FAA Efforts to Re-Tool Itself in Response to Covid-19 Closures

We had a phone call today with FAA Associate Administrator Ali Bahrami and his team.  This is part of a series of calls in which we’ve been engaged to share information and keep everyone working together during the Covid-19 crisis.  Bahrami is working from home but he nonetheless has been very transparent with the industry about the FAA’s efforts.

Here are some bullet points on new developments in aviation regulation:

  • FAA has issued a SAFO 20009 for air carrier crews.  This replaces SAFO 20003 (an earlier document with guidance for air carrier crews).  It includes guidance for health monitoring and health protection.
  • FAA is working on a new Special Federal Aviation Regulation (SFAR) to address a wide variety of issues that are caused by the current Covid-19 crisis.  This mostly addresses timing issues where certificates or approvals are expiring but cannot safely be renewed at the present time.  It is in FAA coordination and is moving toward finalization.  The next step will be DOT review.  DOT knows that this is a priority.  The FAA confirmed today that there is presently no authoritative list of items in the SFAR because the draft is still subject to change; nonetheless, the SFAR is expected to provide extensions for a number of recurring regulatory requirements, including:
    • Extensions of pilot currency requirements;
    • Extensions for certified flight instructor certificate requirements;
    • Extension of knowledge examination expiration periods;
    • Extension for filing certain documents under the FAA’s enforcement provisions;
    • Extensions for certain aircraft maintenance / continuing airworthiness requirements.
  • FAA issued an aircraft certification service policy for the use of remote technology.  Flight Standards has been working on their own corollary document.  FAA Maintenance Division Manager Jackie Black explained that the maintenance and operations industry sectors have different business needs from those of the manufacturing sector.  Thus, the Flight Standards guidance is different from the Aircraft Certification guidance.  This guidance was signed by Ricardo Domingo today so it will be issued very soon.  It has already been briefed to the Flight Standards managers.  Mr. Domingo asked Mr. Black to make it available to industry.
  • The FAA has the power to reinspect or reexamine an FAA-issued certificate at any time.  This is known as a 709 reexamination because the authority is found in 49 U.S.C. 44709.  For 709 reexaminations, the FAA has said that if you make a request then they can delay the re-examination or conduct it remotely.
  • The FAA is looking into how to handle IA recurrent training.  They have already extended the expiration date of existing approved courses.  There are some existing remote-delivery courses in the FAA’s IA-training database but many courses were approved only as “conventional” courses (e.g. live-and-in-person).  Forthcoming guidance will allow the current providers of already-approved courses to change the format of delivery (to permit remote delivery), without having to go through a burdensome re-approval process for the new method of delivery.
  • FAA has received an OMB memo about planning for the return of FAA employees to the office (using the White House’s three-phase approach).  FAA is currently defining a process that meets the OMB requirements, so they can be prepared for a return to in-office operations.

 

 

Paycheck Protection Program: Frequently Asked Questions

We’ve gotten a lot of questions about the Paycheck Protection Program. We will use this location to try to offer some answers for the ASA Community.  If you have questions that are not answered here, then please email them to Jason Dickstein and he will attempt to find answers and post them to the blog.

These answers are general in nature and are not meant to reflect legal advice.  Answers to your specific questions can turn on specific facts that apply to your situation.  Many of these issues can get far more complicated when you consider unusual fact patterns.  If you are uncertain about how the law applies to your particular facts, then you should contact an attorney for assistance.

Also, please note that SBA has JUST issued regulations for this program, which are available here.

 

Is my business eligible for the Paycheck Protection Program?

The Paycheck Protection Program. is meant for small businesses, and certain other businesses described in the CARES Act.  Under SBA rules, to be considered a small business you need to meet the SBA’s guidelines for your industry.

Industry small business thresholds are distinguished and published based on NAICS codes.  To identify the threshold that applies to you, you need to first identify the NAICS code that reflects your primary business activity.  In determining the primary industry in which a concern or a concern combined with its affiliates is engaged, SBA considers the distribution of receipts, employees and costs of doing business among the different industries in which business operations occurred for the most recently completed fiscal year. SBA may also consider other factors, such as the distribution of patents, contract awards, and assets.

For example, let’s imagine you are operating a repair station and also distributing aircraft parts.  The repair station accounts for 60% of your revenues, and it also accounts for 75% of your personnel.  Under this hypothetical, the repair station appears to be the predominant business for purposes of identifying the appropriate NAICS code to apply.

This table shows a few of the NAICS codes that commonly reflect the business models of ASA members:

Business Activity NAICS (2017) Size Standard
Aircraft Parts Distribution 423860 500 employees
Aircraft Sales 441228 500 employees
Commercial Aircraft Leasing (dry lease) 532411 $35,000,000 annual revenue
Air Transportation Support Activities, including Repair Stations (but excepting “factory” conversion, overhaul and rebuilding) 488190 $35,000,000 annual revenue

There are special rules for the Paycheck Protection Program. If your business does not meet the small business thresholds, but it has 500 employees or less, then it is permitted to apply for the Paycheck Protection Program (unless otherwise excluded).  For example, a repair station that has average receipts of $40 million would appear (at first blush) to be too large to qualify as a small business; but if it has only 400 employees then it likely is permitted to apply for the Paycheck Protection Program under this special rule.

This size standard includes the employees/revenue of your foreign and domestic affiliates (you have to consider affiliates, too, when calculating whether you meet the size standards).

There are exclusions, too.  They include those who are delinquent in paying a past SBA loan, and businesses with significant owners (>20%) who are in jail, under indictment, or otherwise subject to the criminal justice process.

Source 13 C.F.R. 121.107

 

How do I calculate revenue for size standard purposes?

For small business purposes you should use your most recent tax returns to identify your revenue.   If you are looking at your business tax return, this typically means your “total income” plus “cost of goods sold.”  You msut use the average of the most recent three years.  Where there are affiliates, you have to include the revenues of your affiliates.

