Debtor fails to comply with the terms of his or her contractual obligations.  Creditor then sues Debtor for breach of contract and ultimately prevails and obtains a judgment against Debtor.  Creditor then seeks post-judgment discovery from Debtor in a search of Debtor’s assets in order to satisfy the judgment against him or her.  In response, Debtor invokes the constitutional privilege against self-incrimination under federal and state law and Debtor refuses to provide the requested post-judgment discovery to Creditor.  Now what?

In New York, a judgment creditor is generally entitled to broad discovery to assist in enforcing the judgment, especially since the evidence is typically within the possession of the judgment debtor.  See  Petrocelli v. Petrocelli Elec. Co., Inc., 121 A.D.3d. 596 (1st Dep’t. 2014).  In addition, N.Y. C.P.L.R. § 5223 compels disclosure of all matter relevant to the satisfaction of a judgment and sets forth a generous standard which allows the judgment creditor a broad range of inquiry through either the judgment debtor or any third person with knowledge of the debtor’s property.  See  ICD Group, Inc. v. Israel Foreign Trade Co. (USA), 224 A.D.2d 293, 294 (1st Dep’t. 1996).

The refusal of the Debtor to provide the requested post-judgment discovery will likely result in the Creditor moving to hold Debtor in contempt.  The law is clear that a party may not be held in contempt based upon a good faith invocation of the privilege against self-incrimination, which can be asserted in any proceeding, civil or criminal, and which protects against disclosures which the debtor reasonably believes could be used in a criminal prosecution or could lead to other evidence that might be so used.  See Carver Fed. Sav. Bank v. Shaker Gardens, Inc., 167 A.D.3d 1337, 1340 (3d Dep’t. 2018) (internal cites omitted).  However, the law is also clear that the witness asserting the privilege must have reasonable cause to apprehend danger from a direct answer and the witness is not exonerated from answering merely because the witness declares that in so doing he or she would incriminate himself or herself.  Id.

Among the documents usually sought from a judgment debtor by a judgment creditor in the search of assets to satisfy a judgment are tax returns.  Generally, the disclosure of tax returns is disfavored due to their confidential and private nature.  See Pinnacle Sports Media & Entertainment, LLC v. Greene, 154 A.D.3d 601 (1st Dep’t. 2017).  However, once a judgment debtor invokes the privilege against self-incrimination, the issue becomes whether any recognized exception to that privilege allows production of the judgment debtor’s tax returns.  The answer is yes.  It has been held in New York that a judgment debtor’s income tax returns, W-2 wage statements and 1099 forms all fall within what is known as the “required records exception” to the privilege against self-incrimination.  Shaker Gardens, Inc., supra, 167 A.D.3d at 1341.

Under the “required records exception”, the Fifth Amendment privilege against self-incrimination cannot be asserted with respect to records which are required, by law, to be kept and which are subject to governmental regulation and inspection.  Id. (internal cites omitted).  In order to constitute “required records” the documents must satisfy a three-part test:  (1) the requirement that they be kept must be essentially regulatory, (2) the records must be of a kind which the regulated party has customarily kept, and (3) the records themselves must have assumed ‘public aspects’ which render them analogous to public documents.  Id.  Tax returns, W-2 wage statements and 1099 forms have all been held to fall under this rubric.  Id.  That means that despite Debtor’s invocation of the privilege against self-incrimination, Debtor is required to produce his or her tax returns, W-2 wage statements and 1099 forms in response to post-judgment disclosure requests made by Creditor.  The Debtor’s failure to produce the requested tax documents can lead to a judicial finding of civil contempt against the Debtor.

What about the rest of the documents sought by Creditor to assist in the search of assets to satisfy the judgment?  Assuming the information sought by Creditor is customarily asked at judgment debtor examinations and there is no indication that the purpose of the examination is anything other than an ordinary search of Debtor’s assets to satisfy the judgment against him or her, then Debtor will be required to establish that any fear of criminal prosecution based on the disclosure of the requested information is anything other than “imaginary” or based on something more than a “remote and speculative possibility.”  See Shaker Gardens, Inc. , 167 A.D.3d at 1342 (internal cites omitted).  Where the danger of incrimination is not readily apparent, the witness is required to establish a factual predicate for the invocation of the privilege against self-incrimination.  Id.  That means that Debtor cannot make a broad, undifferentiated assertion of the privilege as to each and every question asked at a judgment debtor examination or to all documents requested by Creditor.  Instead, in order to effectively invoke the protections of the privilege against self-incrimination Debtor must make a particularized objection to each discovery request.  Id.  That will likely require the trial court to conduct an in camera inquiry to assess the validity of the assertion of the privilege upon particularized objections.  Id.  As to documents, Debtor is required to establish a factual predicate and will usually require the submission of the documents at issue for an in camera inspection and/or compiling a privilege log in order to aid the Court in its assessment of a privilege claim and enable it to undertake in camera review.  Id. (internal cites omitted).

In sum, Debtor cannot invoke the privilege against self-incrimination as a vehicle to prevent disclosure of his or her tax returns, W-2 wage statements and 1099 forms to Creditor.  The failure to produce the tax documents can lead to a finding of civil contempt.  As to other requested post-judgment documents and questions asked during judgment debtor examinations, in order to invoke the privilege against self-incrimination, Debtor must show that the hazards of incrimination are substantial and real and not merely trifling or imaginary and that usually requires particularized objections to each discovery request and a determination by the Court of the validity of those particularized objections under the circumstances.

If you have any questions regarding the enforcement of contract rights, the satisfaction of judgments, or the interplay of enforcement of judgments with the privilege of self-incrimination, please feel free to contact Scott Fisher at (516) 746-8000, Ext. 248 or at




Many of our clients have asked whether they can commence a commercial foreclosure in New York State at this time.

On March 7, 2020, Governor Cuomo issued Executive Order (“EO”) Number 202, declaring a State disaster emergency for the State of New York.  On or about May 7, 2020, Governor Cuomo issued EO Number 202.28, which, among other things, decreed as follows:

There shall be no initiation of a proceeding or enforcement of either an eviction of any residential or commercial tenant, for nonpayment of rent or a foreclosure of any residential or commercial mortgage, for nonpayment of such mortgage, owned or rented by someone that is eligible for unemployment insurance or benefits under state of federal law or otherwise facing financial hardship due to the COVID-19 pandemic for a period of sixty days beginning on June 20, 2020.

