Good News for Small Business Affected by COVID-19: State EDA Programs and SBA Programs

March 28, 2020
Nicholas F. Talvacchia, Esq. | Jennifer B. Barr, Esq.


The New Jersey Economic Development Authority (“NJEDA”) was authorized by Governor Phil Murphy in recent signed legislation to  provide relief to New Jersey small and mid-sized businesses. This package of initiatives will provide more than $75 million of both State and private financial support.  If more resources become available through additional State, Federal, and philanthropic sources, it is expected that these initiatives will grow to more than $100 million.  

The NJEDA initiatives will complement the forthcoming federal economic recovery initiatives.  

There is a fixed amount available to fund  these programs. We recommend early application.

Through both grants and loans, the NJDEA approved the following programs:

Small Business Emergency Assistance Grant Program

  • For businesses and non-profits with between 1 and 10 full time employees
  • Intended to stabilize their operations and reduce the need for layoffs or furloughs
  • Targeted for payroll and working capital support, not capital expenses such as construction
  • $1000 per FT employee, maximum of $5,000 in grants
  • Includes retail, arts, entertainment, recreation, accommodation, food service, and other services – such as repair, maintenance, personal, and laundry services
  • Excludes home-based businesses, and businesses related to gambling or adult services

Small Business Emergency Assistance Loan Program

  • For businesses and non-profits with less than $5 million in annual revenue
  • Intended to help entities that were closed, reduced hours, had 20% decline in revenue, or a disrupted supply chain
  • $100,000 direct loan, with flexible terms such as 10-year amortization, 0% interest, 12-month deferred repayment
  • Includes entities in business for at least one year,  must show negative impact related to COVID-19, and must certify that entity will make best efforts to not lay off employees or will rehire employees as soon as possible
  • Excludes home-based businesses, businesses related to gambling or adult services

Community Development Finance Institution (CDFI) Emergency Loan Loss Reserve Fund

  • Provides loan guarantees to CDFIs for working capital loans to businesses that have been directly impacted by COVID-19
  • Loans can be made by the CDFI to companies that have certified it has been adversely affected (i.e. closed, reduced hours, reduced revenue, etc.)
  • $75,000 loan amount per company
  • Interest rate for the loan must be lower than 3.75%
  • Loans must provide flexible loan structure such as deferred payments, moratoriums on interest for 6 months, etc.)
  • Loan amount cannot exceed five years

CDFI Emergency Assistance Grant Program

  • $250,000 in grant funding per entity
  • To support the scale-up of the organization, tech support, and underwriting capacity, including hiring staff
  • Allows the CDFIs to buy down interest rates on any COVID-19 related emergency working capital loan to provide impacted businesses with lower-costs and more flexible financing

CDFIs include: 

UCEDC (United Counties Development Corp;)
GNEC (Greater Newark Enterprise Corp.)
RBAC (Regional Business Assistance Corp.)
NJCLF (New Jersey Community Loan Fund)
CBAC (Cooperative Business Assistance Corp.)

NJ Entrepreneur Support Program

  • Intended to encourage private sector investors to provide additional working capital loans to entrepreneurial businesses 
  • Provides a guarantee of an investor loan advanced for working capital for an entrepreneurial businesses impacted by COVID-19
  • Investment must have been made after March 9, 2020, program is retroactive to that date
  • NJDEA will guarantee 80% of the total investment amount, not to exceed $200,000 per entrepreneurial company
  • The entrepreneurial business must have:
    • minimum of 50% employees in NJ
    • less than 25 total employees
    • under $5 million in revenue
    • corporate HQ in NJ
    • in one of 8 sectors as follows: advanced manufacturing, information technology, life sciences, finance/insurance, clean energy, food/beverage, advanced transportation, film/digital media
  • Investors can be individuals, trusts, or corporations, and must already have equity interest/position in the company
  • Investors need not be NJ residents

Small Business Emergency Assistance Guarantee Program

  • Pilot program that makes available one-year first loss guarantees of permanent working capital loans and lines of credit from specified “Premier Lender” banks.
  • Intended to cover operating expenses for small businesses and non-profits impacted by COVID-19
  • Provides 50% guarantees on working capital loans and provides a waiver of loan fees
  • Premier Lenders include, among others:
    • BB&T
    • Fulton Bank
    • M&T Bank
    • Ocean First Bank
    • Sturdy Savings Bank
    • TD BAnk
  • Businesses eligible for these loans must have $5 million or less in annual revenue and in existence for at least one year; home-based businesses ineligible

