DSOs Present Challenges For Dental Practices Seeking COVID-19 Loans Under the CARES Act

nat rosasco • April 18, 2020

Like almost every other business and profession, dental practices have been decimated by the COVID-19 pandemic. Stay-at-home orders, social distancing, and the limitation of economic activity to “essential services” means that dentists are deferring most routine, elective, or non-emergency procedures. With doors closed and chairs empty, practices find themselves in untenable positions in terms of paying their workforce, rent, utility, and other obligations.

While the federal government’s response to the current crisis has been lacking in many respects, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act passed at the end of March does provide for financial assistance to cash-strapped businesses, including dental practices. Among the many aspects of the CARES act, eligible practice owners can obtain low-interest and potentially forgivable loans for coronavirus losses through the Paycheck Protection Program (PPP).

But for practices that are part of a dental services organization (DSO), qualifying for a PPP loan can be a particularly tricky endeavor. Loans are only available to businesses with less than 500 employees, so can or how does a small practice qualify for a PPP loan if they are part of or affiliated with a large DSO with too many employees to participate in the program?


Paycheck Protection Loan Basics

The PPP sets aside almost $350 billion in funds for emergency Small Business Association (SBA) loans to help qualifying businesses cover payroll for their workforce as well as pay for other operational costs such as rent and utilities.

Dental practice owners can apply for a PPP loan at any lender approved to participate through the existing SBA 7(a) lending program, as well as at any other institution approved by the U.S. Department of the Treasury. Participating lenders began accepting applications on April 3, and businesses can apply for a PPP loan until June 30, 2020.

The maximum amount any small business or practice may borrow is 250 percent of its average monthly payroll expenses incurred during the one-year period before the date on which the loan is made, up to a total of $10 million. This amount is intended to cover eight weeks of payroll expenses and any additional amounts needed to make payments towards debt and certain other identified obligations such as covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks following the loan.


The purpose of the Paycheck Protection Program is to help businesses retain employees at their current base pay. If the borrower keeps all of its employees and uses the loan proceeds for the above-described purposes, the entire loan may be forgiven. There is no requirement that the employer have work for the employees in order to pay them.


The Problem For Practices In DSOs: Too Many Employees to Qualify For a PPP Loan

With some exceptions, PPP loans are only available for small businesses that employ 500 or fewer employees. For dental practices that are part of a dental services organization, this limitation may or may not pose an insurmountable barrier to loan eligibility as the SBA may count the total number of employees of the DSO, not the individual practice, in determining whether a practice qualifies.


On April 3, 2020, the SBA issued guidance regarding how it treats practice management companies like DSOs when evaluating employee headcount. For purposes of determining the number of employees of a PPP loan applicant, the SBA considers the applicant together with its “affiliates.” As such, eligibility hangs on whether or not the SBA finds a practice and its DSO to be “affiliates.” And that determination centers on control.


As the SBA states in its guidance:

“Concerns and entities are affiliates of each other when one controls or has the power to control the other, or a third party or parties controls or has the power to control both. It does not matter whether control is exercised, so long as the power to control exists.”


There are four circumstances in which the SBA will find that there is control over the practice such that the practice would be considered an affiliate. The one most applicable to DSO arrangements involves control of management. Specifically:

“Affiliation… arises where a single individual, concern or entity controls the management of the applicant concern through a management agreement.”



Most dental practices that are part of a DSO are also parties to management agreements that give the DSO a substantial say in the management and operation of the practice. As such, practice owners should consult with an experienced dental practice attorney who can review any agreement as well as the overall relationship with the DSO to determine what, if anything, needs to be changed to reduce the chances that the SBA finds the two entities to be affiliates. As noted, the deadline for applications is June 30, so practices should take all necessary steps as soon as possible to position themselves for approval for these vitally needed funds.

