Virus Crisis from a Legal Standpoint

A Q & A with home improvement lawyer D.S. Berenson, Managing Partner of Berenson LLP

In the fast-moving events surrounding uncertainty about how best to work with homeowners during a contagion as well as new shelter-in-place orders, Qualified Remodeler interviewed leading home-improvement attorney D.S. Berenson of Berenson LLP. His firm represents a majority of the Top 500 home improvement firms in the remodeling industry. He’s an expert on all legal matters facing home improvement firms.

This interview was conducted March 17, 2020, prior to the passage of the Families First Coronavirus Relief Act. Mr. Berenson updated his answers on March 23, 2020 to reflect the passage of the new law.

QR: What initial concerns are you seeing from home improvement company owners?

Berenson: Well, we’re seeing the concerns on two fronts. The first is what to do with workers who are looking to stay at home either because of the schools being closed and they need child care that they don’t have, or because they have a loved one at home, they believe has the virus or they’re concerned about getting it.

So the first one is the whole question about how to handle workers who want to quarantine or want to stay at home and do we have to pay them or not pay them? What’s the best strategy on that?

And the second is how do we handle jobs in the pipeline with customers who are becoming increasingly concerned about having workers on their property, which leads into sort of a subcategory, which is what do we do about our marketing if we’re not able to set any leads because nobody wants us to come out and run demos, let alone do installs.

So those seem to be the two large issues that most of our clients are focusing on right now.

QR: So let’s tackle that first one, employees who want to stay home.

Berenson: If you have a sick leave policy in place, that’s the first thing that you want to address. You’d want to take a look and see how your sick leave policy covers this. But interestingly, our laws don’t currently address this kind of issue. There is no federal law that covers private employees who want to take off from work to care for healthy children or care for someone in the family who has coronavirus or the flu or wants to quarantine themselves. Some states go a little further, but it really becomes a question as to how the employer wants to implement a leave policy. So if you, if you want to allow people to work from home, you can, but you don’t have to.

QR: Then there is the sick-leave law that was passed by the House. (Update: The Families First Coronavirus Relief Act became law on March 19, 2020) Are you familiar with it?

Berenson: I am. The problem is that, if I may be a little rough, very few people in the Congress have ever actually had to meet payroll or start a business, so there is always a disconnect between the real world and Washington DC. You see that time and again, just look at  telemarketing legislation or lead-paint legislation. Everything looks good on paper, but when it falls out, it’s our industry that seems to get the brunt of it. The Families First Coronavirus Relief Act goes effective on April 2 – and that will start the clock on employers with fewer than 500 employees having to provide (i)  two weeks of paid sick leave and (ii) up to 12 weeks of job-protected leave (10 weeks on a paid basis) to employees impacted by the coronavirus.

Again, this would be for the three reasons I mentioned previously, you have to take care of children that are otherwise healthy, you have to take care of someone in your family that you believe has the coronavirus, or you yourself may have it and you want to self-quarantine.

This paid sick leave wages are limited to $511 per day up to $5,110 total per employee for their own use and up to $200 per day – $2,000 total – to care for others  The job-protected leave is an expansion of the Family Medical Leave Act, and allows any employee with you for at least 30 days to take up to 12 weeks of job-protected leave – with 10 weeks paid – if an employee is unable to work due to a need to care for a child because that child’s school or place of care has closed.

The contractor generally must pay full-time employees at two-thirds their regular rate for the number of hours the employee would otherwise be normally scheduled to work. The Act limits this pay entitlement to $200 per day and $10,000 total per employee.  As a rule, if you have less than 25 employees, you may not need to keep the person’s job protected for their return, but otherwise you would.

There are a number of concerns with this. First of all, it only applies to employers that have less than 500 employees. Right off the bat you would think that Apple and Hewlett Packard and Amazon and Facebook would be the ones that could best afford this. Employers that have less than 500 employees, that’s literally every contractor in the country. They’re going to get hurt by having to start paying workers to stay home. So it seems a bit backwards.

So they added a section into it where the Department of Labor is then supposed to be able to grant exemptions for businesses with less than 50 employees. They can do that if it was deemed that letting your workers work from home could jeopardize the viability of the business as a going concern.

So then on top of that, the idea would be that we would then get tax credits to offset the cost of having to pay these workers to stay home, but tax credits, speaking as a guy who came out of the IRS can take months and months. So it’s way beyond the fluidity that we’re seeing on a day-to-day basis. But, tax credit reimbursement have been promised to be “quick and easy to obtain,” with an “immediate dollar-for-dollar tax offset against payroll taxes”.

QR: For small businesses, most may run out of cash before those credits get paid back to them.