Source 13 C.F.R. 121.104

 

How do I calculate number of employees for size standard purposes?

For small business purposes you should use the average number of employees (including those of your affiliates) in each pay period for the past 12 calendar months.

In determining your business’ number of employees, you should counts all individuals employed on a full-time, part-time, or other basis.  This includes employees obtained from a temporary employee agency.  Part-time employees are each counted the same as full-time employees (they are not fractions).  Volunteers are not considered employees (but for many companies in the ASA community, volunteers could violate the Fair Labor Standards Act so be careful about characterizing employees as volunteers).

Source 13 C.F.R. 121.106

 

What are the SBA Affiliation Rules and how do they impact my ability to qualify as a small business?

In determining whether a business is a small business, the SBA will add in the revenue/employees of its affiliates.  So if a business has three locations that are subject to common ownership or control, then the employees/revenues of all three locations will be aggregated to determine if the business is a small busieness.

Concerns and entities are affiliates of each other when one controls or has the power to control the other.  Two businesses may also be affiliates when a third party (or group) controls or has the power to control both.   It does not matter whether control is actually exercised, so long as the power to control exists.  Factors to consider in determining affiliation include ownership, management, previous relationships with or ties to another concern, and contractual relationships.  Negative control, like minority ownership with the power to prevent a quorum, can also be a form of control.

Foreign affiliates and non-profit affiliates are also considered affiliates for these purposes.

The Paycheck Protection Program created a special exception to the affiliation rule.  The exception applies to businesses under the NAICS codes beginning with 72 and having 500 or fewer employees at each location.  This includes hotels and restaurants.  This means that a hotel chain can treat each location as a separate business for purposes of applying the 500 person limit.

Source: CARES Act, 13 C.F.R. 121.103.

 

How do I apply for the Paycheck Protection Program?

Applications for the Paycheck Protection Program must be filed with a qualified bank or financial institution.  This includes lenders who are already qualified to process SBA section 7(a) loans.  You should consult with your local lender as to whether it is participating. You can visit the SBA website for a list of SBA lenders.

Source: Treasury PPP Fact Sheet for Borrowers

 

What is the Maximum Loan Size?

The maximum loan size is two and half times of your average monthly payroll for the prior year (so, 2.5 months-worth of payroll). If you’ve already received a disaster assistance loan between January 31, 2020 and the date on which these loans are made available, then you can also refinance that prior loan under this new program (this amounts to an increase in the maximum loan authority over the “2.5 times payroll” limit).

If you refinance an Economic Injury Disaster Loan (EIDL) through this mechanism, ten you should note that it will be subject to the limits of this loan program (e.g. two year term) as well as the benefits (e.g. lower interest rate)

There is an additional cap of $10,000,000 for the total loan amounts for which you may be eligible.

Source: CARES Act

 

What Can I Use the Loan For?

You can use the loan for

  • Payroll costs for US residents (which include compensation up to $100,000 annual salary)
  • Group health care costs and insurance premiums
  • Employee salaries and commissions
  • Mortgage interest (but not principal)
  • Rent
  • Utilities
  • Interest on pre-existing debt
  • refinancing an EIDL loan made between January 31, 2020 and the date on which the PPP loans become available

Only some of these uses are eligible for loan forgiveness.

The regulations anticipate that at least 75% of the PPP Loan must be used for payroll.

Source: CARES Act, SBA PPP Regulations

 

What qualifies as “payroll costs?”

The sort of payroll costs that are allowable expenses under the Program are compensation to U.S. employees (principal place of residence must be in the United States).  This compensation can take the form of:

  • salary, wages, commissions, or similar compensation
  • cash tips or the equivalent
  • payment for vacation, parental, family, medical, or sick leave
  • allowance for separation or dismissal (severance)
  • payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement
  • payment of state and local taxes assessed on compensation of employees

This list does not include the provisions for sole-proprietors because ASA members tend to be structured as businesses.

Source: SBA PPP Regulations

 

How many employees do I have to retain qualify for the Paycheck Protection Program?

The Paycheck Protection Program does not specifically require you to retain any employees, but it is intended to allow you to retain employees, so failure to retain employees will (1) give you less payroll on which to spend the funds, and (2) reduce your ability to obtain loan forgiveness for the Paycheck Protection Program loan.

As part of the loan application, you will be required to certify “that funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.”  But this does not mean that you can terminate all of the employees and spend all of the money on lease payments.  The regulations clarify that at least 75% of the loan must be spent on payroll.

The real penalty for failure to retain employees is that the amount of loan forgiveness is reduced if your headcount goes down or your payroll goes down (or if you fail to use the money for payroll).

Headcount Reduction: You compare the average monthly headcount during the eight weeks from the origination of the loan to the average monthly headcount during the period beginning on January 1, 2020 and ending on February 29, 2020. If headcount has gone down then you get a percentage of forgiveness correlative to the percent of remaining employees. For example, if you had 20 employees during the 2019 period, but only 18 during the eight weeks after origination of the loan, then you would only get 90% forgiveness (and the remaining ten percent of the loan would be subject to repayment).

Payroll Reduction: The amount of loan forgiveness is also reduced by the amount of any reduction in total salary or wages of any employee (except for employees who received more than $100,000 pay in 2019). This applies if the employee’s wages during the eight weeks after origination of the loan are reduced in excess of 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period. I think this clause may have been improperly drafted by the Senate, because we are comparing wages over an eight week period to wages over a thirteen week period; but it is clearly meant to be an incentive to continue wages at (or near) their pre-loan amounts.

In addition, not more than 25 percent of the loan forgiveness amount may be attributable to non-payroll costs.  So if you try to use the loan for rent and not payroll, you could severely limit your loan forgiveness options.

Source: CARES Act, SBA PPP Regulations

 

If I already applied for an SBA section 7(a) Loan then can I apply for a Paycheck Protection Program loan?