Emergency Technical Assistance Program

  • This program will support technical assistance to New Jersey-based companies applying for assistance through the U.S. Small Business Administration

Existing NJEDA Business Customers

  • 3-month payment moratorium for eligible businesses on direct loans and premier lender participation loans (pending approval by the agency bank)
  • NJEDA is also allowing collateral releases, subordinations and substitutions on business assets
  • Late fees on loan repayments and loan modification fees will be waived for impacted businesses
  • NJDEA has also waived certain requirements for employee presence in the office for programs under Grow NJ, HUB, BEIP, and BRRAG 
  • Under Grow NJ, the NJDEA has discretion to extend time to file project completion certification under certain circumstances


Because New Jersey is approved for federal disaster assistance, New Jersey businesses are available to apply for Economic Injury Disaster Loans through the Small Business Administration (SBA).  

Economic Injury Disaster Loans (EIDLs)

  • Loans are for working capital for small businesses (including small agriculture cooperatives and aquaculture), and private non-profits of all sizes
  • Intended to assist through the disaster recovery period
  • Must have sustained economic injury
  • Credit requirements: must have an acceptable credit history, ability to repay, collateral for loans over $25,000
  • Interest rate is 3.75
  • Loan term is a 30-year maximum
  • Amount of loan is limited at $2,000,000

The attorneys at Cooper Levenson can help your business apply for any of the above programs.  Sign up for the latest news from Cooper Levenson.

CARES Act and Small Business Paycheck Protection Loans

The “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES Act” (“Act”) was unanimously approved by the United States Senate on March 25, 2020.  On March 27, 2020, the Act was passed by the House of Representatives and signed into law by President Trump. Many small business owners are questioning how the Act will help them remain operational and if they will qualify for relief.  While it is a fluid process, the questions that we are most commonly receiving are addressed below.

What constitutes a small business?

Under the Act, a “small business” is a business that employs less than 500 people.  Small businesses are eligible to receive loans that offer debt forgiveness, which is non-taxable, subject to limitations.  The Act appropriates $349 billion to the Paycheck Protection Program, which aids small businesses in covering payroll (for employees earning up to $100,000 per year) and other expenses from February 15, 2020 through June 30, 2020.

What do Paycheck Protection Loans Cover?

Paycheck Protection Loans may be used to pay payroll, group healthcare benefits, insurance premiums, interest on a mortgage or other debt incurred prior to February 15, 2020, and rent and utility payments. Loan proceeds may not be used to prepay debt. No collateral or personal guaranty is required to obtain Payment Protection Loans.  The maximum repayment term is ten years, with a maximum interest rate of 4%.

How much can I borrow?

Qualifying businesses and non-profit entities are eligible to receive loans up to 2.5 times their monthly payroll costs, measured over the prior twelve months, or $10 million, whichever is smaller. Payroll costs are defined broadly and includes salaries, certain employee benefits, state and local taxes and certain types of compensation to sole proprietors or independent contractors up to $100,000. Seasonal employees are treated differently.

What about loan forgiveness?

Paycheck Protection Loans are eligible for loan forgiveness equal to the amount expended by the borrower during an eight-week period after the origination date of the loan on payroll costs, interest payments on mortgages that commenced prior to February 15, 2020, rent incident to any lease that was in force prior to February 15, 2020, and utilities for which service began before February 15, 2020.

The entire amount of the loan is eligible for forgiveness if the loan proceeds are expended on eligible expenses, except that forgiven amounts will be reduced by the amount of the small business’s employee or salary/wage reductions, which is based on a formula outlined in the Act.

If I already laid off employees, can I rehire them?

Yes, you can. The loan forgiveness reduction may be offset and does not apply if, by June 30, 2020, the borrower of a Paycheck Protection Loan rehires the same number of employees (not necessarily the same employees) who were laid off between February 15, 2020 and 30 days after enactment of the Act.

