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The New “Business as Usual” with COVID-19

Written by Tara Sweeney

Food & Facilities Episode on The New “Business as Usual” with COVID-19

The COVID-19 virus is forcing businesses in critical industries, like food processing and manufacturing, to make many changes very quickly. Closures and new operating procedures are popping up throughout all of commerce, and new information is constantly emerging. Updated versions of this article will be available through our website. This article contains current COVID-19 information that will help you and your company adapt to this shifting business landscape. To help you adapt to the temporary, new normal created by the COVID-19 outbreak, this article contains the following: 

  • WHO Symptoms for COVID-19
  • If You Contract COVID-19
  • Facts About COVID-19 that the CDC is Emphasizing
  • FEMA Factchecks
  • How COVID-19 Could Affect Workplaces
  • Jobs and Exposure Risk
  • Federal Critical Infrastructure Sectors
    • Manufacturing
    • Food & Agriculture
  • The Families First Coronavirus Response Act (FFCRA) 
  • Assistance for Small Businesses During the Outbreak

The Coronavirus disease 2019 (COVID-19) is a respiratory illness that spreads from person to person through close contact (within 6 feet) and respiratory droplets from an infected person through coughing or sneezing. The first US case was reported on January 21, 2020.

WHO Symptoms for COVID-19

It is essential to understand that the COVID-19 virus affects different people in different ways.  It is a respiratory disease and most infected people will develop mild to moderate symptoms and recover without requiring special treatment.  However, people who have underlying medical conditions and those over 60 years old have a higher risk of developing severe disease and death. The WHO has outlined what the typical symptoms are, along with additional, less common symptoms.

Common Symptoms Include:

  • fever
  • tiredness
  • dry cough

Other Symptoms Include:

  • shortness of breath
  • aches and pains
  • sore throat
  • and very few people will report diarrhoea, nausea or a runny nose.

Lowering your chances of contracting Covid-19 is simple: avoiding contact with persons who are sick; avoiding touching your face (eyes, nose, mouth); washing your hands frequently with soap and water for at least 20 seconds. However, the CDC has outlined steps to take if you do contract COVID-19 despite taking precautions.

If you contract COVID-19:

  1. People with mild symptoms who are otherwise healthy should self-isolate and contact their medical provider or a COVID-19 information line for advice on testing and referral.
  2. People with fever, cough or difficulty breathing should call their doctor and seek medical attention.
  3. Call ahead before visiting your doctor.
  4. Separate yourself from other people and animals in your home.
  5. Avoid sharing personal household items.
  6. Wear a face mask.
  7. Cover your coughs and sneezes with your elbow.
  8. Wash your hands often, for at least 20 seconds.
  9. Clean all “high-touch” surfaces (phones, doorknobs, steering wheels, etc.) daily.
  10. Monitor your symptoms.

With these precautions if you contract COVID-19, it is also important to recognize misinformation taking footholds during the uncertainty of this crisis. Both the CDC and FEMA have responded to some of the most common misconceptions that have been circulating.

Facts About COVID-19 that the CDC is Emphasizing:

  1. Diseases can make anyone sick, regardless of their race or ethnicity.
  2. Some people are at increased risk of getting COVID-19. (Above 60 years of age and those with pre-existing conditions.)
  3. Someone who has completed quarantine or who has been released from isolation does not pose a risk of infection to other people.
  4. You can help stop COVID-19 by knowing the signs and symptoms.
  5. Using protective precautions to keep yourself and others safe is simple.

Visit the CDC website for the latest information: www.cdc.gov/coronavirus/2019-ncov.

Where the CDC is emphasizing information directly related to the disease outbreak, FEMA has had to rebut disease tangential misinformation. It is important to check your primary information sources credibility and to not assume secondary information sources are factual. During times of uncertainty, it’s more important than ever to verify the source of the information.

FEMA Factchecks

  1. Hantavirus is not a new disease. Transmission from one human to another may occur, but is extremely rare. It is primarily contracted through touching waste products of infected rodents. Visit https://www.cdc.gov/hantavirus for more information.
  2. There is no national lockdown. It is being determined at the state and local levels. The fifteen day shelter in place suggestion is to minimize exposure and prevent the continued spread of the disease. The latest information and resources are available at www.coronavirus.gov
  3. FEMA does not have military assets. Like all emergencies, response is most successful when it is locally executed, state managed and federally supported.  Each state’s governor is responsible for response activities in their state, to include establishing curfews, deploying the National Guard if needed and any other restrictions or safety measures they deem necessary for the health and welfare of their citizens.
  4. Stockpiling groceries and supplies is not suggested. Food supplies are likely to spoil and you want to minimize chances of contact. Demand is high for grocery, household cleaning, and some healthcare products–stores need time to restock.
  5. The U.S. Government is not mailing checks in response to COVID-19 at this time. If you’re contacted about such a check, at the moment, it’s a scam. Keep an eye on the FTC website for more information about this and other common COVID-19 related scams. 
    1. The Coronavirus Aid, Relief, and Economic Security (CARES) Act has passed both the house and Senate and been signed by President Trump on March 27th. Both  CNN and Fortune Magazine report that it could take five to six weeks for the federal government to cut checks and send them out. The $2 trillion package includes a provision to send checks directly to many Americans. The amount is based on annual income: individuals earning up to $75,000 and heads of household up to $112,500 will receive a $1,200 rebate from the federal government. Whereas, couples who earn up to $150,000 will receive $2,400. Above those income levels, the benefits are gradually reduced by $5 for every additional $100 income. This will be capped at $99,000 for individuals, $146,500 for heads of household, and $198,000 for couples. Parents are eligible for a $500 rebate per child.