No.  Part of the certification necessary when you apply for the Paycheck Protection Program is a certification that you do not have an application pending for a loan under the same subsection (15 USC 636(a), or section 7(a) of the original Act), nor have you received a loan under that subsection, that would duplicate the purpose of the Paycheck Protection Program.

Thus, if you’ve already applied for a section 7(a) loan to cover things that reflect allowable expenses under the Paycheck Protection Program, then you will need to withdraw that application before you can apply for the Paycheck Protection Program.

This does not seem to apply to EIDL loans, because they arise under section 7(b) of the Act (a different subsection).

Source: CARES Act

 

If I already received an SBA Economic Injury Disaster Loan (EIDL) then can I apply for a Paycheck Protection Program loan?

Yes.  EIDLs appear to arise under subsection 7(b) so they do not appear to interfere with the PPP program.  If you received an SBA EIDL loan between January 31, 2020 and April 3, 2020, then you can apply for a PPP loan.

If your EIDL loan was not used for payroll costs, it does not affect your eligibility for a PPP loan.

If your EIDL loan was used for payroll costs, then your PPP loan must be used to refinance your EIDL loan.  The EIDL features an option for an advance of up to $10,000 that does not need to be repaid (“advance”).  Proceeds from such an advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan.

Source: CARES Act, SBA PPP Regulations

 

If I already received an SBA loan then can I apply for a Paycheck Protection Program loan?

It depends on the type of loan and it may depend on reasons why you got the loan.

Part of the certification necessary when you apply for the Paycheck Protection Program is a certification that you haven’t received a loan under the same subsection (subsection 7(a)), that would duplicate the purpose of the Paycheck Protection Program.  So if you received a subsection 7(a) loan and it was meant to be applied to payroll, mortgage, rent, or any of the other allowable costs of the Paycheck Protection Program, then you may be precluded from applying for the Paycheck Protection Program.

But you received an SBA 7(a) loan for something outside the allowable costs of the Paycheck Protection Program, then you may be permitted to apply for the Paycheck Protection Program.  The CARES Act specifies that if you already received a 7(a) loan between January 31, 2020 and the date on which the Paycheck Protection Program is made available, then you can apply for the Paycheck Protection Program loan as long as the EIDL was for a purpose other than the alowable uses for the Paycheck Protection Program.  As an example, if you were in a declared disaster zone due to a tornado and received an EIDL to pay for tornado-damage to your facility, then that would not inhibit your efforts to secure a Paycheck Protection Program loan.

Source: CARES Act

 

What is the PPP Loan Interest Rate?

1%

The statute explained that interest will be charged in an amount set by SBA, not to exceed 4 percent.  SBA had revealed a plan to set the interest rate at 0.5%, but the final regulation set interest at one percent.

Source: CARES Act, SBA PPP Regulations

When Do I Start Repaying the PPP Loan?  What is the term?

Under the statute, repayment is deferred for between 6 months and one year, and the repayment period can be up to ten years.  The US Government guidance that has been released since the Act was passed states that the loans will be for only two years and the deferment period will be six months. This means that you will start repaying the loan six months after it was issued.

Interest will continue to accrue on PPP loans during this six-month deferment.

Only the amount remaining after loan forgiveness needs to be repaid.  This may be limited to interest if the principle is entirely forgiven.

Source: CARES Act, Treasury PPP Fact Sheet for Borrowers, SBA PPP Regulations

 

Do I Have to Repay the PPP Loan?

Not if you spend it on the right things and meet the right requirements! You can receive loan forgiveness for amounts spent, during the eight weeks after origination of the loan, on:

  • Payroll
  • Mortgage interest
  • Rent
  • Utilities

Note that this is a slightly shorter list than the list of things for which you can use the loan, so you can use the loan as a typical loan for the other eligible expenses, as well.  Money spent on allowable purposes outside this list will continue to be treated as a non-forgiven loan.

Source: CARES Act

 

How Much Loan Forgiveness Can I Get?

You can get up to 100% of the principle forgiven, as long as it is used for Payroll, Mortgage interest, Rent, and/or Utilities.  However, there are certain things that can reduce this amount.  The amount of loan forgiveness will also be reduced if your headcount goes down or if your payroll is substantially reduced:

Headcount Reduction: You compare the average monthly headcount during the eight weeks from the origination of the loan to the average monthly headcount during the period beginning on January 1, 2020 and ending on February 29, 2020. If headcount has gone down then you get a percentage of forgiveness correlative to the percent of remaining employees. For example, if you had 20 employees during the 2019 period, but only 18 during the eight weeks after origination of the loan, then you would only get 90% forgiveness (and the remaining ten percent of the loan would be subject to repayment).

Payroll Reduction: The amount of loan forgiveness is also reduced by the amount of any reduction in total salary or wages of any employee (except for employees who received more than $100,000 pay in 2019). This applies if the employee’s wages during the eight weeks after origination of the loan are reduced in excess of 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period. I think this clause may have been improperly drafted by the Senate, because we are comparing wages over an eight week period to wages over a thirteen week period; but it is clearly meant to be an incentive to continue wages at (or near) their pre-loan amounts.

To get loan forgiveness, you will have to submit an application to the lender the proves what you spent the money on, so keep good records.

Source: CARES Act

What if I have already terminated employees before I realized that I could get the PPP?

If I have already terminated workers before the PPP, then you may be able to secure the full amount of loan forgiveness by rehiring them.

If you reduced headcount and/or salaries between February 15, 2020 and April 26, 2020, but you remedied headcount/salaries by eliminating the reduction in employees/salary by June 30, 2020, then the loan forgiveness will be calculated without any reduction.

Source: CARES Act

 

Is it easier to apply for the PPP than for other SBA programs?

Yes.  Some of the normal small business loan preconditions are waived for these Paycheck Protection Program loans. The most important ones are:

Source: CARES Act

 

If I seek loan forgiveness, then is the forgiveness treated as taxable income?

