COVID-19 Coronavirus and Resources for Your Business

Coronavirus COVID-19 and related public health measures are causing business disruptions.

Note: This post was originally published on March 18 and has been periodically updated as additional information has become available.

First things first: Kelcey and David and their families are currently well. We have relatives who are currently in self-isolation due to suspected contact with COVID-19, but so far, these relatives have no symptoms.

Second, we are continuing to work remotely and can work with clients by email, phone, or video chat. We are suspending all in-person meetings for the moment. You can contact us as usual to work on your legal matters.

Third, we know this is a very scary time for many of our clients. We hope that you are staying home and staying safe. Small business owners are expecting to be particularly hard hit in this crisis, so here is a list of resources for your business and your personal life (which we will update as we learn of additional resources):

National and International Resources

The Small Business Administration is offering the following assistance:

  • Disaster loans, low-interest loans to help small businesses cover operating expenses after a declared disaster.
  • Local assistance in the form of free counseling, mentoring, and training services nationwide.

The Internal Revenue Service has set up a Coronavirus Tax Relief page to help individuals and businesses explore their options for addressing tax issues. For the moment, the tax payment deadline has been extended to July 15, 2020, as has the filing deadline. You can also find general information about disaster assistance and emergency relief for individuals and businesses on the IRS website.

The Centers for Disease Control and Prevention have set up a page to help explain how to clean and disinfect to prevent the spread of COVID-19 in households with suspected or confirmed infections as well as specific recommendations for high-risk populations and travelers.

The World Health Organization has an information page on the COVID-19 pandemic with travel advice, situation reports, media resources, information about research and development, frequently asked questions, and mythbusters.

The Occupational Safety and Health Administration has set up a page with guidance about how to control and prevent the spread of COVID-19 in various types of workplaces.

The Department of Labor has a page with guidance about how to handle employment issues relating to workplace safety, wages, paid leave, and unemployment insurance. With respect to the new Families First Coronavirus Response Act, Public Law No. 116-127, DOL has announced that it is working with the IRS regarding the tax-related provisions and will be providing emergency guidance for small businesses with fewer than 50 employees regarding exemptions. We will update with links when the guidance becomes available.

The Federal Emergency Management Agency has a page dedicated to its Coronavirus response.

You can also check disasterassistance.gov, a one-stop Web portal that consolidates information from 17 US government agencies, and benefits.gov, an online resource to help you find federal benefits you may be eligible for in the United States, for information about individual and business assistance that may be available in your area.

The United Way is offering assistance finding food, paying housing bills, accessing free childcare, or other essential services, through some of its local affiliates.

Iowa Resources

The State of Iowa has created a general information page for coronavirus in the state.

Iowa Workforce Development has a page for employers and employees with questions about unemployment insurance. Governor Reynolds has announced that the due date for unemployment taxes is being extended from April 30 to July 31 to help small businesses. As of March 30, unemployment insurance will soon be available to self-employed, independent contractors, nonprofit employees, and gig economy workers; you can file a claim now.

The Iowa Economic Development Authority has grants of $5,000 to $25,000 available for small business relief (application deadline: March 31 at noon) for businesses that meet the criteria: 1) suffering COVID-19-related economic damage; 2) had 2-25 employees prior to March 17, 2020; 3) physical location in Iowa. There are also grants of $5,000 to $10,000 available to support targeted small businesses with no employees. To be eligible, your business must be certified or have a certification application in process by April 10; the fund will accept applications until it is exhausted. There is also a page for general information and updates. Be sure to check regularly for updates on resources available to small businesses such as webinars about how to apply for loans or grants.

The Iowa Department of Public Health has the following resources:

Check for your local Iowa United Way to see what resources are available in your area.

Minnesota Resources

The Minnesota Governor’s Office has issued a stay-home order effective March 27 – April 10. There is an FAQ page about this order so you can figure out whether and how your business can continue to operate.

Minnesota Employment and Economic Development has a general information page with information for both employees and employers linked, including information about unemployment insurance. Minnesota is waiving raises to unemployment taxes for employers whose employees are collecting unemployment because of COVID-19; the FAQs in the previous link suggest strategies for avoiding layoffs. As of March 27, Minnesota will be making Small Business Emergency Loans available in the near future (check regularly to see whether the program is in effect now). As of March 30, unemployment benefits will soon be available to the self-employed, gig workers, and independent contractors, but the state is awaiting federal guidance for implementation; you can learn more at this page.