With regard to salary/wage reductions, the forgiven loan amount will be reduced dollar-for-dollar by the amount of salary or wage reductions in excess of 25% in comparison to the employee’s most recent full quarter. With regard to employee salary/wage reductions, the amount of the loan that may be forgiven will be reduced in proportion to the number of employees that a company lays off. To calculate the proportionate reduction, businesses may compare their reduced workforce numbers to either their average full-time equivalent (“FTE”) employees from February 15, 2019 – June 30, 2019, or their average FTEs from January 1, 2020 – February 29, 2020.

However, the forgiven loan amount reduction applies only to salary/wage reductions for employees who did not receive, during any single pay period during 2019, wages or salary at an annualized rate of more than $100,000. Salary/wage reductions for employees who earn in excess of $100,000 per year will not impact loan forgiveness eligibility.

An eligible recipient who employees tipped employees (as described in section 3(m)(2)(A) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)(2)(A))) may receive forgiveness for additional wages paid to those employees.

When will I know if a portion of my loan was forgiven and is that income as cancellation of debt?

A lender must issue a decision on a loan application no later than 60 days after the date in which a lender receives an application for loan forgiveness under this section from an eligible recipient. Forgiven amounts may be excluded from gross income.  As such, this cancellation of debt is not income. If you have any questions or concerns, please contact Jarad Stiles at

Jarad Stiles is an attorney in Cooper Levenson’s tax practice and financial restructuring group. He concentrates his practice on business transactions, debt restructuring, bankruptcy, business succession planning, tax planning and controversy matters, asset protection, elder law, trusts, estates, and probate matters in New Jersey and New York.  Jarad may be reached at (856) 857-5594.

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Parenting Time During Sheltering in Place: Communication, Cooperation, and Common Sense

March 26, 2020
Alexandra K. Rigden, Esq. | Cynthia N. Grob, Esq.

The pandemic and its innumerable ripple effects have created many questions about exercising parenting time in light of the stringent restrictions on ‘unnecessary movement’ and social gatherings (not to mention a long list of other things) due to Governor Murphy’s Executive Order No. 107 which was issued on March 21, 2020, and can be found here. Just how far reaching is this Executive Order? If I am supposed to shelter in place, not leave my house, and socially distance, am I even allowed to exercise my parenting time? The short answer (for now, since everything changes day by day!) is, yes. 

Paragraph number 2 of the Executive Order provides that all New Jersey residents shall remain home unless they are engaging in a variety of activities including, at subparagraph number 4,visiting family or other individuals with whom the resident has a close personal relationship such as those for whom the individual is a caretaker.  So, despite the fact that we are all supposed to remain in our homes, this Executive Order carves out an exception which, on its face, would apply to having parenting time with children and leaving your house to effectuate parenting time. Transportation, i.e. being on the roads driving to and from parenting time exchanges, is a simple issue and not precluded based on the text of the Executive Order.  

However, there are many more potential issues in light of the pandemic that cannot be addressed by the Executive Order and come down to the “3 Cs”—communication, cooperation, and common sense, which can sadly be missing between co-parents. But now, they are more important than ever. Hopefully, parties abiding by a parenting time Order are able to communicate with each other and decide whether their parenting time schedule needs to be modified, at least temporarily, in light of the pandemic. For example, maybe it would be in all parties’ interests health-wise to keep the amount of parenting time the same, for example, continue to maintain an existing parenting schedule, but with fewer exchanges. So, instead of a schedule with exchanges a few times a week with a 50/50 schedule, for examples, parties could transition to a one-week-on/one-week-off or even two-week-on/two-week-off schedule so that if there are any issues with the virus, the parent or child has less of a chance of contaminating two homes with the virus. Longer stretches may allow for symptoms to arise so that the parties can determine the best course of action if they do. 

Another issue coming up for clients is what to do when one parent works from home while another parent is still going outside of the home to work in a hospital, for example, or choosing to go into work or out for social reasons. The parent working from home may be understandably apprehensive about exposing the child to a parent who has not been able to, or has chosen not to, shelter in place. While ideally a client would not violate a Court Order for parenting time, clients have to use and be guided by their best judgment in these unprecedented times and balance following a certain parenting time schedule with promoting their children’s best interests and the public’s interest in social distancing and keeping others, especially high risk individuals, safe. Achieving this balance is do-able and far easier if the parties can openly communicate with each other and decide the best course of action when either or both parents are still out in the community. 