The amount forgiven will be treated as cancelled debt but is NOT included in gross income.

Typically, some cancelled debt is considered taxable income under federal tax standards.  But another clause in the CARES Act would exclude this forgiveness amount from gross income so this may mitigate subsequent tax consequences.

Source: CARES Act

 

What happens if PPP loan funds are misused?

If you use PPP funds for unauthorized purposes, then SBA will direct you to repay those amounts.

If you knowingly use the funds for unauthorized purposes, then you may be subject to additional penalties through mechanisms such as government fraud charges.

New Sick Leave and Parental Leave Guidance

We previously published articles about the new paid sick leave and paid parental leave provisions.  The Department of Labor has issued new guidance concerning these new laws.  The new guidance provides answers to some of the compliance questions facing the industry.

Effective Date

The effective date of the new paid sick leave and paid parental leave provisions has been fixed.  These paid leave provisions are effective on April 1, 2020, and apply to leave taken between April 1, 2020, and December 31, 2020.

Posting Notice

We indicated that a notice would be required, but was not yet published.  The new notice has been published.  In recognition of the fact that many employees may be working from home, employers can meet the notice requirement by emailing the notice or posting it on the employee portion of their website:

“An employer may satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website.”

Enforcement

The government will not bring enforcement actions against any public or private employer for violations of new paid sick leave and paid parental leave provisions that take place between March 18 and April 17, 2020, provided that the employer has made reasonable, good faith efforts to comply with the new laws. There is further guidance and instructions for this forbearance, so if you think you may have violated the new laws, then you should contact an attorney immediately.

General Compliance

Looking for guidance on the interaction between the Covid-19 and the Family and Medical Leave Act (FMLA) or general Labor Law?  The Department of Labor has published guidance:

Still not sure what to do?  ASA member should send their questions to ASA so we can try to find you answers!

“Forgivable” Disaster Assistance Loans Could Become Available For Aviation Supply Chain Payroll

Last night, Congressman Raskin’s office called me. We had filed a letter with them asking for assistance for the entire aviation supply chain, including FAA-approved parts manufacturers. Our call last night was an opportunity for me to describe the aviation supply chain, including parts manufacturers, distributors, and repair stations, and the important role that they play in supporting our transportation infrastructure. Martha Sanchez, Congressman Raskin’s Legislative Assistant, told me that she is pretty sure our industry will be covered in the final bill, and asked us to reach out to the Congressman again if we do not feel that the bill is adequate to protect the industry.

Our call happened just before the Coronavirus Relief Bill passed the Senate. The current version of the legislation will go to the House and is expected to be passed tomorrow.

The current bill is said to be 880 pages,and it may be days before we can see the entire 880 page bill (a 247 page version that was introduced a week ago is the only version currently on the US government websites). The bill was passed as H.R. 748, but that was just used as a convenient legislative vehicle: the Senate amended H.R. 748 (a tax bill) by replacing it with the text that had been negotiated by the Senate.

There has been much talk about the payments to individuals, but I am told that the bill will feature about $350 billion in SBA disaster loans for small businesses, and that those loans may be convertible to grants (by being ‘forgiven’) if they are used for certain purposes (like payroll).

Early versions of the bill would have forgiven loans used for payroll.  We are hoping that the final language resembles this proposed language.  The proposed forgiveness formula would be reduced for companies that lay off employees, using a formula that looks like this:

So if your headcount remains the same as a year ago (or is greater) then you could potentially get 100% of disaster assistance loans that you used for payroll ‘forgiven’ and it would thus be turned into a grant.  The proposed version also included reductions if you have reduced wages by more than 25%.  This was an early proposal and a final version of the bill has not yet been voted by the House, so it is still subject to change.

We will keep you updated!

FAA Gears Up for Covid-19: What Does This Mean for Distributors and their DARs?

Ali Bahrami hosted a teleconference yesterday afternoon and invited industry leaders to discuss the FAA ongoing work to support aviation safety during the Covid-19 crisis.  Bahrami is the FAA’s Associate Administrator for Aviation Safety but he used to be with AIA so he understands the industry perspective, and the importance of transparency in government.

Bahrami expects the situation to impact the FAA for about 60-90 days, and has been planning accordingly. The FAA expects to issue new policy statements and extensions in order to facilitate aviation business while maintaining aviation safety.  They expect the first of the new guidance documents to be released by the end of this week.

Risk-Based Approach

Last week and this week the FAA has been working on using a risk-based approach to identify and categorize the tasks the FAA performs.  The FAA has used this approach to distinguish which tasks can be delayed and which ones must be accomplished as planned in order to preserve the expected level of safety.  Among those that must be performed as planned, they are investigating how best to ensure health and safety when they perform the tasks.  Some examples include:

  • The FAA is publishing guidance on how technologies can be used to perform remote oversight during the Covid-19 crisis;
  • Expiring class one medical certificates will be extended for 90 days so that holders will not have to visit aviation medical examiners during the Covid-19 crisis;
  • The FAA is investigating ways to mitigate the health dangers of Covid-19 in confined spaces, like health risks to to inspectors, trainers and students in simulators;

The FAA has been coordinating its plans with the International Civil Aviation Organization (ICAO) in order to help ensure that the FAA’s practices are consistent with those of the rest of the world, and will not adversely affect acceptance of  US aviation products in the rest of the world.

FAA Aircraft Certification Service

Earl Lawrence is the Executive Director of the FAA’s Aircraft Certification Service. He’s also a former trade association guy and an old friend – having worked for EAA for many years.  Lawrence joined the call to talk about FAA oversight of design and production, but he also answered questions about DARs, which is an important issue for ASA members.

DAR Extensions and Privileges

Lawrence explained that he remembered our concerns about DARs, and that the FAA is already working on the guidance for them.  The current guidance for the Covid-19 crisis will be modeled on the approach that the FAA adopted during the last government shutdown.

