Document Type
Article
Abstract
Imagine it is late March 2020, and you own and manage a small transportation company that employs independent contractor drivers. In addition to managing the upheaval that has occurred to all small businesses across the country with the onset of the COVID-19 pandemic, you worry that your workers will not be able to keep food on the table. You hear about a new government program—the Paycheck Protection Program (“PPP”) created by legislation known as the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)—that is meant to “keep[] American workers paid and employed.” You understand that the United States Small Business Administration (“SBA”) has designated certain lenders to facilitate low-interest “PPP Loans,” which provide funds to qualifying businesses based on their payroll costs from 2019. Better yet, your bank tells you that as long as the loan proceeds are spent on certain specified payroll and non-payroll business costs, your business will receive full forgiveness of the PPP Loan, which will make the money more like a grant. You fill out the SBA’s PPP Loan application, and upon the guidance available to you at the time and the advice of your bank, you include independent contractor payroll calculations in your loan amount calculation. Based on your payroll costs from 2019 (including independent contractor payroll), you calculate your loan amount to be around $1 million. The loan is swiftly approved, and the loan funds are deposited into your business account within days. You use the loan funds for approved payroll and non-payroll costs. Fast forward one year, and you have applied for full forgiveness of the PPP Loan. However, the SBA denies your application, explaining that small businesses were forbidden from including independent contractor payroll in their PPP Loan amount calculation. Then, your bank informs you that your loan payments will become due shortly thereafter. Because your PPP Loan had a maturity date of two years, your first monthly payment will be tens of thousands of dollars. Had you known you would not be able to obtain forgiveness of your loans, you would never have applied in the first place and would have considered other means to weather the COVID-19 pandemic.
Recommended Citation
Mary Claire Davis,
Keeping All American Workers Paid and Employed? How Small Businesses with Independent Contractors Feel Slighted by the Paycheck Protection Program and What Can be Done,
126
W. Va. L. Rev.
537
(2024).
Available at:
https://researchrepository.wvu.edu/wvlr/vol126/iss2/6