mae and Freddie Mac announced that their servicers may offer the new payment deferral loss mitigation option beginning July 1, 2020 (it had originally been slated to roll out by January 1, 2021). For borrowers who experience a temporary financial hardship – whether COVID-19-related or otherwise – and have taken advantage of loan payment forbearance but cannot fully reinstate their loans when the forbearance period ends, or afford to repay the forborne amounts alongside their usual monthly mortgage payments, servicers may offer to defer up to two months of forborne payments as a non-interest-bearing balance to be repaid when the loan matures or is otherwise paid off.

Fannie’s program is described in Lender Letter 2020-05 (issued March 25, 2020), and Freddie’s is described in Bulletin 2020-06 (also issued March 25, 2020). Freddie Mac also issued Bulletin 2020-07, containing additional COVID-19-related guidance, including, among other reminders: updated reporting and property inspection and preservation requirements; clarified requirements for streamlined Flex Modifications; and outreach and collection techniques. Fannie Mae similarly updated its earlier Lender Letter 2020-02.

  • CFPB Response

On March 26, 2020, the CFPB issued several statements in furtherance of its previously issued joint statements with the other agencies, as detailed above, to encourage lenders to work constructively with borrowers and other customers affected by COVID-19 to meet their financial needs.

Statement on Supervisory and Enforcement Practices Regarding Quarterly Reporting Under the Home Mortgage Disclosure Act

In this statement, the CFPB announced that it will not require quarterly Home Mortgage Disclosure Act (HMDA) and Regulation C reporting from mortgage lenders. Rather, lenders should continue to collect the data and await further instruction regarding when to commence new quarterly submissions.

Statement on Supervisory and Enforcement Practices Regarding Bureau Information Collections for Credit Card and Prepaid Account Issuers

In this statement, the CFPB noted that it is also postponing reporting of certain information related to credit card and prepaid accounts under the Truth in Lending Act, Regulation Z, and Regulation E, as well as data collection regarding certain pending rulemakings.

Statement on Bureau Supervisory and Enforcement Response to COVID-19 Pandemic

Finally, in this statement the CFPB stated that “[t]he Bureau encourages prudent efforts undertaken in good faith that are designed to meet the exigent needs of financial institutions’ borrowers and other customers. To that end, when conducting examinations and other supervisory activities and in determining whether to take enforcement action, the Bureau will consider the circumstances that entities may face as a result of the COVID-19 pandemic and will be sensitive to good-faith efforts demonstrably designed to assist consumers.”

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was passed by the U.S. Senate on Wednesday, March 25, 2020, the U.S. House of Representatives on Friday, March 27, 2020 and signed by President Trump later that day.

The CARES Act is an 880-page piece of legislation with an estimated $2 Trillion price tag.  It is designed to provide cash relief to U.S. citizens, facilitate public health spending to combat the coronavirus, enhance small business lending and allocate and appropriate significant amounts of money to industries and organizations significantly impacted by the Coronavirus.

While the CARES Act is broken down into various Divisions and Titles, the following is a summary of what is contained in Title I of the CARES Act (Title II provides funding for unemployment compensation, establishes a recovery rebate for most U.S. taxpayers, contains provisions related to retirement accounts, encourages charitable giving, grants credits to certain employers and revises certain Federal income tax provisions.  Title III contains provisions related to Coronavirus testing, changes certain sick and family leave conditions and modifies various health savings account terms.  Title IV allocates $500 billion for loans, loan guarantees and investment in certain eligible businesses.  Title V contains a $150 billion appropriation for state and local governments to use in responding to the Coronavirus.  Title VI provides borrowing authority for the U.S. Postal Service.  Finally, Division B consists of appropriations for various programs that will be made available to companies).

For more specific information, analysis and insight into this or any other Title of the CARES Act, contact the Pillar+Aught attorney with whom you regularly work.

What Does Title I do?