During the last government shutdown, ASA worked with Lawrence on protocols for extending DARs’ recurrent training and extension requirements.  Under those protocols, those who needed training during the shutdown would be able to wait and get the training after the shutdown; and those whose authority expired during the shutdown would be permitted to operate until after the end of the shutdown (the guidance included a window of time after the shutdown, because of the recognition that the FAA would not be able to process everything immediately, after the shutdown ended). This should be the model for treatment of DAR renewal and training during the Covid-19 crisis.

The new designee guidance is being developed jointly with the Flight Standards Service to make sure that all DARs are covered.  He expects it to be issued next week.

Remote Witnessing and 8130-3 Tags

Lawrence explained that his office is also working on how best to use technology during Covid-19 to accomplish their oversight goals.

In fact, his office is working on two pieces of guidance – one on deviation authority to permit use of remote technologies to carry out FAA oversight responsibilities and one on using technology to accomplish testing, oversight, witnessing and certification in FAA projects.  Lawrence expects both of these documents to be in draft form by today, and hopes to have them issued by early next week.

He expects that their ideas will be turned into guidance that can be used by FAA designees as well.  He specifically mentioned using remote technologies for issuing 8130-3 tags during the Covid-19 crisis.

"Stay-At-Home" Laws Updated to Include Florida and Ohio (effect on aviation supply chain)

ASA has published a table summarizing the effect of “stay-at-home” laws on aviation supply chain business.  The Stay-At-Home table has been updated and it now includes California, Florida (Broward), Illinois, New Jersey, New York, Ohio, and Washington.

In general, we’ve found that airlines, and the supply chain that supports them are generally permitted to operate as critical infrastructure/essential businesses in most jurisdictions.  But some jurisdictions have not included repair stations and manufacturers in that same excepted category.

Even where the business is permitted to operate, employees should practice social distancing, frequent hand-washing, and other preventative steps to protect themselves from exposure to Covid-19.

ASA will continue updating this table as new information becomes available.

Stay-at-Home Laws: How Do They Affect Aviation?

A number of states have issued “stay-at-home” orders in response to Covid-19.  Generally these laws and executive orders require residents of the state to remain in their residences.  They frequently allow residents to leave for jobs that are considered to be essential.  This article is not meant to summarize all of the details of the orders; rather it provides links to the orders with a summary of the most relevant exceptions that apply to the aviation industry.

We have already provided some guidance on how to interpret such laws in an earlier article.  Generally speaking, if your business is permitted to remain open then social distancing, enhanced sanitation practices and teleworking for personnel who can telework are expected.

The CISA standards have been updated to a 2.0 standard.  These more explicitly define companies that are needed to support aviation as part of the federal critical infrastructure, including (for example) the following text:

Workers who support the operation, distribution, maintenance, and sanitation, of air transportation for cargo and passengers, including flight crews, maintenance, airport operations, those responsible for cleaning and disinfection, and other on-and off-airport facilities workers.

Essential businesses that remain open are encouraged to provide letters to their essential employees to verify their status.  Such letters may need to be shared with law enforcement to justify transit during a “stay-at-home” executive order.

We will try to keep up with the changes to the best of our ability.  Aviation industry members who notice changes are encourage to share those changes with us so we can update this table.

Updated as of 04/06/2020.

State Order Duration Notes relevant to aviation
Alabama Stay-at-Home (4/3/2020) 4/4 – 4/30 Individuals may leave their residence for essential activities including support of the federal critical infrastructure sectors under the CISA standards (which includes aviation).  Aviation infrastructure operations and aerospace/defense manufacturing are also explicitly called-out as essential activities.

Updated as of April 5, 2020

Alaska
Anchorage
EO-03 3/22 – 3/31 The following Critical Businesses may operate (each of these bullets remains subject to other initiatives, like the closure of restaurants and the requirements for social distancing):

  • Airport operations
  • Businesses that provide transportation for goods or persons (including airlines)
  • Defense and national security related operations
  • Businesses that supply other critical businesses with the support or supplies necessary to operate (including aviation supply chain)

Updated as of 3/23/2020.

California EO N-33-20 3/19 – UFN Individuals may leave their residence for necessary tasks to support federal critical infrastructure sectors under the CISA standards (which includes aviation)

Updated as of 3/22/2020.

Colorado D2020-13 3/22 – 4/10 NOT a stay-at-home order, but except for exempt businesses, all businesses must reduce in-person employees by 50%.  Exempt businesses are defined by CDPHE and include:

  • Airlines
  • Warehouses/distribution

Updated as of 3/24/2020.

Colorado,
Denver
Stay At Home 3/24 – 4/10 Individuals may leave their residences to work to provide any services or perform any work necessary to the operations and maintenance of Airports and passenger and cargo operations (“essential businesses”).  This also includes businesses that supply other essential businesses with the support or supplies necessary to operate (see also Colorado).  This should include the commercial aviation supply chain.

Updated as of 3/24/2020.

Florida EO 20-91 4/3-4/30 Miami-Dade County, Broward County, Palm Beach County and Monroe County shall restrict public access to businesses and facilities deemed non-essential pursuant to the guidelines established by Miami-Dade County pursuant to its March 19, 2020 Emergency Order 07-20 as amended.  Businesses covered under CISA standards are also essential (which includes aviation).

See Miami-Dade, below, for specifications.

Clarified by EO 20-92 to supersede conflicting local ordinances

Updated as of 4/5/2020.

Florida,
Miami-Dade
County
EO 07-20

EO 07-20 amd 1

EO 07-20 amd 2

3/19 – 4/9 The following Essential Businesses may operate (each of these bullets remains subject to other initiatives, like the closure of restaurants and the requirements for social distancing):

  • Airlines
  • Businesses operating at any airport
  • Manufacturers
  • Logistics suppliers including warehouses
  • Any business that is interacting with customers solely through electronic or telephonic means, and supplying goods only through mailing, shipping or delivery services

Updated as of 4/5/2020.