There is no definition of what constitutes a “residential” or “commercial” mortgage. (It should be noted that legislation in New York enacted on June 17, 2020 specified that it applied only to individual  owner occupied 1-4 family dwellings)  To further complicate matters, EO Number 202.28 mixes both evictions and foreclosures, and uses the word “owned” with respect to the mortgage which is being foreclosed.  It would appear that despite this usage, EO Number 202.28 is not referring to the borrower/mortgagor, but rather, the current owner of the property being foreclosed, although this is not explicit.  It is also not clear whether the term “owner” includes a legal entity, such as a corporation or limited liability company, and whether the restriction applies if the legal entity is not facing financial hardship, but the owner(s) of the entity are facing such hardships.

On or about June 23, 2020, the Chief Administrative Judge of the State of New York issued Administrative Order (“AO”) AO/131/20, which, among other things, decreed as follows:

[E]ffective June 24, 2020, commencement papers in foreclosure proceedings involving residential or commercial property shall require the inclusion of (1) an attorney affirmation in the form attached as Exh. 1 and (2) a Notice to Respondent, in English and Spanish, in the form attached as Exhs. 2 and 3.

Again, there is no definition of what constitutes a “residential” or “commercial” property. AO/131/20 also decreed that, with limited exceptions:

[F]oreclosure matters commenced on or before March 16, 2020 shall continue to be suspended until further order; foreclosure proceedings filed after March 16, 2020 shall, upon the filing of a complaint (if no answer is filed thereafter) or the filing of an answer, be suspended until further order . . .

On or about July 7, 2020, the Chief Administrative Judge of the State of New York issued AO/143/20, which modified AO/131/20 as follows:

[F]oreclosure proceedings shall no longer require an accompanying attorney affirmation . . . as previously required pursuant to . . . AO/131/20 . . . and AO/131/20 [is] modified to this extent only, and shall otherwise continue in full force and effect . . .

Moreover, the prohibition contained in EO Number 202.28, discussed above, on initiating a proceeding or enforcing a foreclosure, under the specified circumstances, remains in place for a period of sixty (60) days from June 20, 2020.  As of now, that prohibition has not been further extended pursuant to Executive Order.

Due to the use of words and phrases which are not defined in EO Number 202.28, it is not entirely clear how to comply with the order when commencing a foreclosure, so as to avoid any potential sanction by the court.  While we cannot predict how a court will rule, we believe that a commercial foreclosure action may be commenced when the mortgaged property is owned by a legal entity, and the lender has not been informed that the owner of the mortgaged property, or a guarantor which owns such entity, is suffering financial hardship due to the pandemic.  Where the lender has been informed of a financial hardship (even if it is not substantiated) or where the owner is an individual, the safest course of action is to wait until after August 20, 2020 to file the foreclosure action (if the forgoing orders are not further extended).

It should be noted that there are different rules for residential mortgages for New York regulated banks, and for federally backed mortgage loans, including loans owned or insured by Fannie Mae, Freddie Mac, or guaranteed by FHA, Va, or USDA.


Long Island business owners and residents are slowly getting used to a new way of life as restrictions on social distancing are relaxed.  On June 6, 2020, Governor Cuomo issued Executive Order 202.38 permitting outdoor dining at restaurants subject to New York State Liquor Authority (“SLA”) regulations and Department of Health (“DOH”) guidance.  The next day, the Governor explicitly limited permission for outdoor dining to those regions that had reached Phase 2 of reopening.  On June 10, 2020, Long Island officially reached Phase 2 and local restaurant owners anxiously began to offer outdoor dining both on privately owned property and adjoining public sidewalks.  Most local municipalities have streamlined the permitting process for outdoor dining areas in an effort to assist business owners and the local economy in the wake of Covid-19.  In fact some municipalities have chosen to close public streets during certain evening hours to allow restaurants and bars to use those streets for outdoor dining.  Nevertheless, restaurant owners must be diligent about following rules and regulations set forth by both local and State officials with respect to controls on outdoor dining and associated public gatherings.

Rules and regulations concerning outdoor dining currently fall into two categories with the first being those enacted as a result of Covid-19 and the second being those in effect prior to Covd-19.  Regulations on outdoor dining specific to Covid-19 are geared towards social distancing and related public health concerns.  Outdoor space can include an awning or roof but there must be two open sides for airflow.  The tables in an outdoor dining space must be a minimum of six feet apart.  If it is impossible for the tables to be six feet apart, barriers of at least five feet in height must be installed between the tables and those barriers cannot interfere with access to an emergency exit.  Proper face coverings must be worn by restaurant employees at all times and patrons must also wear face coverings which can be removed while seated at an outdoor table.  Additional DOH guidance can be found at outdoor dining guidelines NY.

Equally important to those rules and regulations related to Covid-19 are municipal regulations for outdoor dining that typically relate to zoning.  Restaurant owners must be cognizant of their total permitted occupancy pursuant to an existing certificate of occupancy or certificate of completion.  Municipalities will not allow the number of occupants in an outdoor space to exceed the legally permitted maximum indoor occupancy.  This is true even if the proposed outdoor space can accommodate a larger number of occupants while abiding to social distancing requirements.  The reason being that municipal zoning codes typically require off-street parking spaces based on the number of occupants in a particular building and/or outdoor space.  While a restaurant may have a large outdoor dining area, which may even include a portion of a private parking lot, available parking for patrons is always is a concern.  The need for available parking at restaurants will only become more prevalent as Long Island reenters Phase 3 as of June 24, 2020 and limited indoor dining, in addition to outdoor dining, is permitted at restaurants.  Local code enforcement officers will likely be visiting restaurants to assure adherence to occupancy limitations and other safety issues.  To that end, pedestrians must be able to utilize public sidewalks and easily access businesses adjoining restaurants.