The Minnesota Department of Public Health has the following resources:

Minnesota nonprofit WomenVenture has compiled lists of resources for child care providers, for small businesses, and for peace of mind.

Check for your local Minnesota United Way to see what resources are available in your area.

Other Resources

Biomedical illustrator Assata Worrell of Legacy Biostudios created a free poster showing proper handwashing technique that you can download and hang at your office or home, or share with your community.

Facebook is offering cash grants to small businesses worldwide.

Todoist has these tips for parents working from home with kids present.

If you know of any other resources that we missed, please comment below.

Originally posted 3/18/20. Updated 3/19/20, 3/21/20, 3/23/20, 3/24/20, 3/26/20, 3/27/20, and 3/30/20.

Employment Non-Compete Clauses and Liquidated Damages in Iowa

Contracts & Licensing

If you have ever signed an employment agreement, or asked your employees to sign one, it probably had a covenant not to compete with the employer if the employee leaves the business. These clauses are usually called “non-competes.” They typically limit the time and the geographic area within which the former employee can perform the same kind of work and/or work in the same industry. But how enforceable are they? A recent Iowa Court of Appeals decision, Cedar Valley Medical Specialists, PC v. James Wright, M.D., shows both how these clauses are used and what the courts think of them.

Wright, a cardiothoracic surgeon, entered into an employment contract with Cedar Valley Medical Specialists, PC, in Black Hawk County, Iowa. In the contract, Wright agreed that if he left the employment he would not practice medicine within 35 miles of Black Hawk County for a period of two years after leaving. He also agreed that if he did not comply with the restrictions, he would pay as liquidated damages the greater of $100,000 or his last 6 months’ salary with the group.

Wright retired from the medical group and went to work for a local hospital the next day. The medical group sued to enforce the agreement and won in the district court. Wright appealed, and the Iowa Court of Appeals ruled on his case on October 9, 2019. 

The court began its analysis by stating the Iowa law on restrictive covenants, saying:

Because restrictive covenants involve the partial restraint of trade, we construe them against the party seeking enforcement and approve them with some reluctance. We apply a three-pronged test to determine whether an employment contract with a restrictive covenant is enforceable: (1) Is the restriction reasonably necessary for the protection of the employer’s business; (2) is it unreasonably restrictive of the employee’s rights; and (3) is it prejudicial to the public interest?

Cedar Valley Medical Specialists, PC v. James Wright, M.D.

As you can see, the courts do not automatically enforce these contractual provisions, but rather engage in a balancing of interests among the employer, the employee, and the public good. Moreover, the burden is on the employer to prove it is entitled to enforce the covenant.

As to the first prong, the court found the covenant was reasonably necessary to protect the employer. The market for Wright’s specialty was limited; Wright had confidential information about the medical group’s operations; and the group had supported, promoted, and invested heavily in Wright. When he left, the group lost the revenue he would have brought in.

The court next found that the restrictions were reasonable as to time and geographic area.

Wright argued that the public interest favored striking the clause. If he, the only cardiothoracic surgeon within 50 miles, was prohibited from practicing his specialty, there would be none. Lives hung in the balance. The court rejected this argument, noting that there were only three or four emergency cases annually and there were other providers close enough by. Besides, the former employer was not seeking an injunction (that is, it was not trying to prohibit Wright from practicing medicine); it was asking to enforce the liquidated damages provision to make up the losses it suffered when Wright went to work for a competitor. 

The second part of the analysis of this non-compete clause was the reasonableness of the liquidated damages provision. Liquidated damages are damages agreed to when a contract is made that will be paid if a party breaches the contract. They are enforceable if: 1) they were a reasonable estimate, at the time the contract was entered into, of the damages that will be suffered if the contract is breached; and 2) the amount of actual damage is difficult to determine. Given the investment the former employer made in Wright and the lost revenue it would likely suffer if Wright were to compete with them, the court found the clause to be reasonable and enforceable.

If you need assistance with an enforceable non-compete for your employees, feel free to contact us for assistance.

