News & Publications
News & Publications
2 Trillion $ Care Act for Companies and EmployeesH. Roske & Associates LLP, March, 31st 2020.
With the "Coronavirus Aid, Relief and Economic Security Act" or "CARES Act", U.S. Congress has - at first glance - provided generous and far-reaching funds for relief for troubled American businesses and households. Despite a total volume of almost 2 trillion dollars (!) the funds are likely to be exhausted faster than expected, given the extent of the financial damage caused by the rampant pandemic, It is therefore worthwhile to examine the available instruments offered by the new law as early and as quickly as possible. Whilst there are aid programs at state level in all 50 states, including at municipal level, this article is intended to provide a quick overview of the CARES Act as far as it affects our main target group, small and medium-sized enterprises and their employees.
Probably the most important and attractive program under the CARES Act is the Paycheck Protection Program through the issue of "Forgivable Loans", i.e. loans with the possibility of subsequent cancellation of the repayment obligation. Individual loans can amount to a maximum of $10 million, but generally up to 2.5 times salaries (less withholding taxes, FICA, paid sick leave and others) over the last 12 months before the loan is granted and must be used for the following purposes:
- Continuation of payment of salaries, with higher paid employees only being eligible for up to $100,000 (although there is for those relief elsewhere through tax relief under the Families First Coronavirus Response Act)
- Rent payments
- Servicing of mortgages
- Expenditure for independent contractors/freelancers
- The law provides for a so-called "Tax Credit", i.e. a fully refundable tax credit for companies of any size that are closed down or are in trouble. The aim is to rehire dismissed employees or otherwise ensure that they can return to their previous jobs. The amount of the tax credit is 50% of the salaries that will continue to be paid during the Covid-19 crisis, provided the business has been partially or fully discontinued and revenues have decreased by at least 50% compared to the same quarter last year.
- Payment of employers’ social security contributions (6.2% of salary) is deferred for a total period of 2 years, with the first half to be paid by 31.12.2021 and the second half by 31.12.2022.
- Losses from the previous years 2018, 2019, 2020 can be offset for the past 5 years ("carried-back").
- Companies can claim up to 50% of interest-related expenses for tax purposes instead of only 30% as before.
- U.S. employees with incomes under $75,000 will receive a check for $1,200. Families with children will also receive $500 per child. For higher incomes, but below $99,000, this amount decreases gradually. For incomes above that, these benefits are not available.
- There are also further ”unemployment benefits” in addition to those that are being paid at state level. Here, the federal government adds up to $600 per week. This program is currently limited to 4 months.
Can I change my US colleagues to short-time work because of the Covid 19?H. Roske & Associates LLP, March, 23rd 2020.
The attorney answer most hated is "it depends". Nevertheless, unfortunately it does matter here, because the answer depends on the type of employment contract. Many Americans, including executives, have no written contracts at all. A comparable high number have a so-called "at will" employment contracts. This is a written agreement (employment contract), but it does not specify a notice period. This, combined with the fact that no reason for termination is required in the USA, means that the employee can be dismissed overnight. True to the old advocate's motto "Argumentum a Maiore ad Minus", in both these cases it is possible to switch to short-time working unilaterally. This is the minus compared to the dismissal, i.e. if I may already give notice, then I definitely can pay even less and order short-time work.
If the employment contract has a notice period -- often 3 to 6 months for managers -- then I can only order short-time work after the same short-time work has expired.
An amicable, written agreement, which takes into account the Covid 19 circumstances, is possible in all 3 cases.
What about delayed delivery because of Covid 19?H. Roske & Associates LLP, March, 23rd 2020.
If the delivery contract or the general terms and conditions -- both can have the same goal -- are based on common law, which is the international standard and is also recommended for companies from the DACH region, then the so-called Time-is-of-the-Essence clause is important. This is a business slang term in the USA for default and the clause is one of the 5 pillars of international contractual risk management and is probably included in all major corporate policies of American companies as an absolute 'must'.
"In the event that the parties agreed upon a specific time for delivery, however, time shall not be of the essence, and seller shall only be obligated to deliver within a reasonable time after such delivery date".
One can see that the clause should actually be rather called Time shall not be of the essence.
What is a 'reasonable time' depends on the case law in the respective industry segment, combined with its commercial practices. In the automotive supply sector with its just-in-time deliveries, it has almost never been possible to enforce the clause, in other sectors you get about 1 week to 10 days grace period, and in today's corona time we do not know because there are no decisions on this yet. In any case it is good to use such a clause, otherwise you are fully liable for all damages caused by delay.
What effect does the corona virus have on deliveries to the USA
H. Roske & Associates LLP, March, 23rd 2020.
Deliveries from the DACH region to the USA are usually based on a contract or general terms and conditions combined with Order & Acceptance. If something unforeseen happens afterwards, the question arises what will happen to the order. There are two obligations, i.e. delivery of goods and payment. There is no precedent for Covid 19, but it is likely that its rapid expansion and the associated consequences will be considered 'unforeseen'.
If the contractual agreement of the parties follows the international standard and applies a common law -- UK or a US state -- then there is usually a force majeure clause combined with a so-called The-Deal-is-The-Deal clause (... "this agreement shall constitute the entire agreement......."). In this case only the force majeure provision applies. If it is applied, the parties are released from their obligations.
If US law is applicable, but there is no force majeure clause, the Uniform Commercial Code (UCC) is available to the parties with the same effect, as a kind of gap filler. This is one of the rare examples where the Americans agreed upon a codified law, as in the old world e.g. the HGB. All 50 states have now ratified the UCC.
Force majeure must be invoked. A written notice to the trading partner is therefore necessary.
Disaster Relief Credit Program for US small businesses
H. Roske & Associates LLP, March, 23rd 2020.
If the current and for the time being probably continuing restrictions due to the coronavirus put your U.S. company in an unstable situation, the following information could be a relief. The Small Business Administration (SBA) has set up an aid credit program, which promises to quickly and easily grant favourable loans.
The prerequisite is that the company is located in a state recognized as particularly hard hit and has to cope with substantial economic losses due to the current corona situation. The following states are currently included: Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Illinois, Indiana, Louisiana, Maine, Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, Washington, and West Virginia.
The loans can be up to $2 million and have specified uses, including servicing continuing obligations, salaries, suppliers and other invoices. The interest rate is 3.75% for those companies that do not receive loans elsewhere. The term can be up to 30 years, with individual terms renegotiated from contract to contract, depending on the financial strength of the borrower.
For further information, especially regarding the availability of the loan at your location, please contact the SBA Disaster Assistance Customer Service Center or our team.
Stuttgarter Zeitung KOMPASS, March, 7th 2020.
Der US-Markt ist und bleibt gigantisch für Made-in-Germany-Produkte
DOWNLOAD ARTICLE: Artikel-Kompass.pdf
Stuttgarter Nachrichten, February, 1st/2nd 2020.
Die höchste Hürde ist das Visum.
DOWNLOAD ARTICLE: Artikel-STN.pdf