The Small Business Act is amended so that businesses who otherwise would not be eligible for SBA loans are now eligible for these loans during the “covered period.”  The term “covered period” is defined by the CARES Act as February 15, 2020 through June 30, 2020.  Banks currently authorized to make SBA loans are specifically authorized to make loans under the CARES Act.

Who can Obtain a Loan Under the CARES Act?

Generally, any business, including nonprofits and sole proprietorships, employing not more than 500 employees are eligible for loans during the covered period.  There are two caveats to this general rule: (i) if the Small Business Administration has designated a smaller size standard for a particular industry, that number applies; and (ii) if the employer is in the hospitality and dining industry, has more than one physical location and an NAICS code beginning with 72 (accommodation and food services), as long as there are 500 or fewer employees per location, the business is eligible for a loan during the covered period.

What are the Terms of the Loans?

Loan amounts are capped at $10 million and will, generally, be granted in an amount equal to 2.5 times a businesses’ total monthly payroll costs in the one-year period before the loan is made.  The interest rate on the loans may not exceed 4% and the requirements to obtain a loan are fairly easy to meet: (i) the business must have been operating on 2/15/2020; (ii) the business must have had employees that it paid; and (iii) the business must certify that (A) the loan is needed to continue operating during the COVID-19 emergency, (B) it will use the funds to retain workers and maintain payroll or make mortgage, lease or utility payments and (C) it does not have other applications pending for similar loans.

What can the Loan Proceeds be Used for?

Businesses can use the loan proceeds to pay for payroll, health benefits, interest on mortgages, rent, utilities and interest on debt acquired prior to the covered period.

When Does the Loan Have to be Repaid?

While the maturity date on the loans cannot exceed 10 years, the loans are automatically eligible for repayment deferral for six months to one year.  Additionally, there is a special loan forgiveness provision built into the CARES Act.  The loan, upon application and submission of certain materials that verify employees, costs, etc., will be forgiven (in the form of debt cancellation that is specifically made exempt from Federal income tax) in an amount equal to the following costs incurred and payments made during the 8-week period beginning on the date of the origination of the loan: payroll, interest on mortgages, rent and utilities.  This amount is, however, reduced for employee cuts and wage reductions.

The employee cuts formula is: maximum amount of relief computed above x (average full time employees per month during the 8-week period beginning on the date of the origination of the loan / average full time employees per month from either (A) 2/15/2019 to 6/30/2019 or (B) 1/1/2020 to 2/29/2020.

The wage reduction formula is a straight reduction by the amount of reduced salary of an employee during the 8-week period beginning on the date of the origination of the loan in excess of 25% of the employee’s salary during the most recent quarter of employment before such period.

Even so, there are limited circumstances where these reductions will not apply, specifically where a business rehires or makes up wage reductions by June 30, 2020.

Are There Any Other Special Provisions Associated with These Loans?

  • No fees will be charged for processing these loans.
  • There is no requirement that a business demonstrate that it cannot obtain credit elsewhere.
  • No personal guarantee is required with respect to the loans.
  • There is no prepayment penalty associated with the loans.
  • The total amount appropriated for loans under this program is $349 Billion.

Does Title I Impact the Current SBA Disaster Loan Program?

A borrower under the SBA Disaster Loan Program may refinance any such loan obtained on or after January 1, 2020 under this program.  Moreover, the SBA Disaster Loan Program is amended for the period January 31, 2020 through December 31, 2020 so that businesses with 500 or fewer employees can participate.  A business applying for a loan under the Disaster Loan Program may request an advance of up to $10,000, which it will not have to repay even if the loan application is denied.

Will Further Guidance on Title I be Forthcoming?

Regulations are to be issued on these CARES Act provisions by April 26, 2020.

Are There Other Loan Options Out There Similar to This?

The COVID-19 Working Capital Access Program is administered by the Pennsylvania Industrial Development Authority.  Please contact Pillar+Aught for additional information about this program.


