Alerts & Newsletters

The Centers for Disease Control and Prevention has expanded the definition of close contact to now evaluate exposure cumulatively over a 24-hour period such that “15 cumulative minutes of exposure at a distance of 6 feet or less can be used as an operational definition for contact investigation.” Because the newly expanded definition is not limited, it impacts many different industries (including transportation and logistics, health care, automotive, manufacturing, and educational industries) and different persons (e.g., first responders, health care professionals, customer-facing employees, and others). As winter is coming and the holiday season is upon us, the CDC’s new “close contact” definition greatly impacts all workers, employers, and workplaces, as everyone now needs to evaluate physical distancing in smaller, repetitive increments of time.

On November 15, 2020, Michigan’s Department of Health and Human Services (“DHHS”) issued a new Gatherings and Face Mask Order that further limits in-person gatherings and employer operations, but does not meaningfully change requirements for most businesses. These gathering limits do not apply to workplace gatherings that occur consistent with the Emergency Rules issued by the Michigan Occupational Safety and Health Administration (“MIOSHA”) on October 14, 2020.

While public attention focused on the federal and state elections, Michigan voters made an important decision—they adopted Proposal 20-2, which amended Michigan’s Constitution to extend its protection from unreasonable searches and seizures to electronic data and communications. With the proliferation of personal electronic devices and storage of business information on computers used at home in the past few decades, federal and state courts, including the Supreme Court, have grappled with how to apply Fourth Amendment protections against unreasonable searches and seizures in a digital age. Although Proposal 20-2 might not change investigative practice, it clarifies that electronic data and communications are subject to the same protection against unreasonable search and seizure as other “traditional” information, such as paper records.

On June 5, 2020 the  Department of the Treasury and the Internal Revenue Service (“IRS”) issued Notice 2020-43 (the “Notice”) proposing two alternative methods to satisfy tax capital account reporting requirements as the only methods for reporting partner’s capital accounts under the tax basis method for taxable years that end on or after December 31, 2020. While some taxpayers may have concerns about these changes, the implementation of the new reporting requirement should not change or adversely affect the partners and should provide a better understanding of their tax capital accounts. With the year-end approaching, partners and partnerships should review the IRS guidance and begin conversations with their accountants about the use of tax capital reporting and conversion from other methods used in prior periods.

Governor Whitmer announced last week that MIOSHA is increasing enforcement of its October 14 Emergency COVID-19 Rules, with a focus on promoting more remote work for offices. Specifically, the Governor’s announcement indicated that the increased enforcement efforts will focus on ensuring compliance with Emergency Rule 5(8)’s “requirement that employer COVID-19 Preparedness and Response Plans contain policies prohibiting in-person work to the extent that work activities can feasibly be completed remotely.” Employers should anticipate increased, unannounced inspections to verify compliance with this requirement beginning immediately.

After months of predictions of a possible Democratic wave, Tuesday’s election delivered mixed results. Joe Biden appears poised to narrowly defeat President Trump after one of the most contentious election cycles in recent memory. Republicans are favored to retain their Senate majority despite having to defend twice as many seats as their Democratic counterparts. However, Democrats will have one last chance to wrestle back the Senate majority from Republicans if they are able to pull off upset wins in two Senate runoff elections in Georgia scheduled for January 5. In the biggest surprise of election night, House Republicans picked up seats, knocking off at least seven Democratic incumbents, with more races still too close to call. Despite Republican gains, Democrats did retain control of the House of Representatives, leaving Speaker Pelosi to preside over a razor-thin majority.

Dykema’s M&A transaction volume was up sharply in the third quarter with 25 deals closing during that three-month period. The transactions involved a wide variety of industries including Dental Service Organizations (DSOs) and Medical Service Organizations (MSOs), alcoholic beverages, precious metals, automotive, waste management, health & fitness and cloud services.

While some results are still being tabulated, we can now reasonably assess the outcome of the 2020 Election in Illinois. As expected, Democrats maintained their supermajority status in both the Illinois House of Representatives and Senate in this election cycle. What is unexpected, however, is the first challenge to Michael J. Madigan’s speakership in more than 40 years. Additionally, the defeat of the constitutional amendment to replace the state’s flat income tax with a progressive income tax deals a major blow to Governor Pritzker. Overall, the results could lead up to what may be a volatile and unpredictable legislative environment going forward. We’ll also take a look at legislation that is likely to be introduced.