Some local villages and towns are allowing restaurants to use public property for outdoor dining.  Restaurant owners must review local requirements prior to using public space adjoining their private property.  Any municipality allowing use of public property for outdoor dining is requiring an application along with adequate proof of liability insurance and where necessary written consent from adjoining property owners.  The State Liquor Authority (“SLA”) is allowing service of alcohol in outdoor dining areas subject to certain restrictions which include service only to individuals sitting at a bar or table.  People looking forward to participating in bar games, including darts and pool, will have to continue waiting until social distancing restrictions are further reduced.  Moreover, restaurant owners must provide the SLA with an updated diagram depicting the outdoor seating within five business days of the expansion.  Failure to abide with SLA regulations can result in monetary fines and license suspension.  Additional information concerning SLA guidelines for outdoor dining can be found at  SLA Guidance.


On June 24, 2020, Long Island joined the rest of New York State, with the exception of New York City, in entering Phase 3 of re-opening for business. Those non-essential businesses permitted to re-open and resume in-person operations under Phase 3 must follow the procedures established and comply with the guidelines adopted by New York State to limit the spread of COVID-19.

According to the phased re-opening of New York State, once certain health metrics are met certain industries will be permitted to resume in-person operations, provided those businesses comply with specific guidelines established by New York State, as well as applicable federal and local laws, regulations, and standards. The details for Phases 1, 2, 3 and 4, together with the industry-specific guidelines for re-opening can be found at NY Government Re-Opening. The primary industries eligible to re-open for in-person operations under Phase 3 are restaurants/food services and personal care businesses. The specific guidelines for Phase 3 non-essential businesses to follow upon re-opening can be found at phase 3 industries re-opening. In conjunction with the New York State Department of Health, New York State has established industry-specific public health and safety guidelines which must be adhered to by each non-essential business in order to enter each phase of re-opening. In addition, each business must complete a business safety plan and submit an affirmation online which confirms that the business has reviewed and understands the industry-specific guidelines. The affirmation covering Phase 3 businesses can be found in the link cited above for Phase 3 industries.

Under Phase 3, the Food Services Guidelines for Employers and Employees, which can be found at Food Services Summary Guidelines apply to all restaurants and food services establishments, including food trucks and other food concessions. In Phase 3, such food services establishments may open indoor spaces with seating for customers, provided they comply with the Food Services Guidelines, which address both mandatory requirements and recommended best practices. Those guidelines cover requirements for physical distancing, personal protective equipment, hygiene, cleaning, and disinfection, communication, and screening. In addition, all operators of food service sites are advised to stay up to date with any changes to state and federal requirements related to such establishments and to incorporate those changes into their operations. The guidelines are also not intended to replace any existing applicable local, state, and federal laws, regulations, and standards.

Under Phase 3, personal care services include non-hair related personal care businesses and services, including tattoo and piercing facilities, appearance enhancement practitioners, massage therapy, spas, cosmetology, nail specialty, UV and non-UV tanning, or waxing. The Personal Care Services Guidelines for Employers and Employees can be found at Personal Care Re-Opening . Those guidelines do not apply to any hair-related personal care services (e.g., haircutting, coloring, or styling), which are addressed in their own Hair Salon and Barbershop Guidelines for Employers and Employees at Hair Salons and Barbershops Re-Opening . Included in the guidelines for personal care services are mandatory and recommended best practices covering physical distancing, workplace activity, personal protective equipment, hygiene, cleaning, and disinfection, communication, and screening. As with all other businesses, all personal care businesses are advised to stay up to date with any changes to state and federal requirements related to such establishments and to incorporate those changes into their operations. The guidelines are also not intended to replace any existing applicable local, state, and federal laws, regulations, and standards.

As each phase of re-opening expands the resumption of in-person business operations, it is imperative that each industry-specific public health and safety guidelines adopted by New York State are adhered to by businesses for mandatory and recommended best practices for ensuring both the ability to sustain and maximize the widespread resumption of in-person business activities while minimizing the threat and spread of COVID-19.

If you have any questions regarding the re-opening process and guidelines for your specific business or industry, please feel free to contact any of our attorneys, including our Coronavirus Response Team, at 516-746-8000 or at Jaspan Schlesinger COVID-19 Resource Center.

          On June 3, 2020, the United States Patent and Trademark Office (“PTO”) launched a COVID-19 Response Resource Center (“Resource Center”) to provide a central hub for information about the PTO’s efforts and other helpful information for stakeholders and other interested parties in response to the COVID-19 pandemic.  The Resource Center is intended to improve access to PTO initiatives, programs, and other helpful intellectual property (“IP”)-related information regarding the COVID-19 outbreak.

          In launching the Resource Center, Andrei Iancu, Under Secretary of Commerce for Intellectual Property and Director of the PTO, emphasized that, “The USPTO stands shoulder-to-shoulder with inventors and entrepreneurs and is working on a variety of measures to incentivize, protect, and disseminate COVID-19 related innovation. The COVID-19 Response Resource Center will provide inventors, entrepreneurs, and IP practitioners with a centralized destination to access information and assistance needed to meet the challenges of these times.”

          The Resource Center will allow users to easily view information on a number of critical initiatives to aid the public throughout the ongoing COVID-19 crisis.  Among the resources available are the following:

* patent and licensing resources for inventors, entrepreneurs, or businesses interested in contributing to critical medical technologies and include   the Patent Pro Bono Program and “Patents 4 Partnerships” IP marketplace platform for licensing opportunities;

* innovation incentives, including the launch of the COVID-19 Prioritized Examination Pilot Program for accelerating the evaluation of patent applications directed to COVID-19 related technologies, including the diagnosis, prevention or treatment of COVID-19 and the PTO has also launched a program which encourages voluntary early publication of patent applications;

* initiatives to educate and prevent trademark counterfeiting and consumer fraud in the marketplace related to COVID-19; and

* international updates, with the World Intellectual Property Organization compiling Information from foreign IP offices on measures taken to assist stakeholders during the global health crisis.

          As to trademark counterfeiting and consumer fraud, the PTO recognizes that the COVID-19 pandemic has led to a surge in fraudulent activity, including the advertising and sale of counterfeit treatments and products. The PTO has identified several resources available to help healthcare workers and the general public identify and report instances of fraud and counterfeiting related to the COVID-19 outbreak. Those resources include: i) the United States Food and Drug Administration’s (“FDA”) Fraudulent Coronavirus Disease 2019 (COVID-19) Products, which can be found at; the United States Department of Homeland Security’s (“DHS”) COVID-19 related fraud initiatives, which can be found at; and the Federal Trade Commission’s (“FTC”) Coronavirus Advice for Consumers, which can be found at

          With respect to trademark counterfeiting, the PTO has the following “four P’s” advise for consumers and healthcare workers on how to spot a counterfeit product or service:

* Place: Are you buying from a trusted source, either in-person, on-line, or at a physical store?

