The Coronavirus (COVID-19) has made a significant impact on the global economy, altering the way businesses operate. The KMK Law multi-disciplinary Coronavirus COVID-19 Response Team provides some answers below to your most frequently asked questions.

We will continue to update this page as the situation develops. Check back regularly for updates from our team on areas of law impacted by the COVID-19 outbreak. Please feel free to contact any member of the KMK Coronavirus (COVID-19) Response Team for further assistance.

Closure of Non-Essential Businesses

Does the government consider my business essential?

State and local governments across the country have implemented “Stay in Place Orders” or other orders that require the closure of businesses that are “non-essential” or not “life-sustaining”. We all view our businesses essential to the overall economy, but governments are beginning to determine what sort of businesses are essential and therefore permitted to remain. Neither “essential” or “life-sustaining” are legal terms that require governments to make a certain decision. Instead, relevant state laws give governmental authorities wide discretion to make that determination.

In making this determination, a number of states are looking to guidance recently issued by the U.S. Department of Homeland Security Cybersecurity & Infrastructure Security Agency (“CISA”). CISA has developed an initial list of “Essential Critical Infrastructure Workers” to help State and local officials as they work to protect their communities, while ensuring continuity of functions critical to public health and safety, as well as economic and national security. This guidance identifies workers who conduct a range of operations that CISA has deemed essential to continued critical infrastructure viability, including staffing operations centers, maintaining and repairing critical infrastructure, operating call centers, working construction, and performance management functions among others. The industries they support represent, but are not necessarily limited to, medical and healthcare, telecommunications, information technology systems, defense, food and agriculture, transportation and logistics, energy, water and wastewater, law enforcement and public works.  In considering whether your business is or is likely to be deemed essential, the CISA Guidance will serve as a helpful starting point. The Guidance, however, is not necessarily authoritative for all businesses in all regions. Some state and local agencies have taken a broader viewpoint as to what constitutes an essential businesses and other agencies have taken a narrower approach. For example, Pennsylvania has created its own list of what it deems a Life-Sustaining Business.

The Director of the Ohio Department of Health issued a Stay at Home Order on March 22, 2020, effective on March 23, 2020 at 11:59 pm, providing that, absent numerous exceptions, all individuals currently living within Ohio are ordered to stay at home or their place of residence. The order continues until April 6 unless earlier rescinded. Importantly, all “Essential Businesses and Operations are encouraged to remain open.” The Ohio order outlines the listing of Essential Businesses and Operations.  Numerous businesses and operations are expressly called out as exceptions to the order, including, but not limited to, the following: business involved in providing food, groceries or medicine to consumers; financial institutions and insurance companies; businesses that sell, manufacture, or supply other "Essential Businesses and Operations" with the support or materials necessary to operate; professional services, such as legal services, accounting services, insurance services, and real estate services; and manufacturing companies, distributors, and supply chain companies producing and supplying essential products and services in and for industries such as pharmaceutical, technology, biotechnology, healthcare, chemicals and sanitization, waste pickup and disposal, agriculture, food and beverage, transportation, energy, steel and steel products, petroleum and fuel, mining, construction, national defense, and communications. The Ohio order is self-executing for Essential Businesses, so no special permission is required from the State to be considered an Essential Business. A copy of the Ohio order can be found here.

Also on March 22, 2020, Kentucky issued an order that all “Non-Life Sustaining” Businesses will be ordered closed to in-person traffic effective 8:00 pm on March 23, 2020. The Kentucky order is also self-executing and effectively shuts down the following types of stores, among others: clothing, entertainment, sporting goods, shoes, jewelry, florists, furniture, bookstores, auto dealers (repair and part stores remain exempt as does auto, truck and van rentals). Kentucky’s order does not apply to grocery stores, gas stations, liquor stores, banks, veterinary offices, pharmacies, drug stores or UPS, among other exclusions. All Kentucky retail businesses can provide local delivery and curbside service of online or telephone orders. A copy of the Kentucky order can be found here.”

For many businesses it may be clear as to whether their business falls within the definition of an “essential business” under an applicable law. In other jurisdictions the determination may be less clear. This is particularly true where an order also exempts businesses that support an essential government function. In these cases, it is important to analyze the nature of the business and each jurisdiction in which the business operates to determine if a particular business is “essential”.

If you are uncertain as to whether your business is considered “essential” or whether an applicable order applies to your business, please contact a member of the KMK Coronavirus (COVID-19) Response Team for guidance.