Michigan’s Open Meetings Act (“OMA”) was officially amended this past Friday when Governor Whitmer signed SB 1108 (now Public Act 228 of 2020). The new law permits public bodies to conduct electronic meetings under certain circumstances and for a set period of time. With the new amendments in place, public bodies should be sure to conduct electronic meetings—when permitted—in full compliance with the amended OMA requirements. Failure to do so could result in challenges to decisions made by public bodies.

Recent rulings by the Michigan Supreme Court effectively terminated executive orders from Governor Whitmer that enabled municipalities to meet virtually by suspending certain requirements of Michigan’s Open Meetings Act (OMA). In response, the Michigan Legislature swiftly passed SB 1108 that amends the OMA to allow for public bodies to continue meeting electronically under certain circumstances, including statewide or local states of emergency or disaster, through December 31, 2021. The bill will now be enrolled and presented to Governor Whitmer for signature. As a result, while not yet law until signed, it seems that virtual meetings of municipalities may continue for the time being upon the adoption of these new amendments. However, conducting virtual meetings until the bill is signed by the Governor is not without risk.

The Michigan Supreme Court’s October 2, 2020, ruling in In re Certified Questions essentially removed the Governor’s authority to issue any executive orders related to COVID-19 after April 30, 2020. The Court made clear on October 12, 2020, that the orders are “of no continuing legal effect.” Now that the Safe Start orders and Workplace Safety requirements are no longer effective or enforceable, what should a business or public body consider as it moves forward? What restrictions are in place?

On Saturday, September 12, 2020, the Internal Revenue Service (“IRS”) updated a marijuana industry frequently asked questions (“FAQ”) page that provides relief to state-legal cannabis businesses. The FAQ announces that state-legal cannabis businesses can reduce their gross receipts by using an alternative accounting method under Section 471 of the Internal Revenue Code (the “Code”).

On September 2, 2020, we issued an e-alert discussing the deferral of the employee portion of Social Security taxes (“SS Tax Deferral Program”). However, on September 3, 2020, the IRS confirmed that the SS Tax Deferral Program is optional and that employers may, but are not required to, utilize this relief. Thus, the employer, and not the employee, can decide whether or not it will participate in the SS Tax Deferral Program.

On August 13, 2020, President Trump issued a Presidential Memorandum directing the Secretary of the Treasury to use his authority to defer the withholding, deposit and payment of the employee portion of Social Security taxes (“SS Tax Deferral Program”). On August 28, 2020, the Secretary of the Treasury and IRS issued Notice 2020-65 (“Notice”) to implement the SS Tax Deferral Program. This FAQ-style alert addresses the key provisions of the Notice and the many remaining uncertainties about the SS Tax Deferral Program.

On August 27, Michigan Governor Gretchen Whitmer released Executive Order 2020-172, entitled “Protecting workers who stay home, stay safe when they or their close contacts are sick,” which replaces Executive Order 2020-166. The new executive order is nearly identical to the one it replaces, with two important differences. First, the new order recognizes that an employee’s symptoms could be explained by other medical conditions, which should not prevent an employee from reporting to work. Second, the new order recognizes that an employee should not be required to stay home simply because he or she displays one of the more innocuous symptoms of COVID-19 on its own.

Not surprisingly, Dykema's volume of closed deals for the first half of the year slowed from last year’s record pace. What was somewhat surprising is that the volume of transactions in the Dental Services Organization (DSO) space did not seem to miss a beat. All told, we closed 18 DSO deals, including four in the adjacent Medical Services Organization (MSO) space (in this case, all Optometry), slightly ahead of last year’s pace. In addition, we closed deals in the hospitality, cell tower and litigation services sector. Overall, the transactions trended smaller, averaging $16M, down from 2019’s average of $117M.

Businesses across the country have wondered how the new Special Inspector General for Pandemic Recovery (SIGPR) will enforce the CARES Act’s loan requirements, especially with the large number of loan and forgiveness applications. Until recently, the answer was unclear. Press releases have announced Memoranda of Understanding (MOU) between SIGPR and three U.S. Attorney’s Offices to collaborate on investigating and prosecuting CARES Act violations. With this strengthened enforcement model being put in place, CARES Act loan recipients need to ensure their eligibility for loan forgiveness and double-check their documentation of that eligibility.