Families First Coronavirus Response Act

On March 18, 2020, President Trump signed the “Families First Coronavirus Response Act” into law.  Two major provisions of the FFCRA—each of which are Acts themselves—have a direct and immediate impact on leave issues and the corresponding payment obligations that employers are currently facing.  While the Secretary of Labor has been asked to issue additional guidance via the regulatory process (which should hopefully provide additional clarification), and while the law does not take effect for 15 days (April 2, 2020), employers should immediately assess and revise their current leave policies in order to satisfy the new obligations created by the FFCRA.  What follows is a summary of the law’s key highlights that should help start this process.  Employers are encouraged to consult with counsel when implementing these new leave benefits.

Emergency Family and Medical Leave Expansion Act

What it does: The “Emergency Family and Medical Leave Expansion Act” amends the Family and Medical Leave Act (“FMLA”) to include an additional category of FMLA-qualifying leave where an employee “is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.”  (NOTE: If an employee is able to “telework,” he or she would not be an “eligible employee” for purposes of this FMLA leave.)  The term “public health emergency” is defined as “an emergency with respect to COVID-19 declared by a Federal, State, or local authority.

Unpaid (at first), then paid, FMLA leave: The first 10 days of this new FMLA-qualifying leave event are unpaid, but the employee “may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for unpaid leave.”  (NOTE: Unlike other FMLA leave, an employer cannot require an employee to use paid leave during this 10-day period.)  After the 10-day period has expired, the employer is required to pay the employee “not less than two-thirds of any employee’s regular rate of pay” for the duration of the FMLA-qualifying leave.  The total amount paid to each employee is capped: “In no event shall such paid leave exceed $200 per day and $10,000 in the aggregate.”  (NOTE: The law is silent with respect to whether an employee may supplement this paid leave with any available, but unused, leave allotment, or whether the employer may actually use any paid leave to help cover these required payments.)

Employers who are exempted… and who are not (at least right now): Employers with 500 or more employees are exempted from this new law.  (NOTE: Employers with fewer than 50 employees, who are not subject to the FMLA, are NOT exempted from this new law.  As a result, a small employer with just 5 employees is required to provide paid FMLA leave.  However, the Secretary of Labor might issue regulations “to exempt small businesses with fewer than 50 employees from the requirements of [the new law] when the imposition of such requirements would jeopardize the viability of the business as a going concern.”)

Ineligible employees: To be eligible for this FMLA leave, an employee must have “been employed for at least 30 calendar days by the employer.”  (NOTE: The 12-month/1250-hour requirement applicable for FMLA eligibility does not apply for this leave.)  Furthermore, as noted above, to the extent an employee can “telework,” he or she will be ineligible for this FMLA leave.  Further, “an employer of an employee who is a health care provider or an emergency responder may elect to exclude such employee from” this leave benefit, and the Secretary of Labor is authorized to issue regulations “to exclude certain health care providers and emergency responders from the definition of eligible employee.

Sunset: This amendment to the FMLA will expire by its own terms on December 31, 2020.

Emergency Paid Sick Leave Act

What it does: The “Emergency Paid Sick Leave Act” requires employers to provide its employees with a certain amount of paid sick time above and beyond any paid leave time that they may already be providing.  Specifically, this new allotment of paid sick time must be provided to the extent an employee is unable to work (or telework) due to a need for leave because:

  • The employee is subject to (or is caring for an individual subject to) a Federal, State, or local quarantine or isolation order related to COVID-19.
  • The employee has been advised by a health care provider to self-quarantine (or is caring for an individual who has been so advised) due to concerns related to COVID-19.
  • The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
  • The employee is caring for a child school or daycare has been closed, or the childcare provider is unavailable, due to COVID-19 precautions.

Two weeks’ pay: Employees are entitled to an amount of paid sick leave that would cover two weeks off from work.  Thus, a full-time employee is entitled to 80 hours of paid sick time.  A part-time employee, meanwhile, would be entitled to an amount of paid sick time equal to the number of hours he or she works, on average, during a normal two-week period.