Contract Enforcement

Are performance and payment obligations in my commercial contracts or real estate leases suspended?

Maybe. Many commercial contracts and real estate leases have a “force majeure” clause which may excuse payment or performance under the contract because of the coronavirus pandemic. Analysis of whether a specific contract’s force majeure provision may be invoked is a contract specific and fact-dependent inquiry. Please see this article for further discussion.

Cybersecurity & Privacy

Do companies have to consider privacy and security laws when collecting data from employees?

Yes. Companies must remain compliant with applicable privacy and security laws as part of the effort to monitor and prevent the spread of COVID-19.

Employers should keep data related to COVID-19 infections confidential, store it securely, and dispose of it properly once it is no longer needed. Employers should implement a jurisdiction-by-jurisdiction approach, being mindful of varying laws and levels of emergency that may warrant exceptions.  

For companies in Europe, GDPR generally prohibits the collection of health data without explicit consent by the data subject. There is an exception, however, if the collection of such data is protect against a serious cross-border threat to public health and, in particular, to prevent the spread of communicable disease. See General Data Protection Regulation (GDPR), art. 9(i); GDPR, recital 52.

With respect to employees in California, companies are not subject to comparable comprehensive regulation of employee data, in part because the California Consumer Privacy Act largely does not apply to employees until 2021.

How should a company communicate with employees about data processing activities related to COVID-19 data?

As a best practice, companies should communicate with employees about their approach to collecting information about COVID-19 infections among employees and about disclosures to government entities. Where possible, companies should notify and obtain an employee’s permission prior to making a disclosure. For companies with employees in Europe, the GDPR principle of transparency requires an employer to provide notice to employees even when processing under an exception, as discussed above.  See GDPR, art. 5(1).

Employee Benefits

Is there any relief from the rules requiring 60 days advance notice for mid-year changes affecting the content of the Summary of Benefits and Coverage (“SBC”) for COVID-19 related amendments?

Yes, for certain changes that provide greater and/or expanded coverage.  According to FAQs released on April 11, 2020, the Departments are taking a non-enforcement position with respect to any health plan that is amended to provide greater coverage for the diagnosis and/or treatment of COVID-19, or to provide expanded coverage for telemedicine and other remote-care services without providing at least 60 days advance notice.  Instead, health plans must provide notice of these changes as soon as reasonably practicable by issuing a new SBC or a notice of material modification describing the changes.  This relief is independent of the temporary relief set forth in the EBSA Disaster Relief Notice 2020-01, which provides that an employee benefit plan and responsible plan fiduciary will not violate ERISA for failing to timely furnish a notice, disclosure or document (e.g., benefit statements, annual funding notices and other ERISA notices and disclosures) that must be furnished during the Outbreak Period (generally, from March 1, 2020, until 60 days after the announcement of the end of the COVID-19 National Emergency) if the plan and fiduciary act in good faith and furnish the notice, disclosure or document as soon as administratively practicable.  More information is available in the Employee Benefits & Executive Compensation Monthly Minute UPDATE from April 30, 2020.

Does Section 2202 of the CARES Act addressing coronavirus-related distributions apply to defined benefit plans?

Yes. Section 2202 of the CARES Act applies to both defined contribution and defined benefit plans. However, its practical application to defined benefit plans is limited. Section 2202 provides for an exception to the Code’s defined contribution plan distribution restrictions. This exception allows a defined contribution plan to add a new distribution event related solely to individuals impacted by the coronavirus as defined by the CARES Act (“Qualified Individual”). These distributions are referred to as “Coronavirus-Related Distributions" or “CRDs”. Section 2202 does not provide a similar distribution exception for defined benefit plans. Consequently, a defined benefit plan cannot make a distribution to an individual before he or she is otherwise eligible to receive benefits under the plan’s normal distribution provisions, even if the distribution would qualify as a CRD. Regardless of whether a defined benefit plan treats an otherwise permissible distribution as a CRD (or reports it as such), a Qualified Individual can take advantage of the CARES Act’s favorable tax consequences for distributions of up to $100,000 that are received in 2020 (e.g., no 10% early withdrawal excise tax, ability to include a distribution in income ratably over three years, etc.).

Is our employer group health plan required to provide COVID-19 testing free of charge to health plan participants?

Yes. Under the new Families First law, both fully insured and self-insured group health plans must provide COVID-19 testing as a standard part of the group health plan without any cost sharing (including deductibles, copayments and coinsurance).

Will paying for COVID-19 testing and treatment cause a problem with our HDHP/HSA?