During a pandemic (and hopefully this will be the last one in our lifetimes!) strict adherence to a parenting time schedule is likely going to have to fall by the wayside in favor of more global concerns; parenting time schedules may need to be looked at on a day-to-day basis.  For example, a parent who is an every other weekend parent may now need to see the children more, even if just to relieve the ex-spouse who is now home every day with the children and  homeschooling them. Likewise, if a parent is sheltering in place with a child and practicing social distancing, that parent should be flexible in providing the other parent alternative access to parenting time by video or phone conference, and possibly makeup parenting time when this crisis subsides.

Hopefully we can all return to some semblance of normal, or new normal, sooner rather than later. Until then, remember that communication, cooperation, and common sense are key to co-parenting always, but especially during this crisis.  Stay safe and healthy!

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NJSIAA Answers Questions About COVID-19 and Spring Sports

March 26, 2020
Kasi M. Gifford, Esq.

To Our School Board Community:

We have been trying to anticipate and quickly respond to your questions during this time, given the unprecedented challenges presented to our Boards with COVID-19 and the school closure to students.  We have been providing guidance on how best to meet the needs of your students, staff, and community. One of the most unfortunate side effects of the COVID-19 outbreak has been the postponement of the Spring Athletic Season for student athletes. On March 25, 2020, NJSIAA posted a new set of FAQs to their website. The notable highlights include the following:

  • All NJSIAA staff are working remotely.
  • All NJSIAA meetings are taking place virtually.
  • No NJSIAA member school, school district, or coach may conduct practices, scrimmages, or games (which includes all official interscholastic contests). 
  • This is a mandatory period of no in-person contact between coaches and their student-athletes. 
  • During the governor’s statewide shutdown of all schools, no practices, scrimmages, or games may be held.
  • This includes any event organized by a parent, captain, or other student-athlete.
  • These restrictions relate to all sports, not just spring sports.
  • Coaches may interact virtually with their student-athletes, including providing workouts or training materials.
  • However, such virtual contact – as well as any activity that may result from it – must strictly conform to all directives in effect related to the coronavirus outbreak and social distancing guidelines.
  • In addition, any virtual contact and resultant activities must be entirely in keeping with all NJSIAA in- and off-season protocols.
  • NJSIAA will determine the length of the regular season once a school opening date has been announced.
  • All tournaments are subject to change at this point. 
  • NJSIAA is evaluating options for the annual business meeting.
  • The annual scholarship lunch-in has been cancelled. NJSIAA will still be taking nominations and will send each winner a certificate and a gift. Monetary scholarships will not be awarded this year.

Our e-mails about recent developments are not intended to substitute for our legal advice to our clients based on your specific needs or requests.  In addition, our guidance is subject to, and can be superseded by new laws, rules, regulations, or orders.  Moreover, some directives from the Federal and State authorities can appear, and can be, contradictory or in conflict, so please contact us for assistance.

As always, please contact us with any questions. We will continue to do our best to keep you updated in the coming days and weeks.

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COVID-19 Closures Added Allowable Use of New Jersey’s Earned Sick Leave Law

March 26, 2020
Kasi M. Gifford, Esq. 

To Our School Board Community:

We have been trying to anticipate and quickly respond to your questions during this time, given the unprecedented challenges presented to our Boards with COVID-19 and the school closure to students.  We have been providing guidance on how best to meet the needs of your students, staff, and community. On March 25, 2020, Governor Murphy signed Senate Bill No. 2304, which amends the New Jersey Earned Sick Leave law to include provisions allowing employees to use their earned sick leave during a public health emergency. Specifically, the Bill added additional situations in which earned leave can be used and added that earned sick leave may specifically be used during any:

  1. time during which the employee is not able to work because of:

(a) a closure of the employee’s workplace, or the school or place of care of a child of the employee by order of a public official or because of a state of emergency declared by the Governor, due to an epidemic or other public health emergency 

(b) the declaration of a state of emergency by the Governor, or the issuance by a health care provider or the Commissioner of Health or other public health authority of a determination that the presence in the community of the employee, or a member of the employee’s family in need of care by the employee, would  jeopardize the health of others;

 (c) during a state of emergency declared by the Governor, or upon the recommendation, direction, or order of a healthcare 

official, the employee undergoes isolation or quarantine, or cares for a family member in quarantine, as a result of suspected exposure to a communicable disease and a finding by the provider or authority that the presence in the community of the employee or family member would jeopardize the health of others; or…

We wanted to make you aware of this addition as it applies to anyone who is entitled to earned sick leave. Our e-mails about recent developments are not intended to substitute for our legal advice to our clients based on your specific needs or requests.  In addition, our guidance is subject to, and can be superseded by new laws, rules, regulations, or orders.  Moreover, some directives from the Federal and State authorities can appear, and can be, contradictory or in conflict, so please contact us for assistance.