Florida,
Broward
County
BCA EO 20-01 3/23 – UFN The following Essential Businesses may operate (each of these bullets remains subject to other initiatives, like the closure of restaurants and the requirements for social distancing):

  • Airlines
  • Businesses operating at an airport
  • Manufacturing, distribution, logistics, warehouses and supply chain for essential businesses
  • Any business that employs five (5) or fewer persons where the employees do not come into regular contact with the general public in the regular course of business

Updated as of 3/23/2020.

Illinois EO 20-10 3/21 – 4/07 Individuals may leave their residence for essential services, including (but not limited to):

  • Airlines
  • Airports
  • Transportation for essential activities (defined in the order)
  • Manufacturing, distribution, and supply chain for the above

Updated as of 3/22/2020.

Michigan EO 20-21 3/21 – 4/13 or UFN (ambig.) Individuals may leave their residence for necessary tasks to support federal critical infrastructure sectors under the CISA standards (which includes aviation).  The individuals must be designated by their employers as critical infrastructure workers.   A federal critical infrastructure sector business may also designate additional suppliers, distribution centers, and service providers necessary to support its operations.

Updated as of 4/05/2020.

New Jersey EO 107 3/21 – UFN All businesses must accommodate telework, and to the extent telework is not feasible they must reduce staff-on-site to the minimal number necessary.  Warehouse workers and repair workers are listed as examples of employees who must be on-site to do their jobs.

Updated as of 3/22/2020.

New York 202.6

202.7

202.8

essential” guidance

3/22 – 4/19 Businesses must maximize telecommuting and 100% eliminate in-person workforce.  Exceptions for “essential” businesses extend to:

  • airports and airlines
  • warehousing and distribution (“essential services”) needed to provide for the safety of the public (e.g. approved aircraft parts which are regulated under the federal government’s safety regulations)
  • defense and national security-related operations supporting the U.S. Government or a contractor to the US government

Aviation manufacturing and repair are not explicitly included in the guidance; but other business may request an exemption from the state (right now this needs to be done on a business-by-business basis … we already examined whether we could apply for the whole aviation supply chain industry)

Updated as of 3/22/2020.

Ohio DoH Order 3/23 – 4/06 Individuals may leave their residence for Essential Activities including to support federal critical infrastructure sectors under the CISA standards (which includes aviation)

Updated as of 3/22/2020.

Texas GA 08 3/20 – 4/3 NOT a stay-at-home order; “This executive order does not mandate sheltering in place  All critical infrastructure will remain operational, domestic travel will remain unrestricted, and government entities and businesses will continue providing essential services.”  Aviation remains unrestricted.Updated as of 3/24/2020.
Virginia EO 53 (2020) 3/23 – UFN Closes non-essential retail businesses but should not affect aviation supply chain businesses.

Updated as of 3/23/2020.

Washington 20-13

20-14

3/16 – 3/31 It appears that non-retail aviation businesses are currently permitted to operate (see proclamations).  Gatherings are prohibited (with an exception for gatherings under 50 persons that have a plan for social distancing).  Retail operations are prohibited (unless they have a plan for social distancing).

Updated as of 3/22/2020.

Key to Abbreviations

UFN – Until Further Notice

Is my Business Part of the Critical Infrastructure? [Does the California “Stay-Home” Order Apply to Aircraft Parts Distributors?]

Yesterday, California ordered its residents to stay at home in response to Covid-19.  That order provided an exception for person who are needed to “maintain continuity of operations of the federal critical infrastructure sectors.”  But this raises questions in the minds of many in the ASA community: are we needed to “maintain continuity of operations of the federal critical infrastructure sectors?”  Or, more succinctly, which aviation businesses are excepted from the “stay-home” rules in California?

It is likely that other states will follow this model, providing an exception to “stay-at-home” or “shelter-in-place” rules for people who are necessary to the critical infrastructure sectors identified by the federal government.

The federal government’s Cybersecurity and Infrastructure Security Agency (CISA) has identified 16 critical infrastructure sectors.  One of these is “Transportation and Logistics.”  There is not a precise definition of who is covered under this list- instead it offers a list of examples.  The critical infrastructure sectors examples clearly include:

  • Those who repair and maintain aircraft (repair stations and maintenance personnel)
  • Air transportation employees, including air traffic controllers, ramp personnel, aviation security, and aviation management
  • Workers necessary for the manufacturing of materials and products needed for transportation
  • Manufacturers and distributors (to include service centers and related operations) of packaging materials, pallets, crates, containers, and other supplies needed to support manufacturing, packaging staging and distribution operations
  • Employees of firms providing services that enable logistics operations, including cooling, storing, packaging, and distributing products for wholesale or retail sale or use

The “air transportation employees” category is a bit vague, but other listed provisions can help interpret this language as it applies to aircraft parts distributors.

One of the categories listed is “Employees of firms providing services that enable logistics operations, including cooling, storing, packaging, and distributing products for wholesale or retail sale or use.”  This is clearly meant to include those who offer logistics services for goods, but the logic of this category could be applied to aircraft parts distributors as well.  If distributors of groceries are included in the critical infrastructure list, then those who are distributing the parts needed to keep aircraft flying are likely included as well.

Another provision that should influence our analysis (indirectly) is the fact that manufacturers and distributors of packing materials are part of the critical infrastructure because they enable distribution operations.  This seems to suggest that distribution operations are part of the critical infrastructure.

CISA makes it clear that the critical infrastructure focus is on maintaining the businesses and services that enable continued economic and social vitality.  There is a focus on critical functions.  This is not focused on maintaining business as usual.  So it is likely that many aircraft parts distributors are part of the critical infrastructure, but not all of their functions will be considered critical.