Starts immediately: Paid sick time “shall be available for immediate use by the employee …, regardless of how long the employee has been employed by an employer.

Over and above any leave that is already provided: According to the law, “[a]n employer may not require an employee to use other paid leave provided by the employer to the employee before the employee uses the paid sick time.”  (NOTE: There was a provision in a previous version of the FFCRA that prohibited employers from modifying or revising their existing paid leave policies.  That provision was removed from the final version of the law.)

Payments are capped, but currently in flux: If the employee is using paid sick time for his or her own health-related reasons having to do with COVID-19, the amount of such paid sick time shall not exceed “$511 per day and $5,110 in the aggregate.”  If an employee is using paid sick time to care for another, the amount of such paid sick time shall not exceed “$200 per day and $2,000 in the aggregate.”  STAY TUNED… the Secretary of Labor has 15 days to “issue guidelines to assist employers in calculating the amount of paid sick time” due and owing to an employee who makes use of this new benefit.

Employers who are exempted… and who are not (at least right now): Employers with 500 or more employees are exempted from this new law.  The Secretary of Labor may issue regulations “to exempt small businesses with fewer than 50 employees from the requirements of [the new law] when the imposition of such requirements would jeopardize the viability of the business as a going concern.”)

Ineligible employees: If employees can “telework,” they will be ineligible for paid sick leave.  Furthermore, “an employer of an employee who is a health care provider or an emergency responder may elect to exclude such employee from” this leave benefit, and the Secretary of Labor is authorized to issue regulations “to exclude certain health care providers and emergency responders from the definition of eligible employee.

Interplay with expanded FMLA leave: It is not clear right now whether, or to what extent, this paid sick leave can be used in conjunction with the newly created FMLA leave entitlement.  However, the Secretary of Labor is authorized to issue regulations to ensure consistency between these two provisions of the FFCRA.

Sunset: The “Emergency Paid Sick Leave Act” will expire by its own terms on December 31, 2020.

Pillar+Aught is receiving numerous calls and emails from employers who have a variety of questions regarding Coronavirus (“COVID-19”), its impact on their workplaces, and possible employment laws that may be implicated.

This past week, our Labor & Employment Law group met and put together a FAQ to address the most common questions we are fielding.  If you have any questions about the FAQ or COVID-19, please feel free to reach out to any member of the group.

Frequently Asked Questions from Employers

As reports of COVID-19 infections continue to grow, employers are faced with a wide variety of legal issues and concerns that must be addressed as they respond to evolving events.  Employers should understand that decisions involving the impact of COVID-19 on employees and the workplace implicate a variety of employment laws, including (to name just a few) the Occupational Safety and Health Act (“OSHA”), the Americans with Disabilities Act (“ADA”), the Family and Medical Leave Act (“FMLA”), Title VII of the Civil Rights Act of 1964 (“Title VII”), the Age Discrimination in Employment Act (“ADEA”), and the Fair Labor Standards Act (“FLSA”).

At present, the primary struggle employers face in connection with COVID-19 is the inherent conflict between OSHA and the ADA.  Employers must balance their obligation to provide a workplace free of any recognized hazards (OSHA) with the prohibition on “regarding” an employee as having a disability or requiring employees to undergo medical examinations unless the it is job related and consistent with business necessity (ADA).  That being said, given the growing concern regarding the COVID-19 outbreak, and as indicated below, employers are encouraged to err on the side of caution to prevent the spread of the virus in their workplaces and ensure the health and safety of all of their employees, clients, or customers.  This includes reviewing and, if necessary, temporarily revising employee telecommuting and leave policies.