* Price: If the price sounds too good to be true, it probably is.

* Packaging: Does the packaging look “off,” e.g., graphics and printing blurred, colors imbalanced, labels not on straight, misspellings?

* Product: Does the product and labeling have a quality look? Does it look comparable to what you’ve purchased before? Is this product known to have been counterfeited?

          If you have encountered fraud or counterfeiting related to the COVID-19 pandemic, the PTO is recommending that fraudulent schemes and suspected counterfeit products be reported to DHS at COVID19FRAUD@DHS.GOV; scams or other consumer problems can be reported to the FTC at; and unlawful sales of internet medical products related to the COVID-19 pandemic can be reported to the FDA at

          According to the PTO, the Resource Center will be updated on a continuing basis to incorporate new information, programs, and initiatives.

          If you have any questions regarding the Resource Center initiatives or have been the victim of trademark counterfeiting or fraud related to the COVID-19 pandemic, or need assistance with the filing of any trademark documents or fees, contact the Chair of our Trademark Practice Group, Scott Fisher, at (516) 393-8248 or

          In recognition that the COVID-19 pandemic has imposed significant hardships on trademark applicants and registrants, pursuant to the authority provided to it by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the United States Patent and Trademark Office (“PTO” or “Office”) has waived certain trademark-related fees and has twice extended the time to file certain trademark-related documents or fees that would otherwise have been due on or after March 27, 2020.  That relief is set to expire on May 31, 2020.    

          As businesses begin to reopen and to resume operations, the PTO understands that some stakeholders, particularly small businesses and individuals, will continue to require relief caused by COVID-19 related hardships.  In recognition of that, the PTO has issued the following guidelines to assist parties in need of relief after May 31, 2020:

  • Trademark applicants who were unable to submit a timely response or fee in response to a PTO communication should file a petition to revive the application.  See 37 C.F.R. §§ 2.6(a)(15), 2.66.
  • Trademark applicants who missed the 36-month statutory deadline for filing a Statement of Use, which therefore resulted in the application being abandoned, should use the PTO’s Trademark Electronic Application System(“TEAS”) “Petition to the Director” form.  See 37 C.F.R. § 2.146.

  • Trademark registrants who missed a statutory deadline, which resulted in a cancelled or expired registration, or who were unable to submit a timely response or fee in response to a PTO communication regarding a registration, should also use the TEAS “Petition to the Director” form.  See 37 C.F.R. § 2.146.

In addition, the PTO will continue to waive the petition fee to revive abandoned trademark applications and cancelled or expired trademark registrations which became abandoned or were cancelled or expired as a result of the COVID-19 pandemic.  For trademark applicants and owners who, because of the COVID-19 pandemic, were unable to timely submit a trademark filing or payment in reply to an Office communication having a due date of June 30, 2020, or earlier, such that the trademark application became abandoned or the trademark registration was cancelled or expired, the PTO will waive the petition fee to revive the abandoned application or reinstate the cancelled or expired registration.  The petition must include a statement that the delay in filing or payment was due to the COVID-19 pandemic, which means that a practitioner, applicant, registrant, or other person associated with the filing or fee was personally affected by the COVID-19 outbreak, including, without limitation, through office closures, cash flow interruptions, inaccessibility of files or other materials, travel delays, personal or family illness, or similar circumstances such that the COVID-19 outbreak materially interfered with timely filing or payment.

          For all other situations not specified herein, where the COVID-19 pandemic has prevented or interfered with a filing before the Trademark Trial and Appeals Board (“TTAB”), a request or motion for an extension or reopening of time, as appropriate, can be made.

          The PTO remains open for the electronic filing of trademark and TTAB documents and fees.  Since the PTO remains open for the filing of trademark documents and fees, the waivers for an extension of trademark filing or payment deadlines or petition fees are available only if the delay is due to the COVID-19 outbreak, as defined herein.  The PTO has stated that it will continue to  evaluate the evolving situation around the COVID-19 outbreak and its impact on the PTO’s operations.

          If you have any questions regarding the extension of trademark filings or fees, the waiver of petition fees to revive abandoned trademark applications or cancelled trademark registrations, or need assistance with either requesting any trademark extensions or with the filing of any trademark documents or fees, contact the Chair of our Trademark Practice Group, Scott Fisher, at (516) 393-8248 or

The Coronavirus Aid, Relief and Economic Security Act (CARES Act), which created the Paycheck Protection Program (PPP), was signed into law by President Trump on March 27, 2020. The PPP provides government-backed loans to qualifying businesses, which may ultimately be forgiven if certain conditions are met. As nearly eight weeks have passed since the first PPP loans were disbursed, the focus has largely shifted from the loan application process to the issue of forgiveness.

On May 15, 2020, the Small Business Association (SBA), in consultation with U.S. Department of the Treasury (Treasury), released the PPP loan forgiveness application with instructions. This blog provides a “crash course” in the basic requirements for completing the application. All borrowers should consult their attorneys or accountants for specific advice regarding their particular circumstances.

Application Forms

The application consists of four main parts, each of which has its own set of instructions. These include the: (1) Forgiveness Calculation Form; (2) Schedule A; (3) Schedule A Worksheet; and (4) optional Demographic Information Form. In sum, the first three of these various forms provide for a cascade of calculations. The most granular calculations are performed on the Schedule A Worksheet, which is then used to complete the calculations on Schedule A, which is then used to complete the calculations on the Forgiveness Calculation Form.

In the end, only the Forgiveness Calculation Form and Schedule A are required to be submitted to the borrower’s lender, along with a plethora of supporting documentation described in more detail in the forms. The required documents may be submitted to the lender in hard copy or electronically.

The borrower must also maintain the Schedule A worksheet (or an equivalent calculation sheet) and its supporting documentation for a period of six years after the date the loan is fully forgiven or repaid.