  • The AOG desk is likely going to be critical
  • Sales contacts that allow needed aircraft parts to be identified and supplied will probably be likewise critical
  • Anyone who is picking aircraft parts from a warehouse is similarly likely to be considered critical
  • Anyone who is shipping those aircraft parts is similarly likely to be considered critical

The distributor’s marketing department is probably not part of the critical infrastructure.  And I hate to say it, but the legal department may not be part of the critical infrastructure, either.

Ultimately, each business must examine its role in the transportation marketplace to identify whether it serves a role as part of the critical infrastructure.  One way to pose the question would be to ask “If we all stopped performing the function that I perform, then would this ground aircraft in America?  If the answer is “yes,” then you are probably part of the critical transportation and logistics infrastructure.

Here are some shortcuts questions for aircraft parts distributors:

  • Do you have an AOG desk?  If the answer is “yes” then they likely remain critical, and the support structure necessary to permit them to support aircraft is also critical.
  • If you stop supplying aircraft parts (or other goods) then could one or more cargo transportation aircraft be grounded?  If the answer is “yes” then the personnel necessary to support aircraft are critical.  Remember this also includes general aviation cargo aircraft!
  • If you stop supplying aircraft parts (or other goods) then could one or more passenger aircraft be grounded?  If the answer is “yes” then the personnel necessary to support aircraft are critical.  Remember this also includes special purpose aircraft like medical evacuation aircraft, law enforcement aircraft, etc.
  • Do you have hazmat-trained shippers?  If the answer is “yes” then they are also critical because hazmat personnel are also considered to be part of the critical infrastructure (but if you stop shipping then obviously these personnel may stop being critical for your operation).

New Paid Parental Leave Law During Covid-19 Crisis

The Emergency Family and Medical Leave Expansion Act (EFMLEA) made striking changes to the Family and Medical Leave Act (FMLA).  This article provides guidance on how to understand the new law, and how to comply with it.

The Act creates a new category of FMLA-protected leave (we will call it “Covid-19 Leave”) for parental leave. The category of leave only applies to leave for a “qualifying need related to a public health emergency” that arises from March 18 to December 31, 2020. The statute explains what this really means:

“The term ‘qualifying need related to a public health emergency’, with respect to leave, means the 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.”

With schools closing across the nation, this means that anyone with children under 18 could be eligible for this sort of leave. To be clear: Covid-19 Leave is for parents who have to care for their children because the children are at home. If the employee gets sick from Covid-19 then the employee is covered under the more traditional elements of FMLA (which do not apply to ASA’s smallest members). A perverse aspect of this law is that if an employee who has only worked for the business for 6 months stays home to care for healthy children then the employee is covered under FMLA and but if the same employee who has only worked for the business for 6 months stays home because he or she has Covid-19 then the employee is NOT covered under FMLA.

Most of ASA’s members are small businesses that haven’t had to comply with FMLA in the past because it excluded businesses with fewer than 50 employee.  The new law includes those smaller businesses, so this will be new territory for many ASA members.

Paid or Unpaid Leave?

This is the key issue for most businesses. During the Covid-19 crisis, cash flow for aviation businesses is practically non-existent (and expenses continue, unabated).  The length of the crisis is still unclear, but most people expect it to continue for months (at least). There will likely be few, if any, child-care options even through the summer, so parents could be unable to work for many months.

Typically, FMLA leave has been unpaid (this has been, of course, altered by the Emergency Paid Sick Leave Act which is covered in a different ASA blog post). The main benefit is that the employee gets his or her job back after the FMLA event without a loss of seniority, without a loss of benefits, and with no change in terms and conditions of employment. The employer cannot terminate an employee because the employee took FMLA leave.  But the new law changes this traditional model.

The new law provides that Covid-19 Leave is unpaid for the first ten days of leave (two weeks for employees who normally work five days a week). But after those two weeks, the leave is paid leave! The pay must be at least two thirds of the employee’s regular rate of pay, and it must be paid for the number of hours the employee would normally be scheduled to work. There are also rules for calculating hours for employees with varying schedules.
There are upper limits. The maximum daily pay under this law is $200 per day and the maximum total pay is $10,000 in the aggregate. So if you are paying someone $200 per day under this law, then you would be obliged to pay up to 50 work days (a total of $10,000), or about seven weeks.

Of course, a company can always choose to pay more than the amounts in the law.  If you find yourself needing to provide Covid-19 Leave then please be sure to look at the law or get appropriate legal advice because there are additional details in the law that may apply to your specific fact pattern!

This pay should be provided according to the normal schedules for pay.

Employee Eligibility for Covid-19 Leave

Employees typically become eligible for FMLA leave after working for 12 months for an employer, and working at least 1250 hours during the previous 12-month period. Employees become eligible for the special Covid-19 Leave under FMLA after only working for 30 days (so your newer employees will be eligible for Covid-19 Leave, to care for their children, even though they are not yet eligible for other forms of FMLA protection).

Employees are required to provide the notice that is “practicable” to their employer.  So employees, please make sure you provide your employer with some communication about your intent to take this leave, even if it is just an email.

Employee Obligation for Covid-19 Leave

Typically FMLA applies to a business that employs 50 or more employees for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year. The way this is worded, an aviation business that has just gone from 60 employees to 6 employees because of the current crisis likely remains liable for FMLA through at least the end of this year (on the assumption that they had 60+ employees in 20+ weeks last year, but will not meet that threshold this year).

Covid-19 Leave, on the other hand, applies to employers with fewer than 500 employees. So the largest companies are exempt from Covid-19, and it will instead only apply to small and medium-sized businesses.
The Secretary of Labor is authorized to issue regulations to exempt certain businesses, “when the imposition of such requirements would jeopardize the viability of the business as a going concern.” But no such regulation has yet been issued.