The questions and answers set forth below highlight key issues that employers may be called on to consider when confronting the COVID-19 outbreak.  NOTE: These responses are for informational purposes only.  In many, if not most, cases, the ultimate resolution will depend on the particular facts and circumstances of each situation (including the impact or effect on certain state or local laws).  To that end, employers should not hesitate to consult with counsel to further understand their rights, obligations, and options in each instance.  Furthermore, employers are encouraged to stay up to date on the latest developments and guidance from the Centers for Disease Control and Prevention and the Department of Labor’s Occupational Safety and Health Administration via the following websites dedicated to information regarding COVID-19:

CDC: Interim Guidance for Businesses and Employers

Occupational Safety and Health Administration: COVID-19

Can I instruct an employee to stay home or leave work if they exhibit symptoms of COVID-19?

Yes.  An employer can require an employee who exhibits symptoms of COVID-19 to leave work and not return until he or she has sought medical attention and/or fully recovered.

Can I require an employee to be tested for COVID-19 before being allowed to return to work?

Yes, but only if the employer has reason to believe—based on objective factors—that the employee may pose a direct threat to the health and safety of others (e.g., the employee has fallen ill after a recent trip or is exhibiting symptoms of infection consistent with COVID-19).  Under the ADA, “medical examinations” are prohibited unless they are job-related and consistent with business necessity, but there is an exception to this rule when such exams are necessary to ensure the workplace is free from direct threats to the health and safety of the employee or others.  Given the growing concern regarding COVID-19, it is likely that, if an employer can demonstrate that an employee has symptoms of COVID-19 or has other risk factors of exposure to the virus, that employer would be justified in requiring the employee to undergo a medical exam before he or she returns to work.  However, given the relative scarcity of COVID-19 tests (at least at present), it may be more beneficial for the employer to simply require that the employee to self-quarantine until he or she has fully recovered or, in the case of suspected exposure, until the 14-day presumptive incubation period has passed.



An employee just left for a cruise.  Can I require him to self-quarantine before returning to work?

Yes.  The U.S. Department of State has recently issued a recommendation that U.S. citizens should not travel by cruise ship due to the increased risk of exposure to COVID-19.  If the employee cannot cancel his trip and chooses to go despite this recommendation (and the time off has been previously approved), you should tell the employee that he will need to self-quarantine for the 14-day presumptive incubation period after his trip ends before he is permitted to return to work.

An employee has tested positive for COVID-19.  What are the first steps?  What can I tell my employees?

All employees who worked closely with that employee should be sent home for a 14-day period of time to ensure the infection does not spread.  Ask the infected employee to identify, to the best of his or her ability, all individuals with whom he or she may have worked in close proximity (three to six feet) in the previous 14 days to ensure a full accounting of those who should be sent home.  Messaging to employees, customers, and third parties (clients, customers, or vendors) about the issue should be clear and concise (e.g., “We have reason to believe you recently interacted with an employee who has tested positive for COVID-19.”), but in no event should the identity of the infected employee be revealed.

What are my reporting obligations in the event an employee tests positive for COVID-19?

There is no obligation to report a suspected or confirmed case of COVID-19 to the CDC.  That responsibility is handled by the healthcare provider who receives confirmation of a positive test result.  Employers, DO, however, have reporting and recording keeping obligations under OSHA vis-à-vis a confirmed case of COVID-19 in the workplace.  According to guidance from the Occupational Safety and Health Administration:

Recording workplace exposures to COVID-19

OSHA recordkeeping requirements at 29 CFR Part 1904 mandate covered employers record certain work-related injuries and illnesses on their OSHA 300 log.

While 29 CFR 1904.5(b)(2)(viii) exempts recording of the common cold and flu, COVID-19 is a recordable illness when a worker is infected on the job.

What are my payment obligations to employees who have been instructed to stay home?

Under federal law, employers are required to pay nonexempt, hourly employees only for hours they actually work.  Thus, if a nonexempt employee is instructed to stay home—and not work—there is no payment obligation absent any accrued paid time off available to the employee.  Conversely, exempt employees are entitled to their weekly salary in any workweek in which they perform any work.  Thus, if a salaried employee is quarantined during a workweek in which he or she already performed work, the employer must pay the full salary for that week.  However, the employer would not be required to pay the salary in any workweek in which the employee fails to perform any work (once again, absent any accrued paid time off available to the employee).  All that being said, employers are free to make temporary payment arrangements in light of the current COVID-19 outbreak to help alleviate the financial burden faced by employees who, through no fault of their own, may be forced to stay home from work to help ensure a safe work environment for others.