Relevant Time Periods

Previously, it was understood that a PPP loan would be forgiven if the proceeds were spent on certain expenses during the eight weeks after the loan’s origination date. However, the forgiveness application states for the first time that an alternative time period may be utilized for the purpose of calculating loan forgiveness.

Specifically, the application provides that forgiveness can be based on payroll costs incurred during either: (1) the “covered period,” which consists of the 56-day period beginning on the date the borrower’s PPP loan funds were disbursed; or (2) the “alternative payroll covered period,” which is the 56-day period beginning on the first day of the borrower’s next payroll period following the disbursement of loan proceeds. The alternative payroll covered period may be utilized by borrowers whose payroll is on a biweekly or more frequent schedule.

Borrowers must note that using the alternative payroll covered period adds an extra layer of complication. Those borrowers must use the alternative covered period for calculations required by the application that refer to the “the covered period or the alternative payroll covered period.” However, borrowers must make calculations based on the “covered period” (not the alternative period) wherever there is a reference in the application to “the covered period” only. In our observation, it appears that the application refers to the alternative period when dealing with calculations relating to payroll, and only the covered period when addressing non-payroll expenses.

Borrowers should also bear in mind that the government appears to be mulling over the idea of making further changes to the eligible forgiveness window. On May 18, 2020, lobbyists for certain industries met with President Trump to advocate that the covered period be extended from 8 weeks to 24 weeks. The President seemed to be open to the idea, stating, “That should be easy. That’s like one of the easiest requests I’ve ever heard.”

Forgiveness Formula Generally

The main takeaway from the Forgiveness Calculation Form is that the borrower’s maximum forgiveness amount is the smallest of the following three figures:

  1. PPP loan amount (line 9 of the PPP Forgiveness Calculation Form)
  2. Payroll Costs divided by 0.75 (i.e., the requirement that at least 75% of the PPP loan be used for payroll) (line 10 of the PPP Calculation Form)
  3. ((Payroll Costs + Eligible Non-Payroll Costs) – (Dollar Value of Pay Reductions in Excess of 25%)) x FTE Reduction Quotient (line 8 of the PPP Forgiveness Calculation Form)

Figuring our your PPP loan amount is simple, but the other calculations might make your head spin. Not to worry, as we will breakdown what borrowers need to do to perform the other calculations.

Payroll Costs 

Payroll costs essentially consist of two broad components: cash compensation and non-cash benefits, each of which will be determined separately if the borrower follows the steps on Schedule A and the Schedule A worksheet. Below we’ve summarized those calculations in an order that we think is more easily digested (relatively speaking).

Borrowers should start with a list of each individual employed during the covered period or the alternative covered period. For each employee, the borrower should determine his or her cash compensation, which consists of: gross salary, gross wages, gross tips, gross commissions, paid leave (excluding leave under the Families First Coronavirus Response Act), and severance pay. To the extent any employee’s compensation during the relevant time period exceeds $100,000 annualized, the employer should list that employee’s cash compensation as the maximum amount of $15,385. By adding together the result for each employee, the borrower will know the total cash compensation amount.

What about non-cash benefits? These include the amounts paid by the borrower for employer contributions to employee health insurance and employee retirement plans, and employer state and local taxes assessed on employee compensation (e.g., unemployment insurance taxes, but not amounts withheld form employee pay for state and local income tax). The borrower should total the amount paid for each expense for each employee during the covered period or alternative covered period. When these sums are added together, the borrower will know the total amount of non-cash benefits.

Schedule A requires that compensation paid to employee-owners, self-employed individuals and general partners be listed separately. Sums paid to such an individual may be forgiven in an amount that is equivalent to his or her annual draw for 2019, divided by 52, and then multiplied by 8 (i.e., 8 weeks of the individual’s average weekly draw for 2019). However, as in the case of ordinary employees, the amount forgiven is capped at $15,385.

The borrower’s payroll costs are the sum of all cash compensation and non-cash benefits described above. This sum will be filled in on line 1 of the PPP Forgiveness Calculation Form. The sum will also be divided by 0.75 to complete line 10 of the form, which sets forth one of the borrower’s potential forgiveness amounts.

Non-Payroll Costs

The borrower’s non-payroll costs are the total of its eligible business mortgage interest payments, business rent or lease payments, and business utility payments. For these expenses to be eligible, the following conditions must be met:

  1. The obligation to pay the expense must have been incurred before February 15, 2020. This means that, in the case of a mortgage or lease, the borrower must have signed the documents establishing the obligation prior to February 15th. In the case of utilities, service must have begun prior to that date.
  2. The expense must have been paid during the covered period, or incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period. Expenses that were both paid and incurred during the covered period should only be counted once.
  3. Non-payroll costs cannot exceed 25% of the total forgiveness amount (at least this is true at present, although proposals to eliminate this requirement are percolating).

The eligible amounts of these expenses will be filled in on lines 2, 3 and 4 of the PPP Forgiveness Calculation Form.

Calculating the Amount of Qualifying Compensation Decreases

A borrower’s baseline forgiveness amount might be thought of as the total of its payroll costs and non-payroll costs. However, that amount will be reduced to the extent the borrower decreased the average rate of pay of any employee during the covered period or the alternative covered period by more than 25% as compared to that employee’s average pay rate between January 1, 2020 and March 31, 2020.

For each employee, the borrower determines the amount of its loan forgiveness reduction as follows:

  1. Determine the average salary or hourly rate of pay during the covered period or the alternative covered period.
  2. Determine the average salary or hourly rate of pay during the period from January 1, 2020 through March 31, 2020.
  3. Divide the figure resulting from #1 by the figure resulting from #2. If the result is 0.75 or more, no deduction needs to be made from the borrower’s forgiveness amount for that employee.
  4. If the figure resulting from the calculation described in #3 is less than .075, the borrower should determine whether the the employer met the safe harbor requirements by restoring the employee’s salary to pre-pandemic levels (the instructions to the Schedule A worksheet explain how this determination should be made) before June 30, 2020. If the employer meets the safe harbor requirements, then its forgiveness amount will not be reduced.
  5. If the safe harbor has not been met, the borrower must determine the dollar amount by which its forgiveness amount must be reduced. This is done by:

a. Multiplying the employee’s average salary or hourly rate of pay during the period from January 1, 2020 through March 31, 2020 by .75.

b. From the resulting figure, subtract the employee’s average salary or hourly rate of pay during the covered period or the alternative covered period.

c. If the employee is paid on an hourly basis, compute the dollar amount of the reduction in pay that exceeds 25% by determining the average number of hours worked from January 1, 2020 through March 31, 2020, and multiply that figure by the result of item (b) above. Then, multiply that number by 8. The result is the amount by which the borrower’s loan forgiveness must be reduced in respect of this employee.

d. If the employee is salaried, multiply the result of item (b) above by 8. Divide the result by 52. This figure is the amount by which the borrower’s loan forgiveness must be reduced in respect of this employee.