With these foundational facts on the disease and clearing up tangential misinformation, it is also  imperative to take precautions in the workplace to prevent spreading the virus. OSHA has issued guidelines on how to prepare workplaces for COVID-19. It focuses on the need for employers to implement engineering, administrative, and work practice controls and personal protective equipment (PPE), as well as considerations for doing so. Aside from safety compliance, the outbreak has affected which industries are still running and can affect the operations of those that are.

How COVID-19 Could Affect Workplaces

  • Absenteeism. Workers could be absent for many reasons: they are sick;  they are caregivers for sick family members; they are caregivers for children if schools or daycare centers are closed;  they have family members to at-risk people at home, such as immunocompromised; they are afraid to come to work because of fear of possible exposure.
  • Change in patterns of commerce. Consumer demand for items related to infection prevention (e.g., respirators) is likely to increase significantly, while consumer interest in other goods may decline. Consumers may also change shopping patterns because of a COVID-19 outbreak. Consumers may try to shop at off-peak hours to reduce contact with other people, show increased interest in home delivery services, or prefer other options, such as drive-through service, to reduce person-to-person contact.
  • Interrupted supply/delivery. Shipments of items from geographic areas severely affected by COVID-19 may be delayed or cancelled with or without notification.

The OSHA COVID-19 webpage offers information specifically for workers and employers: www.osha.gov/covid-19.

Jobs and Exposure Risk

OSHA outlines the different job industries and their risk of exposure to the virus by very high, high, medium, and low exposure levels. 

  • Very high exposure risk jobs are those with high potential for exposure to known or suspected sources of COVID-19 during specific medical, postmortem, or laboratory procedures. 
  • High exposure risk jobs are often peripherally related to very high risk exposure jobs. 
  • Workers in the medium exposure risk category may be in contact with the general public (e.g., in schools, high-population-density work environments, and some high-volume retail settings). 
  • Low exposure risk groups do not require contact with people or are infrequently exposed to the general public.

OSHA also outlines five steps employers can take to responsibly prevent their workers from being exposed to COVID-19.

  1. Develop an Infectious Disease Preparedness and Response Plan
  2. Prepare to Implement Basic Infection Prevention Measures
  3. Develop Policies and Procedures for Prompt Identification and Isolation of Sick People, if Appropriate.
  4. Develop, Implement, and Communicate about Workplace Flexibilities and Protections
  5. Implement Workplace Controls
    1. Engineering Controls
    2. Administrative Controls
    3. Safe Work Practices
    4. Personal Protective Equipment (PPE)

Despite the pandemic, many industries are considered too critical to close, and must remain in operation during closures with limitations.

Federal Critical Infrastructure Sectors

The Cybersecurity and Infrastructure Security Agency has comprehensively outlined the specific sectors that the Federal Government has deemed critical. Two such sectors are manufacturing, along with food and agriculture.

Critical Manufacturing Sectors

Critical Manufacturing Industries with Sub Industries

Primary Metals ManufacturingIron/Steel Mills and FerroAlloy

 Alumina and Aluminum Production and Processing

Nonferrous Metal Production and Processing
Machinery ManufacturingEngine and Turbine

Power Transmission Equipment

Earth Moving, Mining, Agricultural, and Construction Equipment
Electrical Equipment, Appliance, and Component ManufacturingElectric Motor

Transformer

Generator
Transportation Equipment ManufacturingVehicles and Commercial Ships

Aerospace Products and Parts

Locomotives, Railroad and Transit Cars, and Rail Track Equipment

Products made by these industries are essential to many other critical infrastructure sectors. The Critical Manufacturing Sector focuses on the identification, assessment, prioritization, and protection of nationally significant manufacturing industries that may be susceptible to manmade and natural disasters. CISA has an existing plan from 2015. For more information, please contact the Sector-Specific Agency at criticalmanufacturing@hq.dhs.gov 

Critical Food and Agriculture Sectors

Homeland Security has recognized Agriculture as a critical industry. As such, these closures do not apply to this sector.  The Food and Agriculture Sector is almost entirely under private ownership and is composed of an estimated 2.1 million farms, 935,000 restaurants, and more than 200,000 registered food manufacturing, processing, and storage facilities. This sector accounts for roughly one-fifth of the nation’s economic activity.