Employers Can Require COVID-19 Vaccinations For Most Employees

By nat rosasco • February 25, 2021
As this relentlessly awful year mercifully draws to a close, a light at the end of our pandemic tunnel is rapidly approaching. COVID-19 vaccines are poised for approval, and it is expected that distribution will begin in earnest shortly. But no matter how much and how confidently the FDA and other health experts proclaim these vaccines to be safe and effective, there are large numbers of Americans who say they won’t get the shot when it becomes available. The most recent Gallup poll found that only 63 percent of Americans say they are willing to be inoculated against the disease. Many of those who don’t want to get vaccinated will soon find out that they work for an employer who feels differently. Those employers may also tell them that they either need to get the vaccine or need to find a new job. And, in most cases, employers may be well within their rights to terminate employees who refuse to take the COVID-19 vaccine. Mandatory Vaccinations Are Not New Companies that have spent the better part of the year – and lots of money - trying to keep their workplaces COVID-free see the vaccine as the apex of those efforts. With a fully vaccinated workforce, business owners can operate without disruption and provide employees, customers, clients, and patients with confidence and peace of mind. But all of those benefits of the vaccine only accrue to fully vaccinated workforces. So, many companies may mandate that employees get their shot as a condition of continued employment. By doing so, they are following a legally sound path that predates the current pandemic. Well before anyone had heard of coronavirus, plenty of employers, primarily in the health care sector, required employees to get the flu vaccine and vaccinations against other infectious diseases. Most public school districts also require proof of vaccinations before a student can enroll and attend classes. Since most employees in Illinois work on an “at-will” basis, they can face termination for almost any reason not expressly prohibited by federal, state, or local laws. Generally, no law stands in the way of an employer requiring the COVID-19 vaccine for its workers. ADA and Religious Exceptions However, employers who make vaccines mandatory need to be mindful that employees with legitimate health or religious concerns about the vaccine may be protected from termination and other adverse employment actions if they refuse the shot. But these exceptions don’t necessarily apply just because someone doesn’t believe in vaccines generally (“anti-vaxers”) or thinks that forcing them to get vaccination is an infringement on their liberties. Employees who have a disability recognized under the Americans with Disabilities Act (ADA) that prevents them from taking the coronavirus vaccine cannot be forced to get the vaccine, so long as their exemption does not impose an “undue hardship” on the employer. Such disabilities in this context may include a compromised immune system or an allergy to an ingredient in the vaccine. While there has been no definitive guidance on the subject, one could credibly argue that an employee’s refusal to get vaccinated is an “undue hardship” if it places the health and safety of other employees and visitors at increase risk of infection. Even in such cases, however, an employer may need to make a “reasonable accommodation” for the employee, such as allowing them to work from home. Similarly, the anti-discrimination provisions of Title VII of the Civil Rights Act of 1964 may protect a worker if their “sincerely-held religious beliefs” preclude them from getting a vaccination. Such beliefs do not include political or personal views. The burden is on the employee to demonstrate the legitimacy of their religious objections to the vaccine. More Than Legal Issues To Consider Even when an employer is within their legal rights to require employees to get the COVID-19 vaccine, other considerations may weigh against such a mandate. For example, they may need protection against an employee who has an adverse reaction, even if they signed a waiver upon receiving the shot. A vaccination requirement may also get an adverse reaction from employees generally as well as the general public if it seems heavy-handed and overreaching. Of course, those that decide against a mandate face risks if someone does contract the coronavirus in the workplace and sues. Please Contact Grogan Hesse & Uditsky With All Of Your COVID-Related Employment Questions If you have questions or concerns about how to handle vaccinations or other employment issues related to COVID-19, please call us at (630) 833-5533 or contact us online to arrange for a consultation.

Are You Eligible for the Second Round of PPP Loan Forgiveness?

By nat rosasco • January 11, 2021
The Paycheck Protection Program (PPP) is back , offering a second round of loan forgiveness to new borrowers and qualified second-time PPP borrowers. The second round of PPP loans has earmarked up to $284 billion to support business owners' payroll costs and other eligible expenses through March 31, 2021. Loans will be available to first-time participants on Monday, January 11, and existing PPP participants on Wednesday, January 13. First Draw PPP Loan Eligibility Borrowers that did not participate in the first round are generally eligible for a First Draw PPP Loan if they were in operation on February 15, 2020, and fall into one of the following categories: Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans. Eligible self-employed individuals (including sole proprietors and independent contractors). Non-profit organizations, including churches. Accommodation and food services operations with no more than 500 employees per location. Sec. 501(c)(6) business leagues with no more than 300 employees that do not receive more than 15% of its income from lobbying. Qualifying news organizations with 500 or fewer employees per location. Second Draw PPP Loan Eligibility Existing PPP participants are generally eligible for a Second Draw PPP Loan if the borrower: Used or will have used its First Draw PPP Loan as authorized. Has no more than 300 employees. Can prove it has suffered at least a 25% reduction in gross income between the same quarters in 2019 and 2020. Our team is committed to monitoring new developments with the PPP and providing you with the information you need. It is essential that your small business consults with knowledgeable corporate attorneys , financial advisors, and accountants on your PPP eligibility and forgiveness applications. If you have any questions about the new eligibility requirements or any other issues involving the PPP, please feel free to call or email us.

Amendments to PPP Loan Forgiveness

By nat rosasco • June 5, 2020
Many businesses that received Paycheck Protection Program (“PPP”) funds are coming to the end of their respective eight-week time periods (“Expenditure Period”) during which they must use the PPP funds to obtain forgiveness under the CARES Act. Unfortunately, many of these businesses have found it difficult to reopen and remain fully operational throughout the Expenditure Period and consequently to meet spending thresholds necessary to obtain full forgiveness. Luckily for these businesses, some much needed flexibility is on its way. Paycheck Protection Program Flexibility Act On June 5th, the Paycheck Protection Program Flexibility Act (“PPPFA”) was signed into law. The PPPFA made the following changes relevant to PPP loan forgiveness: Extends the Expenditure Period from eight weeks to the earlier of twenty-four weeks from the date of the loan origination or December 31, 2020. Reduces the required payroll spending amount to a minimum of 60% on payroll instead of the current 75% minimum requirement. This would allow businesses to use the remaining 40% of the PPP funds on rent and other operational items as needed. Extends the deadline for workers to be able to be rehired to December 31, 2020 instead of the current cutoff of June 30, 2020. Extends the PPP loan to a five-year term instead of the current two-year term. As any amendments governing the use and repayment of PPP loans may be vital to a small business’ ability to continue to operate and successfully plan for the future, our team will continue to keep you up to date on the on-going developments. As always, it is important to consult with informed attorneys, financial advisors, bankers and accountants on how best to use your PPP funds. Should you have any questions, don’t hesitate to call or email us.
Show More