As always, please contact us with any questions. We will continue to do our best to keep you updated in the coming days and weeks. 

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Asset Protection: As Important as Washing Your Hands During Turbulent Times

March 26, 2020
Eric A. Browndorf, Esq. | Michael Salad, Esq.

Most of us work a lifetime to create a safety net for our families and retirement. This must be protected at all costs. It must survive irrespective of any virus or other unforeseen calamity.  

While no perfect mousetrap will ever exist, there are asset protection tools that dramatically reduce risk, taxes and conflict amongst future generations. Historically, more people will suffer a shark bite or die from a virus than spend a few hours creating an asset protection plan for their family. 

Many wait until creditors are at the door and then try to hide assets. Perhaps the most egregious and ineffective action is to transfer assets from a spouse with financial problems to the spouse without financial problems.

The primary asset for most of us is our home. Regardless of the amount of equity, we all want to prevent our families from being forced out of our homes. Ironically, one of the most effective asset protection tools is explicitly designed to protect the family home. 

Specifically, if spouses hold title to their home as tenants by the entireties, the home is protected from unrelated debts of one spouse. Simply stated, even if one spouse accumulated hundreds of thousands of dollars in unsecured debt, the family can retain the home and creditors cannot force its sale. The spouse without debts enjoys a right of survivorship which entitles him or her to maintain title to the home free and clear of the deceased spouse’s debts upon the death of a spouse with debts. 

Again, the natural and common reaction of a spouse with debts is to transfer assets to the spouse without debts. Frequently, this includes the home. Do not transfer your home to your spouse. This destroys the tenancy by the entirety. The United States Supreme Court, in US v. Craft, held that if one spouse transfers his or her interests in a home to the other spouse, the tenancy by the entireties cannot be recreated by transferring the property back to the other spouse.

Bottom line, spend a few hours with an asset protection specialist at least every few years to insure that your family is protected from the next calamity.

The attorneys at Cooper Levenson, PA can assist you in asset protection planning and answer any other questions you may have related to your business. Please reach out anytime to Eric A. Browndorf, Esq. at

To learn more about the Bankruptcy & Financial Restructuring group click here.

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March 26, 2020
Eric A. Browndorf, Esq. | Rebecca C. Lafferty, Esq.

FINALLY, some positive news for Small Business. Effective last month, a financially struggling small business does not have to choose between an expensive Chapter 11 bankruptcy or a complete liquidation under Chapter 7. Congress has tailored a quick, streamlined restructuring process for struggling small businesses with debts of less than $2.7 million.

While Congress is infusing the economy with cash in the short term, it is unlikely to be much more than the proverbial band aid. The Small Business Reorganization Act of 2019 (the “Act”) will allow many struggling small businesses to survive and flourish when the Covid-19 virus is defeated and pent up demand is released. Simply put, the Act provides a mechanism for small businesses to obtain Chapter 11 bankruptcy relief but in a more expedited, cost-efficient and debtor-friendly manner. 

What are the benefits of the Act to the small business owner?
It removes some of the procedural burdens and costs that are usually associated with a Chapter 11 bankruptcy including but not limited to: (1) shorter deadlines in order to expedite proceedings; (2) to permit debtor’s administrative expenses to be stretched out over the term of the plan and (3) the removal of the prohibition on modifying residential mortgages. The list of changes is not exhaustive of the changes

What debts are dischargeable under the Act?
A discharge will not granted until the debtor completes all payments due within the first three years of the plan (or a longer period not to exceed five years as the court may fix). The discharge applies to all debts addressed by the plan except for: (1) debts on which the last payment is due after the first three years of the plan (or such other time fixed by the court not beyond five years); or (2) debts otherwise non-dischargeable.

 How do I know if my small business qualifies to file for relief under the Act?
The Act only applies to small business owners with secured and unsecured debts of less than $2.7 million, subject to certain other qualifications. The attorneys at Cooper Levenson, PA can assist you in determining if your business otherwise qualifies to file under the Act and answer any other questions you may have related to your business. Please reach out anytime to Eric A. Browndorf, Esq. at

To learn more about the Bankruptcy & Financial Restructuring group click here.