The borrower must make this calculation for each employee (unless, of course, the borrower already knows that it did not reduce salaries at all or below acceptable levels). The total reduction amount is then filled in on line 5 of the PPP Forgiveness Application Form. Line 6 of the form is the result of (Payroll Costs + Non-Payroll Costs) – Compensation Reduction or, put another way, the result of (Lines 1+2+3+4) – Line 5.

FTE Quotient Reduction

There is yet another possible reduction in forgiveness that borrowers need to consider. In general, it has been understood that the amount of forgiveness a PPP borrower is entitled to will be decreased if it had fewer full-time employees after the loan’s origination date than in the past. The forgiveness application provides the clearest explanation so far about how this determination will be made.

The question is whether the borrower’s average weekly number of “full-time equivalent” (FTE) employees during the covered period or the alternative covered period was less than during the “reference period.” The borrower gets to choose which of the following reference periods to use: (1) February 15, 2019 to June 30, 2019; (2) January 1, 2020 to February 29, 2020; or (3) for seasonal employers, either the period in (1), (2) or any consecutive twelve-week period between May 1, 2019 and September 15, 2019. Logic dictates that borrower will want to choose the reference period with the smallest number of employees.

How does the borrower determine the average number of FTE employees during the covered period, the alternative covered period and the reference period? There are two possible methods. In either method, each employee will be assigned a number that is 1.0 or less (1.0 represents one full-time employee). By way of the simplified method, the borrower can simply assign 1.0 for each employee who works 40 hours or more per week, and 0.5 for each employee who works fewer than 40 hours per week. Alternatively, the borrower can determine a more specific number for each employee by calculating the average number of hours paid per week, dividing that figure by 40 and rounding the result to the nearest tenth (the result is still capped at 1.0). The more complex method will likely be preferred by employers that have many employees who work more than 20 but less than 40 hours per week.

To determine the average weekly number of FTE employees during the reference period, the borrower must assign each person who worked for the borrower at any time during that period a number of 1.0 or less using either of the methods described above, and then calculate the sum of all assigned numbers. The same should be done to determine the average weekly number of FTE employees during the covered period or alternative covered period. However, for the covered period or alternative covered period, the borrower should also assign a number to and count the following employees in its total (unless such an employee was replaced by someone else):

  1. Any positions for which the borrower made a good-faith, written offer to rehire an employee which was rejected by the employee.
  2. Any employees who were fired for cause, voluntarily resigned or voluntarily requested and received a reduction in their hours.

If the average weekly number of FTE employees during the covered period or the alternative covered period is greater than or equal to the average weekly number of FTE employees during the reference period, then no reduction of the borrower’s forgiveness is required. In that case, the borrower fills in the number 1.0 on line 7 of the PPP Forgiveness Calculation Form.

If the average weekly number of FTE employees during the covered period or the alternative covered period is less than the number of FTE employees during the reference period, the borrower must determine whether it qualifies for the safe harbor. Under the safe harbor, a borrower is exempt from a reduction in the amount of forgiveness if: (1) the borrower reduced the number of FTE employees in the period beginning February 15, 2020, and ending April 26, 2020; and (2) the borrower then restored its FTE employee levels, on or before June 30, 2020, to its FTE employee levels in the borrower’s pay period that included February 15, 2020. If the borrower qualifies for the safe harbor, then no reduction of the borrower’s forgiveness is required and the borrower fills in the number 1.0 on line 7 of the PPP Forgiveness Calculation Form.

If the borrower does not qualify for the safe harbor, it must determine by what percentage its loan forgiveness must be reduced. To do this, the borrower must divide its average weekly number of FTE employees during the covered period or the alternative covered period by the average weekly number of FTE employees during the reference period. The resulting figure is referred to as the “FTE Reduction Quotient” and must be filled in on line 7 of the PPP Forgiveness Calculation Form. The borrower will then multiply the FTE Reduction Quotient by the number on line 6 of the form (i.e., the result of (Payroll Costs + Non-Payroll Costs) – Compensation Reduction). The resulting figure is the third possible forgiveness amount that was referred to above, and it is filled in on line 8 of the PPP Forgiveness Calculation.


In prior guidance, SBA and Treasury announced that borrowers that acquired PPP loans in the principal amount of $2 million or more will have their forgiveness applications audited. Those borrowers will need to demonstrate that their PPP loans were necessary to support their continued business operations. The PPP Forgiveness Calculation Form requires borrowers to indicate whether they, together with their affiliates, acquired PPP loans exceeding the $2 million threshold. Borrowers will need to take care to determine whether other entities are properly considered “affiliates” for purposes of aggregating PPP loan amounts, and must refer to the Interim Final Rule on this subject to make that determination.


While the calculations that need to be made to complete the forgiveness application may seem daunting, borrowers should remember that they pulled some of the underlying data when applying for a PPP loan in the first instance. Looking back to the initial application will provide some of the information necessary to complete the salary reduction and FTE calculations. Additionally, those borrowers who use a payroll provider will likely be able to obtain streamlined reports that summarize all the required data.

It is important to note that SBA and Treasury have not updated their Frequently Asked Questions document since the forgiveness application was published. As borrowers begin to complete and submit these applications, it is extremely likely that questions will arise and be addressed there or in other regulations. It is also possible that some of the parameters of the current forgiveness application may change in the future. For example, the definitions of covered period and alternative covered period may be expanded since various industries are advocating for extensions of the current eight-week window.

Borrowers who will soon be eligible to seek forgiveness may want to wait a short while before applying to see whether changes or clarifications are in the offing. Those who do not wish to wait should still be sure to review all guidelines and regulations when completing the application and again on the date the application is submitted. The contours of the PPP change so rapidly that repeated follow-up is absolutely necessary.