An employee refuses to come to work for fear of becoming infected.  Can she be disciplined?

It depends.  OSHA prohibits employers from terminating someone who refuses, in good faith, to expose herself to a dangerous job condition and who has no reasonable alternative but to avoid the workplace.  However, the condition causing this fear must be objectively reasonable.  Moreover, the threat must be immediate or imminent, which means that an employee must believe that death or serious physical harm could occur within a short time.  At present, most work conditions in the United States do not meet the elements required for an employee to refuse to work.  To reiterate, this guidance is general, and employers must make a determination regarding the objective state of the workplace (e.g., by relying on up-to-date information from public health officials) before determining whether it is permissible for employees to refuse to work.





Do I have to allow an employee to wear a surgical mask or respirator in the workplace?

Generally speaking, no.  Absent a legally recognized disability, unique physical condition, or an occupation where employees work directly with those impacted by COVID-19, you are generally not required to allow workers to wear masks at work.

School has been closed, and some employees cannot arrange for childcare.  What can be done?

Federal law does not require employers to provide leave for employees caring for healthy dependents who are unable to attend school.  Thus, employers have no obligation to provide employees with leave (whether paid or unpaid) to remain home with children during an extended school closure (once again, absent any accrued paid time off available to the employee).  Of course, employers are encouraged to come up with creative solutions to address this issue by, for example, making arrangements for telecommuting, reducing or modifying schedules, or advancing additional paid time off, if feasible.

What discrimination concerns are implicated by COVID-19?

As these issues are being addressed, employers must always be mindful of any unintentional bias that may trigger liability under discrimination laws.  If telecommuting arrangements are being made for some employees but not others, be sure that you are able to articulate a legitimate, nondiscriminatory reason for the decision.  Moreover, while concerns relating to national origin discrimination were at the forefront of the COVID-19 outbreak, those issues appear to be subsiding.  Be mindful, however, of any perceived age or disability discrimination issues, particularly where the information from public health officials indicates that older employees and those with compromised immune systems are more susceptible to the virus.  A policy that requires these employees—but not others—to self-quarantine, no matter how well intended, will very likely run afoul of the ADA and the ADEA.


January 29, 2020


On January 23, 2020, the Pennsylvania Department of Revenue (“Revenue”) issued Corporation Tax Bulletin 2020-01 (the “Bulletin”).  The Bulletin addresses the issue of sales for resale in the context of Pennsylvania’s Gross Receipts Tax (“GRT”) and sets forth a procedure by which GRT taxpayers can more easily substantiate their exemption claims.

Application of GRT

At a high level, Pennsylvania imposes GRT on both the (A) gross receipts received from sales of telecommunications and (B) gross receipts received from sales of electric energy.  Pennsylvania law specifically exempts sales for resale from GRT.  In the context of both telecommunication sales and electric energy sales, this exemption is applicable if a taxpayer demonstrates that it is making a sale to an entity that will itself be subject to GRT upon gross receipts it will derive from such resale.

Historic Problems Documenting Sales for Resale

 A GRT taxpayer claiming a sale for resale exemption historically had no way to substantiate that its counterparty was actually going to resell the telecommunications/electric energy in a taxable transaction.  In the context of Pennsylvania’s sales tax, resellers provide an exemption certificate to a seller and the seller is permitted to rely on the same for purposes of claiming a sale for resale exemption.  GRT taxpayers could not do this and instead had to claim the exemption and hope that their counterparty both (A) filed a GRT return with Revenue and (B) claimed the sale as a taxable sale.  If either of these assumptions were wrong, the GRT taxpayer exposed itself to liability upon audit.

