On May 14, 2020, the Bay Area Houston Economic Partnership hosted a
panel discussion during a virtual general membership meeting that focused on
small businesses in relationship to the fallout from COVID-19. The panel
featured Tim Jeffcoat, district director, Small Business Administration; Mark
Conrad, chairman, BAHEP’s Small Business Committee, owner, Express Employment
Professionals; and Phil Griffis, president, Law Office of Phil Griffis.
BAHEP President Bob Mitchell
facilitated the meeting. He asked Griffis and Conrad to take a few minutes each
for opening remarks regarding their individual businesses.
litigation, collaboration, and potential COVID-19 lawsuits
Griffis began by saying, "Our firm’s mission is to help local
businesses and entrepreneurs maximize their profits in and out of the
courtroom. We’re business litigators at heart, but very often our goal is to
try to keep you out of court if that is what is best for your business at the time.
"Today I’d like to talk about
collaboration and a coming together of the local business community to keep us
in the Bay Area out of the courtroom and back in our businesses helping our
customers and our clients.
"Harris and Galveston county
courts are still working their way through business disputes that arose out of
Hurricane Harvey which took place almost three years ago. That was about a
five-day event that affected a majority of the businesses in southeast Texas.
The current crisis that is a multi-month worldwide event has affected a large
majority of the businesses all over the world. Courts are going to be
overwhelmed with lawsuits. It’s going to be very, very difficult to get a case
to trial in the next few years. At the same time, most of our problems, but not
all of our problems, center around cash flow. Many businesses can’t pay their
vendors, their suppliers, their landlords. You are all well aware of the domino
effect that’s causing.
"For some businesses,
litigation over these debts and contractual obligations that can’t be met are
going to be inevitable, but I think in many cases it doesn’t have to be
inevitable. That’s especially true if the disputes are among friends as most of
us on this call are. The goal is to at least make attempts to save your
business or maybe save a client or a vendor’s business.
"One of the tools that our
firm has been successfully utilizing is what’s called a Business Standstill Agreement
which in its simplest form is just a written agreement where one party agrees
to back down, not sue over a debt or dispute, and not start the parties down
the long road towards litigation. In return, the party that owes the money or
the obligation will agree to do something in return such as make reduced
payments or something else of non-monetary value. The possibilities for these
agreements are endless. What may happen is that you cement a business
relationship for life.”
Potential COVID-19 lawsuits against your business
Griffis continued, "You need to
take COVID-19 lawsuits against your business seriously. Unless the federal or
state governments legislate immunity to businesses for COVID lawsuits,
businesses will be the targets of lawsuits. Frankly, many of them could be
legitimate. For instance, one in five Texas businesses do not carry workers
compensation insurance which means that those businesses can be, will be, and
are being sued by employees claiming that they contracted the disease in the
course and scope of their employment. Customers that go onto a business’s
premises are suing businesses claiming that they contracted the disease in the
place of business.
"If you think your business
is too small to be a target for such a lawsuit, with all due respect, you’re
wrong. If you think it would be impossible for someone to prove that they
contracted the disease at your place of business, again with due respect,
you’re wrong. Talk to your insurance agent to see if you’re covered for these
potentialities. Take steps to protect your business. Get online and Google
about how to avoid COVID lawsuits. We also have resources on our website
"We look forward to helping
you work through this, and most of all we look forward to seeing you all in
person very soon.”
Conrad speaks of workforce
management and returning to work
Conrad began, "My industry is focused on workforce management and
employment. Express Employment Professionals has a nationwide presence with a
little over 800 locations across the country. The staffing industry has a
tendency to be viewed as an economic indicator. We’re usually the first ones to
see that market drop and the first ones to see it return. From a market
standpoint, our industry was cautiously optimistic at the beginning of the
year. Seventy percent of the industry predicted solid increases again this year
which was off the back of a pretty significant four percent market growth last
"The top challenges that we
were all dealing with were people acquisitions – finding talent – engagement –
keeping people. The talent shortage and low unemployment we had were
unprecedented. Some would say that we don’t have that problem anymore, but do
"The staffing and recruiting
industry is expecting to see about a 21 percent drop in revenues in 2020. The
unemployment rate is expected to peak at 25 percent. By next month, we’ll see
the highest unemployment figures since the Great Depression. The most recent
reports bring in the unemployment tally to about 36 million people.
"From our industry
standpoint, though, optimism is strong. Seventy percent are still expecting the
industry to be stronger then ever after this return, and only 15 percent expect
it to be weaker. The unknown is how long it will take to get back to pre-COVID
levels. Some pundits say we won’t see employment levels come back until
September. Others say that we’re looking at 1 ½ to 2 years. Some say it’s going
to be the end of the decade.