If you have any questions about the PPP or forgiveness applications, please contact Jessica Baquet at (516) 393-8292 or

In the Jaspan Schlesinger LLP Corporate/Commercial Transactions Practice Group, I advise clients in many mid-cap mergers and acquisitions transactions.  The Group represents both buyers and sellers in these exit/change of control transactions.

Last year, I moderated a five-part mergers and acquisitions Boot Camp webinar series. Each of the five installments of that Boot Camp focused on a different aspect of M&A transactions. My favorite installment addressed a transaction’s process generally.

During last year’s Boot Camp series, it came to my attention that many of my panelists experienced (and continue to experience) a similar pitfall in mid-cap, sell side representation.

The typical business in this situation is owned by family members who are looking to exit the business and seek a liquidity event.  The buyers in these types of transactions tend to be savvy financial buyers or sophisticated larger strategic buyers engaged in the same line of the target’s business.  Although the sell side clients may have received some advice with respect to valuation, they may embark on negotiating a letter of intent for the transaction without involving counsel (and sometimes without involving their accountant or tax advisor).

As a result, many times sellers present counsel with a term sheet that has already been negotiated with a mandate to execute the deal.  The following topics flesh out a small sampling of some of the pitfalls for not involving counsel (and other advisors) sooner in the process:

  1. Tax Planning – The structure of the exit transaction matters. Depending upon the form of the target entity and deal structure, there can be surprising taxation consequences to the sell side where buy side structured the transaction in a way that works for the buyer.  In fact, sometimes the buy side is surprised after doing initial diligence. Investigating the tax planning up front can avoid unnecessary transaction costs and surprises down the line.
  2. Confidentiality – Closely-held businesses should be careful not to let potential acquirers (or their representatives) become privy to confidential formation regarding the target business absent certain protections. Sellers should make sure they get an appropriate non-disclosure agreement signed in advance of disclosure and, when doing so, including an appropriate covenant preventing the buy side from soliciting key service providers (and, potentially, soliciting suppliers or vendors to the detriment of the target business).  Even if a confidentiality agreement has been signed, sellers should consider to what extent and when key information about the target business (the “secret sauce,” or identifying and providing data concerning key customers and key suppliers) should be disclosed. Note, when a seller hires a financial advisor the seller should also have the financial advisor sign a confidentiality agreement.  Financial advisor confidentiality agreements tend to be less fulsome than those agreements between a seller and a prospective buyer.  However, sellers should not rely on the financial advisor’s form without consulting counsel.  Many times, the financial advisor’s form confidentiality agreement does not adequately protect the seller.
  3. Manner of Payment – Although price may have been negotiated, many sellers involved in the letter of intent stage fail to negotiate the specifics of payment. Will there be a (and how much is the) holdback or escrow to support indemnification obligations? Is the amount due all cash at closing (or is there a seller note or performance payment)?  Does buyer need third-party financing? Will there be closing date adjustments based on “net debt” or “net working capital”?
  4. Closing Conditions – Many mid-cap sellers fail to assess at this stage the extent to which third-party consents are required to close the transaction (whether that third-party is a regulatory agency or a material customer or vendor). In addition, the buyer may very well need to secure employment arrangements and or post- closing transition services from key personnel. The material terms of those arrangements should be addressed in the letter of intent as well, especially if an executive shareholder selling into the deal is to be employed post-closing. Recently, we were engaged by a sophisticated executive shareholder who, with our help following our recommendation, negotiated the broad terms of his post-closing employment into the initial letter of intent.  Armed with that letter of intent provision, the executive shareholder was easily able to rebut the buyer’s first draft of his employment agreement which provided that he could be terminated any time after closing with severance far less than the compensation of his agreed upon term of employment as set forth in the letter of intent.

Sure, any lawyer’s blog will generally caution prospective clients to “be sure to consult me as early as possible”. In this case, the moral of the story also applies to consulting tax advisers. I am not recommending that sellers negotiate a full-blown letter of intent or memorandum of understanding. In fact, I recall one transaction (representing a publicly traded company as the buyer) that was purchasing a mid-cap distribution business owned by a single shareholder. That selling shareholder was extremely nervous about the transaction and exhibited seller’s remorse at every turn of the deal process. We ended up with a fully negotiated letter of intent spanning over 20 pages. That letter of intent provided for almost every facet of a fully negotiated definitive purchase agreement (including terms of survival of each type of representation and warranty). There, all parties would have been better served by a different tact.  That deal became incrementally more expensive and took longer to close than necessary.  Good transactional counsel can help a seller navigate the letter of intent process on an effective and efficient basis.

A closely held family business seeking a liquidity event should be wary of some of the deal points identified in this article and yes… out transactional counsel and tax advisors SOONER rather than later.


The COVID-19 pandemic has created financial stress on our entire population.  The CARES Act signed by the President on March 27, 2020 provides financial relief for several sectors of society.  Section 4513 of the Act, entitled Temporary Relief for Federal Student Loan Borrowers, provides broad financial relief for those persons who are currently burdened with federal student loans.  The Act accomplishes this by automatically placing their student loans in an administrative forbearance from March 13, 2020 through September 30, 2020.  During this forbearance period, borrowers are not required to make their monthly loan payments and will not incur a penalty nor accrue additional interest on the loan for not making the payment.  To accomplish this, the CARES Act sets the student loan interest rate on federal student loans at 0% during the period of forbearance.

The 0% interest rate applies to the following types of student loans owned by the U.S. Department of Education (“ED”):  Direct Loans, Federal Family Education Loan (“FFEL”) Program Loans, and Federal Perkins Loans.  It is important to note, however, that the 0% interest rate only applies if the loan is owned by the federal government.  Some FFEL Program loans are owned by commercial lenders and some Perkins loans are owned by the educational institution attended by the borrower. Those loans are not covered. In addition, private loans are also not eligible for the 0% rate provided by the Act. Although these loans are not covered by the Act several lenders are nevertheless providing their borrowers with some type of financial relief.

For those borrowers with Direct loans owned by the federal government who are working toward Public Service Loan Forgiveness (PSLF) the suspended payments will continue to count as if the payment had been made toward the loan forgiveness program so that borrowers are not penalized as a result of the suspension.