Agricultural Leases, or A Horse is a Horse

A single horse

A horse, a horse! My kingdom has a horse.*

If you have been following the United States Senate hearings on the nomination of Judge Neil Gorsuch for the Supreme Court, you may have heard some discussions about how judges should read statutes and the constitution. Without getting too technical, while at the same time trying to avoid the risk of oversimplification, the Senators have been talking principally about two schools of thought. One is that judges should read the words and apply them, period, whatever the result. The second school is that judges should read the words in the context of the problem the writers were trying to resolve and give them a meaning that the writers intended, or would have intended if they had foreseen the problem in the case before the court, even if the writers did not use exactly the right words.

The Iowa Supreme Court last month decided a case that is an instructive example of how these two theories play out when courts read statutes that, if applied according to their plain meaning, could lead to absurd results. The case involved a statute addressing the definition of agricultural leases. The particular question was, “Does a single horse make a farm?”  Porter vs. Harden (Iowa S. Ct. No. 15–0683, Filed March 10, 2017 Amended March 13, 2017). In answering the question, the majority of the court employed the context based rule whereas the dissent, and the Iowa Court of Appeals before it, employed the plain meaning rule.

The question arose in the setting of a lease termination and the answer was important because Iowa law gives tenants differing protections depending on the type of property being leased and the duration of the lease. For example, residential tenants are given more protections than commercial tenants because generally residential tenants have much less bargaining power and sophistication than commercial tenants who have the means to negotiate with their landlords.  

Farm tenants, since 1939, have been given certain statutory protections because of the seasonal nature of the business and the historical importance of agriculture to Iowa. Particularly, in terminating a farm tenancy, the landlord must follow timelines set by the legislature.  Generally, the law requires written notice of termination to be given on or before September 1, with termination to occur the following March 1. This assures that there is sufficient time for the tenant to harvest growing crops and for the parties to negotiate a new lease or find other land to rent, or find another tenant. A 2006 amendment to the statute added grazing to the existing list of agricultural activities.

The parties in the Porter case had a month to month lease. In those cases, either party has the power to cancel the lease by giving 30 days notice to the other party, if the subject of the lease is not agricultural land. Porter, the landlord, gave Harden, the tenant, notice that it was canceling the lease in 30 days, thus following the legal requirements for terminating a month to month lease. The tenants on this six-acre property, which was their primary residence, claimed they were entitled to the much longer notice required to terminate a farm tenancy because they had a horse grazing on the property. They claimed that a close reading of the statute regarding farm leases required only one grazing animal to qualify the property as a farm. The district court did not agree and ruled in the landlord’s favor saying, “the keeping of one 38-year old horse does not make this a farm tenancy.” The tenant appealed.

The Iowa Court of Appeals reversed the district court and ruled that, even though it might be an absurd result, as the statute was written, the definition of livestock “means an animal …”. Reading the statute strictly, one old horse could make a farm tenancy.  The landlord asked the Supreme Court to review the Court of Appeals’ decision.

The Supreme Court looked again at the statute and decided the Court of Appeals was reading the statute too literally. To determine what the legislature meant required reading the statute in context of its purpose as well other statutes addressing the same or similar subject matter. It then said, “just as we would not conclude that someone with a small vegetable garden ‘produces crops . . . on the land’ …, we think it would be questionable to hold that someone keeping an old mare at the homestead ‘provides for the care and feeding of livestock on the land’ within the meaning of the same statute.”  

The Court emphasized that it would assume the legislature intended a reasonable interpretation of the statute and imprinted a primary purpose test on the statute. That is, one must look at the property to see if its main object was the growing of crops or the feeding of livestock. By accepting the “one old mare” argument, any tenant anywhere could create a farm merely by bringing an old horse or a few chickens onto the property. Probably not what the legislature intended.

However, one justice dissented essentially adopting the Court of Appeals reasoning. When a statute’s language is plain and unambiguous, a court should look no further than the statute. Here the statute says “an animal.” Even though the result may be absurd, it is up to the legislature to fix it, not the courts. The courts have only to apply the statute as written, even if poorly written. If the legislature does not like the result, it can rewrite the statute.

If you have questions about this case, or other issues involving leases, you need not hesitate to contact us.

Apologies to William Shakespeare’s play, Richard III,  Act-V, Scene-IV.