The Bulletin

To resolve the issue addressed above, the Bulletin announces a Sale for Resale Acknowledgement Form (“Acknowledgement Form”) that resellers can provide to their counterparties.  A GRT taxpayer that receives a valid Acknowledgement Form can, in the words of the Bulletin, “claim the GRT sales for resale exemption.”  This is a bit misleading, however, since Pennsylvania law does not require an Acknowledgement Form in order to merely claim a sale for resale exemption.  Hopefully Revenue will view receipt of the Acknowledgement Form as not only authorization that a GRT taxpayer is entitled to claim the sale for resale exemption, but also, absent fraud, substantiation that a GRT taxpayer is entitled to receive a sale for resale exemption.

The Acknowledgement Form

 Revenue will automatically provide resellers that report taxable sales and valid sales for resale with an Acknowledgement Form.  The first batch of Acknowledgement Forms will be issued by June 15, 2020.  Each subsequent year Revenue will, in June, issue an updated Acknowledgement Form (assuming the GRT taxpayer is still reporting taxable sales and valid sales for resale).  Sellers that receive an Acknowledgement Form are required to retain a copy thereof in order to support their resale exemption claims.

Effective Date

The Bulletin applies to sales of telecommunications and/or electricity after July 1, 2020.

Issues not Addressed in the Bulletin

While the Bulletin is welcome guidance from Revenue, it does not address:

  • The application of GRT and the sale for resale exemption with respect to entities trading, selling and/or buying energy commodities, futures and derivatives;
  • The impact of American Electric Power Supply Corporation on municipalities, especially in light of Senate Bill 958 of 2019-2020; and
  • The application of GRT and the sale for resale exemption where the sales are associated with the PJM market.

Should you wish to discuss the Bulletin or GRT assessment and refund issues, please reach out to Jeff Kaylor at 717.308.9632 or


P+A is pleased to welcome Jeffrey E. Kaylor to our firm.

Jeff is not your typical tax lawyer.  While he has advised private sector clients on matters related to mergers and acquisitions, asset and stock sales, fund formation and debt and equity offerings, he has also acted as counsel to the government with respect to a multitude of tax issues.

Following his tenure at an international law firm where he represented publicly traded companies, private equity firms and hedge funds, Jeff was an attorney with the Pennsylvania Department of Revenue where he provided legal guidance on tax issues associated with Pennsylvania’s personal income tax, corporate net income tax, gross receipts tax, insurance premiums tax and bank shares tax.  The knowledge gained while practicing in both the private and public sectors has afforded Jeff a unique perspective, better enabling him to achieve the best result for his clients.

Jeff graduated from the University of Scranton and thereafter obtained his J.D. from Widener University School of Law and an LL.M. in Taxation from the University of Florida.  When he is not in the office, Jeff enjoys spending time with his three children and golfing.

Pillar+Aught co-founder Kevin Gold, an NFLPA Certified Contract Advisor, has signed two top players for the upcoming NFL Draft in April.

DE/OLB Eli Mencer, who played at the University at Albany, and LS Liam McCullough from Ohio State University, are both potential draft picks.

The NFL Draft will take place in Las Vegas on April 23-25, 2020.

John Shannon of Notre Dame was the inaugural winner of the Patrick Mannelly Award for the best senior college long snapper at the FBS level.  Shannon received the Award at a ceremony at Bernie’s Book Bank in Lake Bluff, Illinois on Saturday, December 14, 2019.

Kevin Gold of Pillar+Aught is one of the three founders of the Award.  Below is the Press Release announcing Shannon as the winner.

William Penn Bank to Acquire Fidelity Savings and Loan Association of Bucks County and Washington Savings Bank

Thursday, December 5, 2019 5:00 PM

BRISTOL, PA / ACCESSWIRE / December 5, 2019 / William Penn Bancorp, Inc. (the Company) (OTC PINK:WMPN), the holding company for William Penn Bank (the Bank), announced today the signing of definitive agreements pursuant to which Fidelity Savings and Loan Association of Bucks County (Fidelity) and Washington Savings Bank (Washington) will merge with and into William Penn Bank.