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Remote Notarization Due to State of Emergency (as of 3/25/20)

March 26, 2020
Jennifer B. Barr, Esq. 

New Jersey Governor Phil Murphy issued Executive Orders 107and 108, effective on March 21, 2020, closing non-essential businesses in New Jersey to help contain the spread of the novel coronavirus or COVID-19.  Many people are able to continue to work while isolating at home through the use of remote computer access, email, as well as telephonic and video conferencing. However, some sectors of the economy rely on notaries to execute business.  Real estate closings and estate planning documents, to name a few, require notarization.  

Before the national state of emergency, many states passed legislation to allow remote notarization.  Other states, as part of emergency measures, have temporarily authorized remote notarization.  

New Jersey has pending legislation awaiting the Governor’s signature that will allow remote notarization.  On March 18, 2020, the state legislature passed A3864/S2299. However, this bill, if signed by the Governor, will not take effect for 90 days.  In addition, the bill does not apply to wills or to family law matters (divorce, adoption, etc.).  

In 2018 another bill was proposed in New Jersey authorizing remote notarization. This bill was not passed in either house but rather was referred to committee.  

Federal legislation has been introduced recently that would allow any existing notary public to remotely notarize documents that affect interstate commerce.    

Emergency measures are being passed every day across the country.  As of March 25, 2020, the following is a list of states that have temporarily allowed remote notarization, and those with pending legislation.  Also included is a list of states that have already authorized remote notarization.

New YorkExecutive Order No. 202.7 

New HampshireEmergency Order #11 

ConnecticutExecutive Order 7K  

Pennsylvania – (limited to administering oaths remotely) from PA Dep’t of State  only for court proceedings (court reporters are notaries)

Iowatemporary in advance of the effective date of legislation permitting remote notarization 

Wisconsin – order of Department of Financial Institutions 


Federal – in response to COVID19, on March 19, 2020,  U.S. Sen. Mark R. Warner (D-VA) and Kevin Cramer (R-ND) introduced S. 3533, the “Securing and Enabling Commerce Using Remote and Electronic (SECURE) Notarization Act of 2020.” This bipartisan legislation permits immediate nationwide use of Remote Online Notarizations (RONs), a type of electronic notarization where the notary and signer are in different physical locations. Here is a copy of the bill.

New Jerseyemergency legislation passed, pending Governor’s signature

Emergency legislation proposed A3864/S2299 passed in both houses on March 18, 2020.   

Previously proposed legislation S-3147/A4860  introduced in 2018

Pennsylvania – proposed legislation Senate Bill 0595 introduced April 17, 2017

Massachusetts – proposed legislation SD 2882


Florida – as of 1/1/2020
Also, the Florida Supreme Court authorized remote notaries to administer oaths during the state of emergency: 

According to the website NSA Blueprint, the following states already permit remote notarization:

Maryland (Senate Bill 678 signed by Governor Hogan in May 2019, effective October 1, 2020)
Nevada (for out of state documents, effective as if signed in NV), signed on June 6, 2017
North Dakota
South Dakota

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Assessing Damages for Businesses During COVID-19

March 25, 2020
Young Yoon, Esq.Carmelo T. Torraca, Esq.

With state shutdowns and indefinite ban on most gatherings taking place,  including weddings and funerals, the course of this COVID-19 crisis continues to evolve as life affected by it plunges into a deeper state of paralysis.  Business is no exception, as the degree and duration of disruptions to business activity – from retail closing to event cancellations – seem indefinite, for now.  In light of COVID-19, businesses are assessing damage, in addition to available remedies, as a result of performance becoming impossible or impracticable.

“Force majeure,” or more commonly known as “acts of God,” means an event or effect that can be neither anticipated nor controlled — which now has taken on a whole new level of significance as the unforeseeable has become current reality.  It typically refers to natural disasters or other natural events, such as floods, hurricanes, tornadoes, etc., beyond the power of either party to avoid.  The doctrine of force majeure can excuse a contracting party’s performance when an unforeseen event, happening when it did, was one of such severity and unlikelihood that it could not have been anticipated or guarded against.  It protects parties from being held responsible for contractual duties, or put differently, the parties share the risk.   Although the clause is made exciting by the escape it offers, its application in the context of disease and/or epidemics, such as COVID-19 may require further guidance.