"Many essential businesses
have stayed active keeping people employed, although many of the offices and
back offices have moved remote. This may have pushed us forward 10-15 years
technologically as it relates to the workforce.
"We’ve seen a lot of layoffs
and furloughs of our temporary associates which has also moved into the core
staff that employers had. Some businesses completely shut down. A number of businesses
Key issues in returning to work
Conrad then turned to the
challenges of returning to work. He said, "Who returns to work and when will
obviously be unique to each business. The challenges of returning may not be as
easy as what we’d hoped. Businesses must expect the unexpected. We’re actually
finding employers who have people who have decided not to return to work.
Getting people to accept offers is becoming a bit of a struggle, which has a
big impact on employment returns. Some people are getting paid more for staying
home than actually going back to work. Child care is a challenge that many
people are having.
"People have used this time
to re-evaluate and look for something else. Recent surveys have shown that
two-thirds of the workers are remote workers. Some of them are looking to do
that with another company.
"This is also a new
opportunity to re-evaluate who returns to the office and who can work remotely
as a new norm. Virtual flexibility has been a key. This is a time to develop
relationships and to understand of the needs of clients. The unique thing about
small businesses is that they have the ability to be flexible.
"The good thing is that
markets are starting to improve. We’re starting to see some activity on our
side, and that’s positive.”
Administration provides information, offers solutions
Jeffcoat explained, "For small
businesses that are financially impacted by COVID, through the SBA you have two
choices to potentially help you through it. First is getting a Paycheck
Protection Program loan. There is still $117 billion available to be borrowed
by small businesses. Those loans are 100 percent forgivable. The loan is based
on your average monthly payroll. If your average monthly payroll is $10,000,
multiply that by 2.5 which means that you’d get a $25,000 loan. As long as you
spend 75 percent on paychecks and the other 25 percent that you may spend on
mortgage interest, rent, and utilities, then the loan can be 100 percent
forgiven. After eight weeks of having received the loan, you return to you bank
and show them what you’ve done. The bank calls the SBA, and the SBA pays off
the loan. There are about 500 different lenders in the Houston area that are
making the program available to small businesses. There have been roughly $500
billion worth of PPP loans done across the nation.
"One of the keys is
understanding how to get the loan forgiven. My office does at least two
webinars a day to explain that. We are also doing lots of webinars to answer
questions to help you figure out the best way to use the loan to benefit your
business. Go to my website at www.sba.gov/tx/houston where you can get
copies of all the presentations we’re using on the webinars. Also, in the
bottom right hand corner, you can sign up to get our communications. We will
send you emails letting you know about all of the cool things we’re doing to
help your business.
"Tomorrow we’re having a
webinar with two labor attorneys explaining bringing people back from
unemployment compensation. What does that mean to the employee? What are the
legal pitfalls? What does it mean to the employer when you reopen your
facility? What if you don’t follow the CDC’s guidelines in maintaining a safe
workplace? What is your liability?
"We’re doing quite a lot to
try to inform you in a way that can help your business. COVID is not good.
COVID is not beneficial for anybody from an economic perspective. But this is
the time that you can work out how to best pivot your business so that going
into the future it can be more efficient, more effective, maybe you can address
a new customer base. There are all kinds of things that you might be able to do
to make your business even more successful.
"Additionally, the Economic
Injury Disaster Loan (EIDL) is a wonderful loan available directly from the
SBA. However, right now for COVID, the EIDL is only available for agricultural
"Lastly, my district is the
32 counties that surround Houston. In that area we have about 250 consultants
who are available completely free to help you navigate the COVID economic
disaster. They can help in a number of ways, and they are very good.”
Meeting participants ask
Mitchell asked for clarification regarding the EIDL loan. He said he
understood if a business applied for an EIDL loan prior to it being limited to
loans for agricultural businesses that the business was still in the pipeline
to be considered for the loan. Jeffcoat answered that if a company has already
applied for an EIDL loan that it should be in good shape, although he did not
know the timeline for these loans. He said the SBA has implemented some
automated tools. He noted that a business might get an email stating that it is
approved for a certain amount of money.
Jeffcoat explained, "You slide a bar up
and down for however much you want, click submit, the SBA will come back to you
with a promissory note that you sign, and the SBA starts disbursing funds.
We’re trying to make it a more streamlined process.”
What advice do you have for preparing a crisis plan based on what
you’ve learned during the pandemic?
suggested, "If you don’t have a framework for a crisis plan, the easiest place
to find one is on Google. If you have a grocery store, locate your association
for grocery stores and see what crisis plans that larger and more sophisticated
businesses have put into effect. If you’re judged down the line, at least in my
world by a jury, the typical question is going to be, ‘Did you take reasonable
steps to avert whatever crisis you are being criticized for or somehow not
averting?’ You want something solid to hang your hat on down the line if you’re
judged about your crisis plan. You need to say that you went over and above
what was reasonable in our situation.”