For employers who have fewer than 25 employees (“Very Small Employers”), there are complicated exemption rules. In summary, a Very Small Employer is not liable for Covid-19 Leave if the employee’s job disappears due to economic conditions, including those caused by the public health emergency. But the business must make reasonable efforts to restore the employee to a position equivalent to the position the employee held when the leave commenced (so if you reduce aviation parts sales positions, but open up positions selling surgical masks, then you need to restore the employee to one of those new positions if possible upon the employee’s return). Equivalent, in this case, means a job with equivalent employment benefits, pay, and other terms and conditions of employment. The business cannot restore the employee to a position, then for about a year after the end of the public health crisis, the employer needs to offer any new or open (equivalent) positions to the protected employee.

This special rule for Very Small Businesses, unfortunately, incentivizes Very Small Businesses to avoid growth after the public health crisis is over. Such Very Small Businesses in our industry may not have the cash to maintain employees who are not working during an extended crisis. So they will have to eliminate the jobs in order to avoid $10,000 in liability for Covid-19 Leave under the new rules. There is a strong likelihood that aviation supply chain businesses will continue to suffer for a long time after the public health crisis is over. Businesses will likely want to bring back employees, but likely will not be able to offer the same benefits, pay, and other terms and conditions of employment due to the typical extended effect of an aviation slow-down. This will create a legally complicated situation because of the obligation to offer equivalent employment upon the employee’s return.

Notice to Employees

FMLA already requires employers to post a notice to employees of the terms for FMLA.  If you were not subject to FMLA before the new changes then you might not have had an obligation to post this notice because you were not an “employer” as that term is defined in FMLA.  If the change in the law now makes you meet the definition of an “employer” under FMLA (and all aviation small businesses with fewer than 500 employees should now be “employers” under the law) then you will have a new notice obligation that requires you post details about FMLA.  Notice details can be found at 29 U.S.C. 2619.  You can download the Department of Labor poster, which is the approved form of the notice.

It is unclear whether the existing FMLA notice requirements will be interpreted to require that the amendments be subject to an additional notice to the employees.  The Department of Labor may publish guidance explaining whether employer notice obligations change under this new law, or they may simply change the approved poster; until such changes are made, though, the Department of Labor poster should be adequate for compliance.

What Can We Do to Support Compliance?

The ASA members with whom we’ve spoken are trying their best to support employees while also preserving a business without cash-flow for the foreseeable future. Expenses like rent or mortgage aren’t going away for most businesses. ASA members would like to pay employees through the entire public health crisis but many of them know that they just won’t have the money.

ASA members should be planning their finances with Covid-19 Leave in mind.

ASA has already asked Congress to assist the aviation supply chain with low-interest loans, payroll grants, and other incentives to keep aviation strong. We’ve also encouraged the members to tell Congress their own stories (for resources to help tell your story, see this blog post). If Congress provides this sort of support, it will help ensure that ASA members can continue to support their employees in this time of need.

New Law Requires Paid Sick Leave During Covid-19 Crisis

The Emergency Paid Sick Leave Act (EPSLA) has imposed new paid sick leave requirements on businesses.  This article provides guidance on how to understand the new law, and how to comply with it.

The Act require employers to provide 80 hours of paid sick to each employee.  If your company already does this, then the law might not impose any new obligations on your business.  If your company does not yet provide at least 80 hours of paid sick leave then you will need to make sure that you comply with the law.

Employee Eligibility for Paid Sick Leave

Generally speaking, anyone who is treated as an employee of an ASA member under the Fair Labor Standards Act will be eligible for Paid Sick Leave.  This definition includes “any individual employed by an employer” so it is quite broad.

There are six reasons that one is permitted to claim Paid Sick Leave under the new law:

(1) The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID–19.

Employee Obligation for Paid Sick Leave

The EPSLA becomes effective not later than April 2 (the wording of the Act is ambiguous so the Department of Labor could set an earlier effective date).  It continues to be effective through December 31, 2020.

The EPSLA applies to any employer who is covered under the  Fair Labor Standards Act. This is likewise defined very broadly to include the employer and persons acting in the interest of the employer.

It is now illegal to discharge, discipline, or in any other manner discriminate against any employee who takes Paid Sick Leave under this new law.  Employers who fail to pay Paid Sick leave under this new law, or who willfully discharge, discipline, or discriminate an employee for taking Paid Sick Leave will be subject to penalties as if they had failed to pay the employee a minimum wage under the Fair Labor Standards Act, which would carry penalties in addition to back wages.

Note that the law provides 80 hours of paid sick leave as of the effective date, so paid sick leave provided before the effective date probably does not count against the 80 hour obligation.  For example, if your company normally provides 80 hours of sick leave per year, and you already paid an employee for 80 hours of sick leave that the employee used in January 2020, then that employee is likely entitled to another 80 hours of paid sick leave under the new law.

Paid Sick Leave is typically calculated based on the employee’s required compensation and the number of hours the employee would otherwise be normally scheduled to work, but this amount is also capped under the law.  The maximum required dollar amount of Paid Sick Leave is limited, and the limits are based on the six categories shown above:

Many laws that protect employees require that information about the law be posted.  This law includes such a requirements.

The Secretary of Labor is required to make available a model notice that meets the notice requirements.  The deadline for this appears to be March 25.  It will probably be provided through the Wage and Hours Division website; likely on the Workplace Posters page.

What Can We Do to Support Compliance?

The ASA members with whom we’ve spoken are trying their best to support employees while also preserving a business without cash-flow for the foreseeable future. Expenses like rent or mortgage aren’t going away for most businesses. ASA members would like to pay employees through the entire public health crisis but many of them know that they just won’t have the money.

ASA members should be planning their finances with Paid Sick Leave in mind.

ASA has already asked Congress to assist the aviation supply chain with low-interest loans, payroll grants, and other incentives to keep aviation strong. We’ve also encouraged the members to tell Congress their own stories (for resources to help tell your story, see this blog post). If Congress provides this sort of support, it will help ensure that ASA members can continue to support their employees in this time of need.

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