On Monday, August 3, 2020, a New York federal judge issued a decision invalidating portions of the DOL’s regulations implementing the Families First Coronavirus Relief Act (“FFCRA”). The decision’s impact changes the legal landscape employers confronting FFCRA compliance—a landscape that is unstable as the DOL and the courts sort out the legality of the disputed regulations.

On July 29, 2020, Governor Whitmer issued Executive Order Nos. 2020-160 and 2020-161. Executive Order 2020-160 replaces the prior executive orders that address stay home, stay safe restrictions in Michigan. In general, this Order moves the State to a more uniform approach to business operations and restrictions. Northern Michigan will experience the most change under the new Order as Regions 6 and 8 join the rest of Michigan with a 10-person limit on indoor gatherings and the closure of all bars. Executive Order No. 2020-161 addresses workplace safety requirements and replaces Executive Order No. 2020-145.

Eligible dental providers may now apply for Provider Relief Funds, but the deadline to do so, July 24, 2020, is quickly approaching. On July 10, 2020, the U.S. Department of Health and Human Services (“HHS”) announced an additional $4 billion in relief payments to healthcare providers and, notably, opened its provider portal to dental providers.

In order to respond to rising COVID-19 cases in Michigan, Governor Whitmer issued Executive Order No. 2020-147, which imposes new mask requirements on individuals in Michigan as well as on Michigan businesses. Importantly for businesses, the new Executive Order provides that no business that is open to the public may provide service or allow a customer to enter its premises unless that customer is wearing a facial covering. As the Order states, “no shirts, no shoes, no mask—no service.” Businesses that do not comply could risk having their business license to operate temporarily suspended.

The State of Michigan has allocated $100 million of CARES Act funding to implement the Michigan Small Business Restart Program to provide grants to Michigan businesses directly impacted by COVID-19. The grants, up to $20,000 each, will be administered by 15 Economic Development Organizations (EDOs) covering all 83 counties in the state. 47. Funds can be used as working capital to support payroll expenses, rent, mortgage payments, utility expenses or other similar expenses.

In a decision contrary to current Patent and Trademark Office (“PTO”) rules, the United States Supreme Court has found the mark BOOKING.COM as a whole is not generic and that combining a generic term with “.com” does not necessarily result in a composite term that also is generic. While the scope of protection against competitors is likely narrow, the Court’s decision opens the door to registering marks consisting of generic marks with top-level domains. After the Court’s decision, brand owners can expect the PTO to issue further guidance.

On June 30, 2020, the Senate passed an extension of the Paycheck Protection Program (PPP) to keep the program operating until August 8, 2020. On July 1, 2020, the House also approved the extension for the program which was set to end on June 30. The President is expected to sign the extension shortly. The extension permits eligible businesses to continue to apply for PPP loans through August 8, 2020, but does not permit existing PPP borrowers to apply for new loans or increase their borrowings under existing loans.

Once again, the SBA is doling out guidance in small doses, solving some questions, creating new questions and leaving most questions still unanswered. On June 16, 2020, the SBA issued a revised PPP Loan Forgiveness Application, along with related instructions, and new PPP Loan Forgiveness Application Form 3508EZ, also with related instructions. On June 22, 2020, the SBA issued Revisions to Loan Forgiveness Interim Final Rule and SBA Loan Review Procedures Interim Final Rule. The following is a list of our key observations on these latest developments.

The U.S. Copyright Office has issued a final regulation (37 CFR §202.4) permitting a single, “group” registration for “Short Online Literary Works.” To be eligible, each of the works included in the registration “must be published as part of a website or online platform, including online newspapers, social media websites, and social networking platforms.” Further, each covered work must be comprised mainly of text (this requirement distinguishes the category of covered works from the broader definition of “literary works,” which includes words, numbers, symbols). Thus, the registration will cover only copyright rights in the text of each individual work. No other copyrightable aspect will be protected, including as a compilation or collective work.

Following up on Dykema’s alert from June 18, 2020, President Trump signed a Proclamation that extends his April 22, 2020, 60-day ban on immigrant workers entering the United States until December 31, 2020. In addition, it also added those with H-1B, H-2B, L-1 and J-1 visas and any foreign national accompanying them to this ban. The Proclamation states this was done to address, in part, high unemployment levels due to the coronavirus pandemic.