No. The IRS released IRS Notice 2020-15 on March 11, 2020 stating that a health plan that otherwise satisfies the requirements to be a high deductible health plan (“HDHP”) under IRS Code Section 223(c)(2)(A) will not fail to be an HDHP merely because the health plan provides medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible. As a result, the individuals covered by such a plan will not fail to be eligible individuals under IRS Code Section 223(c)(1) merely because of the provision of those health benefits for testing and treatment of COVID-19. If your group health plan is an HDHP, you are permitted to offer COVID-19 testing and treatment without cost sharing before the deductible is satisfied.

Can employee elections under our Section 125 cafeteria plan be changed because of the COVID-19 pandemic?

Maybe.  As explained in the Employee Benefits & Executive Compensation Monthly Minute from May, 2020, IRS Notice 2020-29 (released May 12, 2020) provides expanded options for participants with respect to prospective 2020 mid-year election changes. Although the temporary relief under IRS Notice 2020-29 was issued in response to the COVID-19 health emergency, the relief is not limited to individuals affected by the pandemic.  Notwithstanding the new relief, there may be reasons provided for in the current Section 125 rules that would allow employee elections to be changed even without an amendment pursuant to IRS Notice 2020-29. For example:

These are just two examples where the current Section 125 rules allow changes to be made in relation to the pandemic, provided that the changes are consistent with the terms of your plan, which are in addition to those permitted under IRS Notice 2020-29 that allows for increased flexibility with respect to mid-year election changes during 2020.  Note that the changes permitted by IRS Notice 2020-29 are optional and simply permit Section 125 Plans to be amended to provide for these changes.  The Employee Benefits & Executive Compensation Monthly Minute from May, 2020 explains these changes in more detail and can be found here.

Can employees receive a distribution or a loan from our 401(k) plan because of the COVID-19 pandemic?

Maybe. There has been no special guidance from the IRS or other legislation passed yet that would allow distributions or 401(k) loans for reasons related to the COVID-19 epidemic. However, there may be other provisions in the plan document that permit a loan or a hardship distribution. Many 401(k) plans allow participants to take a loan for any reason. The provisions of the plan should be followed in allowing any 401(k) loans. In addition, many 401(k) plans also include provisions allowing hardship distributions for certain limited reasons that cause an immediate and heavy financial. One example of a permitted hardship distribution is payment of expenses related to medical care for a plan participant, spouse, dependent or named beneficiary under the 401(k) plan. It is important to review and follow the provisions of the plan. This may also change if the IRS provides special guidance or specific legislation is passed.

May employees make DCAP election changes to stop DCAP contributions because their day care is closed?

Maybe.  Under IRS Notice 2020-29, Section 125 plans may be amended to allow prospective election changes during 2020 regarding a dependent care assistance program, regardless of whether the basis for the election change satisfies the current regulatory criteria. The Employee Benefits & Executive Compensation Monthly Minute from May, 2020 explains these changes in more detail and can be found here.

If an employee stopped DCAP contributions due to day care closures, can they be restarted when the day care opens?

Maybe.  Under new guidance released on May 4, 2020, IRS Notice 2020-29 expressly permits Section 125 plans to allow for prospective mid-year election changes during 2020 regarding a dependent care assistance program regardless of whether the basis for the change satisfies the current regulatory criteria. The Employee Benefits & Executive Compensation Monthly Minute from May, 2020 explains these changes in more detail and can be found here.

Can an employer contribute toward its employees’ student loan payments tax-free?

Yes, if certain requirements are satisfied.  Section 2206 of the CARES Act expanded the application of Code Section 127 educational assistance programs to include an employer’s payment for an employee’s qualified education loan.  The employer’s payment must be made after March 27, 2020, and before January 1, 2021, and payment may be made to the lender or directly to the employee.  The payment is excludable from the employee’s gross income to the extent the payment does not cause the employee’s total benefit for the year under the employer’s educational assistance program to exceed the Code Section 127 annual maximum of $5,250.  In order to take advantage of this benefit, the employer must amend its existing educational assistance program to provide for the student loan repayment, or the employer must adopt an educational assistance program if a program is not already in place.  

Financial Assistance

Is the government providing any financing to help business?

Yes, the U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the COVID-19. The State of Ohio's application was approved by the SBA on March 19 and the SBA is now accepting applications from Ohio small businesses. Please visit our Corporate & Securities blog for for more information on this topic. We expect further developments from federal and state authorities on this issue.


Will insurance compensate my business for its losses due to a shutdown or curtailment of operations?