If the fear is the measure of this pandemic, it would be right to suggest that the COVID-19 outbreak may fit the definition above, where it was caused by neither party, which the parties could not reasonably have anticipated or controlled, or overcome.   However, those businesses who are naively inclined to make decisions under the belief that the COVID-19 outbreak satisfies the contractual requirements, and therefore, should provide a contractual excuse for non-performance, may belatedly realize that their force majeure may not provide liability immunity.

All depend on the wording of the contract.  For instance, force majeure clauses are narrowly construed in New Jersey and ordinarily, excuses performance only if the list of specific events are set forth in the contract. See Hess Corp. v. ENI Petroleum US, LLC, 435 N.J. Super. 39, 47 (App. Div. 2014).  Some force majeure clauses are general in nature and do not attempt to define the relevant supervening events; others set out an exclusive list of events; or, some strike the middle by setting forth the general requirements for the provision to trigger together with a non-exclusive list of events.   For example, an inability to provide services due to travel restrictions or the cancellation of planned public events due to quarantine may amount to force majeure if triggered by executive order or government directive.

However, despite the current state of danger, force majeure cannot automatically be established.  Instead, courts will not look elsewhere than the specific language of the parties’ agreements to determine whether COVID-19 related disruptions can excuse performance.  Courts place the burden on the party seeking to rely upon the force majeure clause to demonstrate the existence of force majeure, and that party must demonstrate that performance was physically or legally impossible, not merely more difficult or unprofitable.  Furthermore, contracts include a duty to mitigate damages that place additional burdens on the affected parties to take measures to mitigate the potential effects of such events whenever reasonable.

However, in the absence of a force majeure clause, performance can still be excused by impossibility or impracticability when it can only be done at an excessive and unreasonable cost, or when a party cannot perform due to circumstances beyond that party’s control.  Also, the legal doctrine of frustration of purpose excuses nonperformance in certain situations where the objectives of the contract have been utterly defeated by circumstances arising after the formation of the agreement.  Additionally, although these new realities of the pandemic are left to metastasize, in the face of the multiple directives being issued for purposes of public health, businesses could also face profound challenges to comply with the laws, orders, rules, regulations and requirements of all applicable federal, state, county, municipal and other agencies or authorities — where required.  Out of an abundance of caution, it may be prudent for a business to coordinate with the local authorities and concerned authorities in anticipation of the effects of the outbreak.

Accordingly, businesses should review their contracts or have their contracts reviewed by counsel to determine whether their particular impediments are sufficient to trigger a force majeure.  Please contact either Carmelo T. Torraca or Young Yoon at Cooper Levenson to discuss your business claims and related questions.

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Pending COVID-19 Legislation and Virtual Learning Requirements

by: Kasi M. Gifford

To Our School Board Community:

We have been trying to anticipate and quickly respond to your questions during this time, given the unprecedented challenges presented to our Boards with COVID-19 and the school closure to students.  We have been providing guidance on how best to meet the needs of your students, staff, and community. We have received questions concerning remote instruction of students generally, as well as the legality of providing related services to special education students via remote instruction. While no law on the subject has been signed into legislation thus far, we anticipate legislation to be signed into law by the Governor sometime in the near future. We anticipate the bill will provide in part:

  • If a program of virtual or remote instruction is implemented for the general education students the same educational opportunities shall be provided to the special education students, to the extent appropriate  and practicable.
  • Speech language services and counseling services may be delivered to special education students through the use of electronic communication or a virtual or online platform, as appropriate.
  • Anticipated requiring the Commissioner to create further guidance on all virtual home instruction.

As of 5:00 p.m. on March 24, 2020, THIS BILL HAS NOT BEEN SIGNED. We will alert you when this legislation is signed!

Our e-mails about recent developments are not intended to substitute for our legal advice to our clients based on your specific needs or requests.  In addition, our guidance is subject to, and can be superseded by new laws, rules, regulations, or orders.  Moreover, some directives from the Federal and State authorities can appear, and can be, contradictory or in conflict, so please contact us for assistance.

As always, please contact us with any questions. We will continue to do our best to keep you updated in the coming days and weeks.

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