Several reports, including one by the U.S. Chamber of Commerce, indicate President Trump may issue a Proclamation limiting or prohibiting the entry into the United States of foreign nationals holding H-1B, H-2B, L-1 and J-1 visas. The U.S. Chamber has reported the ban could last 120-180 days and that it would be followed by possible new regulations that would affect the staffing of U.S. companies.

Unexpectedly siding with the liberal wing of the Court, Justice Neil Gorsuch penned a 6-3 decision in Bostock v. Clayton County, holding that Title VII’s prohibition on sex-based discrimination also covers sexual orientation and gender identity discrimination. The Court’s decision dealt a historic victory for proponents of expanding gay and trans protections for workers under Title VII of the Civil Rights Act of 1964. It is clear that this decision will have wide reaching implications for employers.

On May 27, 2020, the Internal Revenue Service (“IRS”) issued Notice 2020-41 (“Notice”) providing COVID-19 relief for businesses seeking to qualify for the production tax credit for renewable energy facilities and investment tax credit for energy property. Pursuant to the Notice, the IRS extended Continuity Safe Harbor for qualified energy projects that began construction in calendar year 2016 or 2017 and provided for a Three-and-a-half Months Rule Safe Harbor with respect to services or property paid for by the taxpayer on or after September 16, 2019, and received by October 15, 2020.

In response to the ongoing COVID-19 crisis and its resulting adverse effects on the income levels of Michigan residents, a package of bills was introduced earlier this month to provide additional protections for residential tenants and owner-occupants during a declared state of emergency. The proposed bills would amend existing laws or enact new legislation to restrict the ability of landlords, mortgagees, and taxing authorities to pursue evictions or foreclosures during a declared state of emergency.

On June 4, 2020, the Internal Revenue Service released Notice 2020-39 providing relief for Qualified Opportunity Funds (“QOFs”) and their investors in response to the ongoing COVID-19 pandemic. The Internal Revenue Service also updated its Qualified Opportunity Zone Frequently Asked Questions.

Pursuant to the Paycheck Protection Program Flexibility Act of 2020, which was enacted into law on June 5, 2020, taxpayers who take out a loan under the Paycheck Protection Program of the Coronavirus, Aid, Relief and Economic Security Act (“CARES Act”), all or a portion of which is subsequently forgiven, may now also take advantage of the tax deferral of the employer’s portion of the Social Security taxes under Section 2302 of the CARES Act.

Governor Whitmer issued Executive Order No. 2020-110 on June 1, 2020. With this Executive Order, more businesses can reopen across the State of Michigan. Not all businesses, however, will be able to fully reopen yet. And all businesses are subject to the workplace safety guidelines set forth in Executive Order No. 2020-97.

On May 28, 2020, the Internal Revenue Service issued proposed regulations providing details for companies that may qualify for carbon oxide sequestration tax credits for qualified carbon oxide that has been securely captured, stored or disposed of pursuant to Section 45Q of the Internal Revenue Code.

Under the Bipartisan Budget Act of 2015 (“BBA”), all entities classified as partnerships, including limited liability companies and limited partnerships, became subject to the centralized partnership audit regime for taxable years beginning January 1, 2018, unless otherwise elected (the “BBA Rules”). Whether or not the parties choose to revise their partnership agreements to provide for the application of the BBA Rules, buyers and sellers should negotiate and include in the Membership Interest Purchase Agreement (“MIPA”), or any equivalent sale agreement, express provisions related to the BBA Rules, the push out election and indemnification from any future tax liability arising from a BBA audit.

Through the recently issued Paycheck Protection Program (PPP) Loan Forgiveness Application and Interim Final Rule on Loan Forgiveness, the Small Business Association (SBA) has once again demonstrated that the contours and requirements of the PPP program are constantly evolving. The SBA’s recent Interim Final Rule on SBA Loan Review Procedures provides some insights on how the SBA will enforce PPP qualification and forgiveness requirements. More agencies are getting involved in enforcement, as shown by the Securities and Exchange Commission (SEC) now reviewing quarterly disclosures to see if they align with representations made in applying for PPP loans. These ever-evolving standards, plus the possibility of Congress extending the time frame in which the PPP funds must be spent, all underscore the importance of effective PPP compliance programs. Given the increased risk of whistleblower complaints related to COVID-19, especially those alleging an improper PPP necessity certification, now is the time for companies to review and, where necessary, reinforce their compliance programs and anti-retaliation policies.