William Penn Bank is a state-chartered savings bank with its headquarters in Bristol, Bucks County, PA. The Bank serves the Delaware Valley with 6 branches and $418 million in assets. Fidelity is a state-chartered savings bank also headquartered in Bristol, PA, with one branch and $86 million in assets. Washington is a state-chartered savings bank headquartered in Philadelphia, PA, with 4 branches and $159 million in assets.

When combined, William Penn Bank will be the second largest mutual institution in Eastern Pennsylvania with 11 branches, $663 million in assets, $475 million in deposits, and equity of approximately $98 million.

Kenneth J. Stephon, current President and Chief Executive Officer of the Company and the Bank, will serve as the President and Chief Executive Officer of the combined banks following completion of the mergers.

“We are very excited about expanding our market presence by combining the three institutions under the lead of William Penn Bank,” Mr. Stephon said. “The mergers with Fidelity and Washington represent a rare and special opportunity. Both Fidelity and Washington are an excellent complement to our existing franchise and are an ideal fit with our culture as a relationship-driven community bank. We believe that both transactions are in the best interests of our customers, employees, and the communities we serve.”

The mergers have been approved by each of the Company, Fidelity, and Washington Boards of Directors and are expected to be completed in the second calendar quarter of 2020. As a result of the mergers, Fidelity and Washington will be merged into William Penn Bank.

Under the terms of the merger agreements, depositors of Fidelity and Washington, respectively, will become depositors of William Penn Bank and will have the same rights and privileges in William Penn, MHC, the mutual holding company parent of the Company, as if their accounts had been established at William Penn Bank on the date established at Fidelity and Washington, respectively. As part of the transactions, the Company will issue additional shares of its common stock to William Penn, MHC in an amount equal to the fair value of Fidelity and Washington, respectively, as determined by an independent appraiser. These shares are expected to be issued in connection with the completion of the mergers.

The mergers are subject to certain customary closing conditions, including the receipt of all required regulatory approvals.

Sandler O’Neill & Partners LP served as financial advisor to William Penn Bancorp, Inc. and The Kafafian Group, Inc. served as financial advisor to both Fidelity Savings and Loan Association of Bucks County and Washington Savings Bank. Kilpatrick Townsend & Stockton LLP acted as legal counsel to William Penn Bancorp, Inc., Pillar + Aught acted as legal counsel to Fidelity Savings and Loan Association of Bucks County, and Jones Walker LLP, Washington, DC, acted as legal counsel to Washington Savings Bank.

Forward-Looking Statements

This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, expectations or predictions of future financial or business performance, conditions relating to the Company, Fidelity and Washington, or other effects of the proposed mergers on the Company and on Fidelity and Washington. These forward-looking statements include statements with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties and are subject to change based on various factors (some of which are beyond the Company’s control). The words “may,” “could,” “should,” “would,” “will,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” and similar expressions are intended to identify forward-looking statements.

In addition, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the ability to obtain regulatory approvals and satisfy other closing conditions to the mergers, delay in closing the mergers; difficulties and delays in integrating the business of Fidelity and Washington or fully realizing anticipated cost savings and other benefits of the mergers; business disruptions following the mergers; the strength of the United States economy in general and the strength of the local economies in which the Company and Fidelity and Washington conduct their operations; general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities, changes in interest rates, deposit flows, the cost of funds, demand for loan products, demand for financial services, competition, changes in the quality or composition of the Company’s loan, investment and mortgage-backed securities portfolios, changes in accounting principles, policies or guidelines and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and fees; and the success of the Company at managing the risks involved in the foregoing.

Annualized, pro forma, projected and estimated numbers presented herein are presented for illustrative purpose only, are not forecasts and may not reflect actual results.

The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company to reflect events or circumstances occurring after the date of this press release.


Kenneth J. Stephon, President and CEO

SOURCE: William Penn Bancorp, Inc.