Many borrowers utilize an auto-debit payment system to make their monthly federal loan payments.  The automatic payments are suspended during the forbearance period.  If a payment had been made during the forbearance period, the borrower can obtain a refund from his loan servicer if he chooses to do so.  Borrowers who are in a positon to make their loan payments during the forbearance period may continue to do so in which case the entire payment will be applied against the loan principle once all interest that accrued prior to March 13, 2020 is paid.

For borrowers who are in default of their federal student loans, the ED has temporarily stopped collection efforts including the garnishment of wages. In addition, borrowers who have had their tax refund or Social Security payment withheld to repay a defaulted loan obligation may recover back the money that was withheld if the repayment of the defaulted loan was in the process of being withheld during the forbearance period.  ED has set up a Default Resolution Group to resolve these issues.  It can be contacted at 1,800. 621.3115.

Additional information can be found on the U.S. Department of Education website at

Continuing the trend of releasing amorphous guidance at the eleventh hour, this afternoon the Department of the Treasury (Treasury) and the U.S. Small Business Administration (SBA) released much-anticipated guidance as to whether Paycheck Protection Program (PPP) borrowers should return their loan proceeds before the safe harbor period expires tomorrow. This follows weeks of threats by Treasury Secretary Steven Mnuchin that borrowers who do not truly need PPP loans will face civil and criminal penalties if they do not return loan proceeds swiftly and voluntarily.


The new guidance was necessitated by confusion over a certification that borrowers are required to make when applying for a PPP loan. Specifically, a borrower must attest in good faith that “[c]urrent economic uncertainty makes [a PPP] loan request necessary to support [its] ongoing operations.” While this certification may seem non-controversial, it became the subject of debate after it was revealed that some public companies obtained loans despite being flush with cash. As a result, on April 23, 2020, Treasury and SBA issued guidance suggesting that borrowers could not make the required certification in good faith without “taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.”

Since this guidance had not been available when some borrowers acquired their loans, Secretary Mnuchin announced that borrowers could return the money without penalty until May 7, 2020. That safe harbor period was later extended to May 14, 2020, and SBA promised to provide additional guidelines before then.

New Guidance

Today’s guidance draws one bright line: borrowers who, together with their affiliates, acquired loans of less than $2 million will be deemed to have made the required certification in good faith without further inquiry. According to Treasury and SBA, this rule is appropriate because borrowers with smaller loans are less likely to have “adequate sources of liquidity” and it will allow SBA to focus its limited resources on larger loans.

On the other hand, the guidance provides little information as to how borrowers with loans of $2 million or more should determine whether or not to give back the proceeds. Without elaboration, the guidance states that borrowers with loans of this size might still “have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance.” In the case of borrowers who do not meet the unspecified criteria, SBA will seek to recoup the amount of the loan and notify the lender that the borrower is not eligible for forgiveness. However, SBA’s guarantee of the borrower’s PPP loan will remain intact.

Importantly, if the borrower repays the loan upon request, SBA will not “pursue administrative enforcement or referrals to other agencies.”

What Should Borrowers of Larger Loans Do Now?

What should borrowers with loans of $2 million or more do now to determine whether acquiring a PPP loan was truly necessary to support their ongoing operations? Insofar as the PPP was created by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the language of the statute is the first place that borrowers should look.

The law specifically states that PPP borrowers are not required to certify that they “cannot obtain credit elsewhere,” as they must in the case of other SBA loans. Under the relevant regulations (13 CFR 120.101), a borrower is able to obtain credit elsewhere when it can “obtain some or all of the requested loan funds from alternative sources without causing undue hardship.” Alternative sources include other loan facilities that do not involve a federal government guarantee, the resources of the business or the personal resources of owners with an interest of 20% or more.

What does this mean to the average borrower? In short, PPP loan forgiveness should not be jeopardized as a result of the fact that the business had access to a line of credit or some cash in the bank, and/or the ability to mortgage the business’ assets or borrow from its principals, among other things. This is true even though the previously issued guidance states that borrowers cannot properly certify that a PPP loan is necessary if they have “access to other sources of liquidity.” Indeed, while SBA can interpret the CARES Act in its guidance documents, it cannot change the legislation.

So, in what circumstances should a business return its PPP loan? With little to go on, businesses should look at their current and projected financial metrics and compare them to previous years. Among other things, businesses should consider:

  • Are revenues down?
  • Are customers or clients in default on their payment obligations?
  • Is the business’ physical location closed as the result of a government order?
  • Are there fewer projects in the pipeline?
  • Does the business have substantial cash on hand, far in excess of its short and medium term cash requirements?
  • Have key employees fallen ill?
  • In light of social distancing considerations, will the business face increased overhead due to the need to employ more workers or take longer to complete a job?
  • Does the industry rely on the type of travel that has been curtailed or eliminated as a result of the pandemic?
  • Is the business negatively impacted by supply chain disruptions?
  • If the business had not acquired a PPP loan, would it have furloughed or laid off employees, or did it terminate employees that were only rehired because of the PPP loan?

At bottom, the more negative comparisons that can be drawn between the current state of affairs and a business’ ordinary performance, the more likely that business will be to prove to SBA that the economic uncertainty of the Covid-19 pandemic made a PPP loan necessary to sustain its operations.

What happens if a business does not return its PPP loan during the safe harbor, and the SBA determines that it did not make the required certification in good faith? The practical import of today’s guidance is that such a business’ loan will not be forgiven but, as long as can the business can repay it, it will not face other civil penalties or criminal consequences. The guidance is silent as to what will happen to borrowers who cannot or do not repay the loan. Presumably, those borrowers can expect, at the very least, a legal battle with the federal government.


In sum, the new guidance provides a significant modicum of comfort to borrowers with loans of less than $2 million. Borrowers who acquired larger loans are in a position that is largely no different than the one they were in yesterday. They know that their loan forgiveness applications will be audited, but they do not know what circumstances will be considered sufficient to prove a good-faith certification. Those borrowers who believe that they acted in good faith and have the ability to repay their PPP loans might consider holding on to the money and waiting to see how their forgiveness applications fare. Those that are not able to repay their PPP loans should consult counsel right away.

If you have any questions regarding the Paycheck Protection Program, contact Jessica M. Baquet at (516) 393-8292