Berenson:

You’re exactly right. It’s really questionable. Some senators are saying we should be issuing hard money, actual checks to workers who have to stay at home, who are impacted by this as opposed to the employer having to pay. It’s fascinating from a historical standpoint because we’ve gone from 100 percent employment three weeks ago to zero percent employment today. We’ve never seen anything like that happen before. So unfortunately, it’s completely up in the air. Putting one of these laws in place is highly problematic for small businesses and there’s no way around that. I’m hopeful that they move to more of a real-money structure or the government is issuing funds. Otherwise you’re going to see the administration pushing very heavily to offset some of this with the stimulus package and payroll tax cut.

QR: With all home shows cancelled and canvassing not a very good option, many owners are looking for ways to find missing leads. What are you hearing?

Berenson: What we are hearing is that a vast majority of the government agencies that handle permitting and inspections have either gone to heavily reduced hours or shutting down entirely. So in places like New York and Florida, Ohio, Maryland, the Mid-Atlantic region and out West, inspections have shut down. This has created a huge contractual problem for most of our clients.

Now, if the contractor has a well-crafted work order, then from a legal standpoint, they should be protected because they should have language on their work order, which says something like “events beyond the control of the contractors, such as delays by local government authorities issuing or for approving inspections or permitting, are not included in calculating timeframes for job performance.”

So a strong custom-crafted work order should cover us legally for this. And we go to the homeowner—obviously with kid gloves—and we say, ‘look, this is a countrywide situation. We simply have to freeze the jobsite for right now until the agencies open back up and then we’ll continue the job.’ You mothball the jobsite until things can be completed. So legally they should be protected.

If they have a work order that doesn’t have that language in it, they can have a lot of problems. We’re seeing a lot of customers trying to cancel jobs, not just because of the delays in permitting and inspections, but because for a lot of people now, consumer confidence is starting to drop. People are now concerned about how they’re going to pay for purchases, so they’re trying to get out of jobs. So hopefully you can turn to your contract and you can freeze the job.

QR: What about canvassing and generating leads?

Berenson: We are not seeing a lot of concerns about lead generation because it’s more a question of how they handle all installations. Leads are still coming in, and canvassing is still in play, other than in areas like Nevada or Pennsylvania.  But few people want contractors to come out to their home to install at this time, unless they can be assured of a risk-free install. In addition, consumers are increasingly concerned about having reps out in their kitchen or their dining room to run a demo.

We have some clients that are trying to do a virtual visits. It’s not working very well for a variety of reasons.

QR: What are those reasons? I’ve heard a couple of contractors talk about selling via screen shares and that type of thing. Is it that medium not working, or is there some legal obstacle?

Berenson: There is no legal obstacle. We can have a discussion about electronic signing concerns but, but no, it can all be done. It just is not working. We have some clients selling a more straightforward product like roofing or windows who are having some success but anything that’s more touch and feel type of thing, is not working. Flooring, kitchens and baths are not working well. So far we just don’t seem to be able to pull it off.

QR: DS, you mentioned that lead-safe work practices can be helpful?

Berenson: The other issue we’re running into is the installation. We’re getting a lot of homeowners telling our clients, “I don’t want your people here”. Almost every sophisticated contractor out there has the ability to run installs where the customer can be put completely at ease for risk of contamination because we’ve been doing it for years and it’s called lead-safe work practices.

And we want to remember that lead-safe work practice installation is a hyper-clean HEPA-filter oriented installation method where the worksite is sectioned off. The workers are in protective gear. There we’re talking about lead-paint dust and here we’re talking about the coronavirus. So, we have one client that we’ve worked with very quickly on their advertising where they are actually now going out there and showing an installation crew in full gear. And they’re saying, we guarantee you that you’re not going to have any concerns about infections from our installation crews. And they’re right because not only could you not catch anything through a lead-safe work practice job site. So we worked with them to create that type of marketing. I’m not saying that all contractors are going to have that ability, but if you think about it, you should be able with good techniques to reassure the customer that the installation can be done on most products, with  safety and assurance as to their family’s health and well being because that’s what lead-safe work practices are.

DS: Do you have clients canvassing right now?

Berenson: Canvassing has become increasingly more difficult in the past three weeks. That’s a fact. Our calls have tripled over problems with the police, canvassing disputes, et cetera. But canvassing, in general, arguably can still work as long as you’re keeping your proper distance. Canvassing is as much an art as it is a science, and you’re not supposed to be standing up there on the door knocking and waiting for it to open anyway. You’re supposed to knock the door and then go back a good 10, 15, 20 feet anyway. The larger concern is converting that lead into a demonstration and working to assure the consumer that they will be OK having the sales reps in the home. QR

UPDATE from D.S. Berenson on the passage of the FFCRA on March 19, 2020.

Says Berenson on March 22, 2020: “The Coronavirus Act goes effective on April 2, 2020 and that will start the clock for employers with fewer than 500 employees. They will have to provide: 1. Two weeks of paid sick leave and 2. Up to 12 weeks of job-protected leave (10 weeks on a paid basis) to employees under the Family and Medical Leave Act.”

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