Conrad said that there were three things
they did immediately. First they reduced costs, reaching out to creditors if
necessary. Secondly, they figured out how to stabilize. Then they went quickly
into growth asking how they could maintain, think differently, and adjust to
the new environment.
businesses that receive PPP loans receive additional scrutiny or auditing by
replied, "If you are getting a PPP loan of $2 million or more, then you are
most likely to be audited. That means that you have at least 200 employees
earning $50,000 each per year. That’s quite a significant company. He reported
that guidance was issued yesterday (May 13, 2020) which said if your PPP loan
was under $2 million ‘then you have been deemed to have certified in good faith
that you need this money.’ This means that if your loan is under $2 million,
you have a safe harbor. If a business received a loan of $2 million or more
under false pretenses, then that loan would have to be repaid.”
The Department of the Treasury ("Treasury”)
and the Small Business Administration added FAQ 31 to the Frequently
Asked Questions ("FAQs”) on Paycheck Protection Program ("PPP”) loans.
Go to https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf to learn
more about the question: Do businesses
owned by large companies with adequate sources of liquidity to support the
business’s ongoing operations qualify for a PPP loan?
viewed as a pro-business state. How would you rate Gov. Abbott’s efforts to get
shared his personal opinion saying, "Every governor is making decisions based
on something that they have never had to deal with before. They make decisions
based on what professionals surrounding them advise. They take this information
into consideration and then make a ‘gut decision’. I would not second guess
anything any of them are doing, because we are not in their shoes, and we don’t
understand all of the implications. We may not like some of their decisions,
but to question what they’re doing I just don’t think is the right thing to do.
When this is all said and done, then we can critique and do lessons learned for
the next go around.”
Conrad offered his view saying, "You are
right in that they are given guidance. We have to take personal responsibility
to take a look at our own businesses, our own markets, our own people. We can’t
abdicate just because somebody said to jump and we jump. I know that there has
to be a general overview, but we have to stay in touch with what’s going on. To
just blindly follow the guidance has given an opening to help. We have to take
our own responsibility of seeing it and take ownership of it.”
are you returning to the workplace? Are there good sources for guidelines in
responded that he has been reviewing documents from various professional
sources and selecting sections that best suit his organization. He feels that this
is a good way to determine the most appropriate protocols for an
Conrad agreed saying that a lot of people
have already done a lot of the work and that we should take advantage of their
expertise as much as we can.
addition to the PPP and EIDL loans, what else can a small business be doing to
secure additional resources as we restart and restore our businesses?
answered that it depends on the needs of a business. He said, "SBA guarantees
small business loans all the time in Houston. Last year it was over $1 billion
worth. Those loans can be made for up to $5-5 ½ million over a 25-year term.
Those programs still exist. It’s just that bankers in the area are preoccupied
with PPP loans. SBA counselors are available all over Houston to help you. Time
is on your side. If you’re in a strong enough position to take the time to
build that strategic plan right now, I think you can build one that is
Do you see
the overall increase in unemployment compensation as hurting small business in
terms of getting qualified employees back into the work space?
"If you are trying to find new employees to add to your business, it is
creating a little bit of an issue. We have some manufacturers who are back, but
they also have very low wage labor within their business. So, if you’re looking
at the great unemployment market place as being a place from which to pull
people, I think the increase has leveled that playing ground. In fact in some cases,
it’s made it difficult. That will last until July 31st, and then
it’s over. Depending on the wage band that people were at and the impact that
was there, sell them the benefits of coming to work for you as a business.
"I think that most people want to work, they
want to contribute. If they’re just looking for money, they’re going to stay home
and look for the opportunities.” Conrad also advised that if a furloughed
employee decides not to return to work, a business should get something in
writing, since it will affect unemployment.
company shifts full-time employees to contract (1099) employees, what are the
trade-offs and how would that impact a PPP loan?
answered, "You can’t get a PPP loan to cover 1099s, and you can’t get
forgiveness for spending the money on 1099s. They’re not employees.”
Conrad said, Traditionally during uncertain
environments or cautiously optimistic environments, the staffing industry is
the first one asked to help support the return of the worker. If there has to be a shutoff, it’s an easy
shut off. It just depends where you are in business. There are different ways
of looking at it.”
people find information about webinars, forms, and guidance that had been
again advised going to the website at www.sba.gov/tx/houston and
clicking on Coronavirus Relief Options at the top of the page to find numerous
resources. At the bottom right hand side of the page, there is an option to
sign up for email updates that give even more information about webinars and
other applicable information.
(The video of the meeting is shown below. Click on the white headline to view it on full screen.)