Companies should review their insurance and understand whether they carry coverages that may potentially respond to loss resulting from COVID-19 and government response to it.

Business interruption coverage is often a part of commercial property insurance. It typically requires a direct physical loss to property that results in temporary suspension of business activities. Although it is uncertain whether COVID-19 can result in the type of direct physical loss contemplated by a property policy, it is possible that a workplace contamination due to a COVID-19 outbreak, or a contamination with a key supplier that suffers a shutdown due to COVID-19, could present insurance issues to explore. Some property insurance policies also contain language addressing interruption by virtue of an order by a civil authority. Such an order may result in a company’s access to its property being impaired in a manner that could provide a potential for recovery.

Each insurance policy contains different language that can affect the potential for business interruption coverage, and must be carefully considered in order to analyze potential applicability.

Labor & Employment

What should we do to ensure employee safety and avoid spreading the disease?

Certain employers, e.g. bars, restaurants and gyms in Ohio, have been required to temporarily close.  For those that have the option of remaining open, guidance for workplace safety is available from several sources. For example, the CDC’s Interim Guidance for Businesses and Employers includes several recommendations that have been endorsed by the EEOC. More recently, OSHA has issued its Guidance on Preparing Workplaces for COVID-19, outlining steps employers can take to help protect their workplaces. The OSHA guidance divides workplaces into four risk zones, according to the likelihood of employees’ occupational exposure during a pandemic. The majority of U.S. workplaces likely fall within the “Lower Exposure Risk” classification. Finally, the EEOC has issued its own guidelines for Pandemic Preparedness in the Workplace and the Americans with Disabilities Act, which apply since both the WHO and CDC have declared COVID-19 a pandemic. However, employers should continue to exercise caution with respect to employee testing and should consult with employment counsel before acting.

Employers should review the above guidance with an eye toward determining what steps are feasible and effective for their workplaces.

If we shut down or send employees home because of the coronavirus threat, are they eligible for unemployment benefits?

Most states are taking steps to ease unemployment benefit requirements and allow workers displaced by COVID-19 to obtain benefits. We have previously posted about the modifications to Ohio’s unemployment benefits for employees impacted by the coronavirus. Detailed information for Ohio employers is located here, including forms to distribute to displaced employees. 

In addition, Kentucky has waived the waiting period for unemployment benefits and Indiana has specifically identified temporary layoffs due to COVID-19 as a basis for receiving benefits.

Can employees refuse to come to work?

Employees are only entitled to refuse to work if they believe they are in imminent danger. OSHA defines “imminent danger” to include “any conditions or practices in any place of employment which are such that a danger exists which can reasonably be expected to cause death or serious physical harm immediately or before the imminence of such danger can be eliminated through the enforcement procedures otherwise provided by this Act.”  It seems unlikely that this standard is going to be met in most typical workplace scenarios but such an analysis should be conducted on a case by case basis. 

There is also the practical consideration of what action an employer might take in response to employee refusals to come to work. Finally, it is worth remembering that the NLRA protects employees (union and non-union) who engage in “protected concerted activity for mutual aid or protection.” This could touch on employee refusals to work or to perform certain tasks. It also covers employee complaints about working conditions and/or their employers’ responses to COVID-19, including complaints shared on social media.

Do we have to pay employees who are not working?

On March 18, 2020, the federal government passed the Families First Coronavirus Response Act (“FFCRA”) in response to the challenges posed by the current COVID-19 outbreak. The legislation covers several areas, but critical for employers are two new sick leave benefits set to take effect no later than April 2, 2020. Detailed information on the new law is available here.

Do we have to allow employees time off to care for children because schools and daycares are closed?

On March 18, 2020, the federal government passed the Families First Coronavirus Response Act (“FFCRA”) in response to the challenges posed by the current COVID-19 outbreak. The legislation covers several areas, but critical for employers are new leave benefits set to take effect no later than April 2, 2020. Detailed information on the new law is available here.

A related issue that has come up a few times is whether employers can provide temporary babysitting at work for employees. This is not advisable for a few reasons. It adds additional people to the workplace, increasing the risk of spreading the virus. Also, daycares have licensing requirements that may be violated by this kind of de facto arrangement and the employer could be exposed to liability for any injuries to children in its care.

Public Company Issues

What should management teams and boards be discussing about COVID-19?

