The $900 billion stimulus that Congress passed last month offers some key avenues of support for struggling retailers, including $248 billion to the Small Business Administration to facilitate another round of paycheck protection program loans.
With control of the Senate shifting Wednesday, as Democrats Jon Ossoff and Raphael Warnock prevailed in the Georgia runoff elections, retail attorneys are hoping that more help will be forthcoming from Congress and the incoming Biden administration.
“I think with Georgia, [Congress] will really have an impact, because I think the new Biden administration will do much more for retail,” said Staci Jennifer Riordan, partner at Nixon Peabody LLP.
Part of that would also require boosting stimulus payments to citizens, she said. It’s unclear how the latest stimulus bill will affect consumer spending, as it has dispensed the much debated sum of $600 in stimulus payments to citizens, though it also includes additional unemployment aid, rental assistance and some temporary relief from evictions. With Biden and the Democrats in charge, there could be hope for another round of stimulus to follower sooner, and potentially with higher stimulus payments.
Meanwhile, the latest package renews the paycheck protection loan program, which had rolled out under the CARES Act in March, when pandemic-related lockdowns were going into place around the country. The program, overseen by the Small Business Administration, is meant to provide forgivable loans to businesses, with the ostensible mission of preventing layoffs and helping businesses with rent. The original PPP loans were made available for companies with less than 500 employees, while the new round restricts it somewhat to companies with less than 300 employees. But the goal again is to cover roughly two months of payroll expenses.
The latest legislation includes tax benefits related to PPP loans, including provisions to make it tax deductible to spend money with forgiven loans, a benefit that wasn’t as apparent during the earlier round of PPP loans.
Companies that applied for PPP loans during the earlier round would be able to apply again under this second stimulus package, particularly if they’re able to show continuing financial difficulties, attorneys said.
“This will save small businesses billions of dollars,” said Ilana Lubin, partner at Crowell & Moring LLP.
At the same time, apparel retailers continuing to see low foot traffic as the coronavirus pandemic spreads in the U.S. need more robust financial support and a resolution to the ongoing question of how to handle rent payments, said retail attorneys.
Retailers who managed to avoid bankruptcy court had to work out concessions with landlords, which in some cases involved deferring rent payments.
“So it’s a very challenging time, and the money’s great, the clarifications are fabulous, but I don’t know if it’s enough to save the small businesses that are really hurting,” said Riordan.
“Congress needs to figure it out in a way that’s perceived as fair, and they could fix that portion,” she said. “It’s retail leases that are going to end up putting people out of business.”
The bill’s other provisions include potential longer-term and indirect benefits for retailers, in the form of potential tax breaks of renewable energy. The bill provides $7 billion to support broadband internet, including $300 million focused on rural areas.
“When you think about the trends in retail with respect to sustainability, to the extent retailers can make investments, there is incentive to invest in sustainable energy,” said Lubin.
Separately on Wednesday, the Department of Labor put out a final rule that is expected to expand the definition of who qualifies as an independent contractor rather than an employee. The rule, if it were to go into effect, is expected to affect not just workers at gig-economy companies, but delivery drivers, cleaning crews and other contract staff.
“It expands the definition of independent contract for many workers,” said Michael Hayes, Associate Professor of Law at the University of Baltimore.
Workers categorized as independent contractors are generally exempt from federal labor law protections including minimum wage, overtime and even safety protections under the Occupational Safety and Health Act.
But the DOL’s final rule isn’t slated to go into effect until this March, and the Biden administration is expected to issue a regulatory freeze that would stall last-minute rule changes during the final weeks of the Trump presidency.