Management teams need to be thinking about what boards should know about the possible effects of COVID-19 on their companies, including impacts on inventories, production capacities, employees, suppliers, and customers. Boards should be asking management about the possible effects of COVID-19 on the company’s expected financial results, including revenues and expenses, as well as operational issues, including employees, suppliers and customers.

In addition, boards and management teams need to clearly communicate a strong tone from the top, maintain appropriate protocols and information flow and determine whether financial scenario planning and stress testing are designed to respond to the liquidity needs of the company.

How should companies think about shareholder communications in response to COVID-19?

And, should public companies be revising earnings guidance right now? Many companies simply do not know how, or how much, COVID-19 will impact their expected financial results. Management should consider whether the recent developments related COVID-19 require revisiting their guidance as to future financial results. Some management teams may want to discuss the merits and risks of withdrawing (as opposed to merely revising) previous estimates or ranges.

While companies go through various stages of assessment of financial outlook, companies should consider identifying and clarifying any possible market misperceptions and expect investor questions about supply chains, customer reactions, business continuity plans and possible risk mitigations.

Can companies that have provided shareholders with proxy materials for annual meetings postpone/cancel meetings?

The SEC recently issued guidance that assists public companies in changing the date and location of shareholder meetings and use technologies such as “virtual” meetings to avoid the need for in-person shareholder attendance. Companies considering virtual meetings should be mindful of the perspectives of institutional investors and proxy advisory firms regarding these meetings. These constituencies generally require disclosure affirming that a virtual meeting will provide full opportunities for shareholders to participate, ask questions, and present shareholder proposals.

What types of changes will COVID-19 require in public company reports?

Reports on Form 10-K and Form 10-Q require disclosure in MD&A of “known trends or uncertainties that have had or that the [company] reasonably expects to have a material favorable or unfavorable impact on net sales or revenues.” Companies should discern these uncertainties and their related response plans with respect to COVID-19 with a view to discussing them in their next periodic report. Companies expecting to be meaningfully impacted by COVID-19 also must disclose risk factors that address specific facts about the past and future effect of the virus. While some companies have added discussion of COVID-19 as a risk factor to reports on Form 10-K and Form 10-Q, other companies preparing for securities offerings or already engaging in continuous securities offerings or otherwise should consider whether a Form 8-K filing to report COVID-19 as a risk factor is necessary. Additionally, companies should carefully consider safe harbor disclosure in forward looking statements disclaimers and perhaps add COVID-19 as a cautionary factor.

Should company insiders be restricted from trading now? What about company buybacks?

Officers, directors and other corporate insiders should be mindful of applicable restrictions on trading in connection with developments related to the coronavirus. Recent market conditions have presented opportunities for corporate share buybacks and individual purchases by officers and directors, and many companies and individuals are taking advantage of these opportunities. While the coronavirus is common knowledge, its evolving impact on a particular company could well constitute material non-public information. As a result, any trading activity – whether involving share purchases or sales of shares and whether or not occurring during an open trading window – should be carefully evaluated to ensure that the company or individual is not in possession of material non-public information.


Have tax deadlines been extended?

Updated: April 10, 2020

Federal – The IRS issued Notice 2020-23 on April 9, 2020 providing additional tax filing and payment deadline relief and supplementing previous Notices.  The deadline for filing most federal tax returns and making federal income tax payments which were originally due between April 1, 2020 and July 15, 2020 has been extended to July 15, 2020. This includes 2019 individual income tax returns originally due April 15, 2020, and 2020 individual estimated payments originally due April 15, 2020 and June 15, 2020.  Interest and penalties will begin accruing on all amounts not yet paid on July 16, 2020.  The deadline for calendar and fiscal year corporate tax returns and payments, and partnership tax returns originally due between April 1, 2020 and July 15, 2020 has also been extended until July 15, 2020.  Notice 2020-23 generally provides broad sweeping relief for tax returns and elections due between April 1, 2020 and July 15, 2020, but taxpayers should check with their tax advisors before assuming a filing or payment obligation has been extended.

Ohio - The deadline for filing Ohio income tax returns, and paying tax due for the 2019 tax year has been extended to July 15, 2020.  Additionally, the due dates for 2020 estimated payments originally due April 15, 2020 and June 15, 2020 have both been extended to July 15, 2020.

Kentucky – The deadline for filing Kentucky income tax returns, and paying tax due for the 2019 tax year has been extended to July 15, 2020.  The penalty relief only applies to income taxes, not other forms of taxes.

Indiana – Like the Federal government, Indiana has extended both the filing and payment deadlines to July 15, 2020 for returns and payments originally due April 15, 2020.

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