The Food and Agriculture Sector is critically dependent on many sectors, but particularly with the following:

Water and Wastewater SystemsClean Irrigation and Processed Water
Transportation SystemsMovement of Products and Livestock
EnergyPower the Equipment Needed for: Agriculture Production and Food Processing
ChemicalFertilizers and Pesticides Used in the Production of Crops

For resources available to Food and Agriculture Sector partners, visit the Department of Agriculture and the Food and Drug Administration websites.

The Families First Coronavirus Response Act (FFCRA)

The Department of Labor is administering new paid leave requirements effective through December 31, 2020. Each covered employer must post in a conspicuous place on its premises a notice of FFCRA requirements. Employers may not discharge, discipline, or otherwise discriminate against any employee who takes paid sick leave under the FFCRA and files a complaint or institutes a proceeding under or related to the FFCRA. Employers in violation of the first two weeks’ paid sick time or unlawful termination provisions of the FFCRA will be subject to the penalties and enforcement (Sections 16 and 17 of the Fair Labor Standards Act. 29 U.S.C. 216; 217.)

FCRA Coverage and Qualifying for Leave

CoveredNot Covered
Certain public employers, and private employers with fewer than 500 employees.Most Federal employees are not covered by these expanded provisions for family and medical leave, but are covered by paid sick leave. 
Small businesses with fewer than 50 employees may qualify for exemption.

Qualifying for Leave

Full-TimePart-Time
Up to 80 hours paid sick leave.Paid sick leave equal to hours worked on average over a 2-week period.
If Workers are Unable to Work or Telework Due to:
1) Being subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
2) Being advised by a health care provider to self-quarantine related to COVID-19;
3) Experiencing COVID-19 symptoms and is seeking a medical diagnosis;
Employees taking leave shall be paid at either their regular rate or the applicable minimum wage, whichever is higher, up to $511 per day and $5,110 in the aggregate (over a 2-week period).
4) Caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
5) Experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury; or.
Employees taking leave shall be paid at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $2,000 in the aggregate (over a 2-week period).
6) Caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19.,Full-time employees are eligible for up to 12 weeks of leave at 40 hours a week

Part-time employees are eligible for leave for the number of hours that the employee is normally scheduled to work over that period. 

Employees taking leave shall be paid at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $12,000 in the aggregate (over a 12-week period—two weeks of paid sick leave followed by up to 10 weeks of paid expanded family and medical leave).

Assistance for Small Businesses During the Outbreak

Covered employers qualify for dollar-for-dollar reimbursement through tax credits for all qualifying wages paid under the FFCRA. Qualifying wages are those paid to an employee who takes leave under the Act for a qualifying reason, up to the appropriate per diem and aggregate payment caps. Applicable tax credits also extend to amounts paid or incurred to maintain health insurance coverage. For more information, please see the Department of the Treasury’s website.

Opportunities and resources for emergency funding outside of these tax credits are available through the CalAsian Chamber of Commerce (CACC). Their Business Triage Center has a dedicated team to help small businesses get access to capital by packaging their loans and providing credit enhancement services, supporting applications to Small Business Administration’s (SBA’s) Disaster Loans and the IBank’s Small Business Disaster Relief Loan Guarantee Program. They can also help direct applicants to one of their various lending institution partners.  Additionally, the CACC created a survey to determine how to best assist small businesses statewide. Your input will better enable them to prioritize your business needs during these uncertain times.

CalAsian Chamber of Commerce Business Triage Center contact information.

The U.S. SBA is offering low-interest federal disaster loans for working capital to small businesses in designated states or territories suffering substantial economic injury as a result of the Coronavirus (COVID-19). SBA Disaster Loans are limited to federally declared disaster states or territories. Therefore, your State or Territory may not yet be eligible for assistance. However as of March 17, 2020 they have issued revised criteria that makes more businesses eligible for the loans.

Under newly revised criteria

  • States or territories are only required to certify that at least five small businesses within the state/territory have suffered substantial economic injury, regardless of where those businesses are located.
  • Disaster assistance loans will be available statewide following an economic injury declaration. This will apply to current and future disaster assistance declarations related to Coronavirus.

As of March 20, 2020, all 50 states, the District of Columbia, five territories and one tribe are working directly with FEMA under the Nationwide Emergency Declaration for COVID-19.

The USDA extended the application deadline for the Rural Business Development Grant (RBDG) program and the Rural Energy for America Program (REAP) to no later than April 15, 2020. Contact the Rural Development office for the RBDG deadline in your state. For additional information on the REAP deadline, see page 16925 of the March 25, 2020, Federal Register.

Knowing the symptoms and preventative measures is only the start. Businesses must take responsibility for their employees’ health by adapting their daily operations, and are required to provide sick leave when prevention is not enough. In light of these responsibilities, business owners are not without help: the Federal government will be providing tax breaks to employers for those companies impacted by the outbreak and Chambers of Commerce, like CalAsian Chamber of Commerce, are providing assistance in acquiring additional funding. Be sure to visit our website wcismag.com and social media to read real-time updates to this article, curated content from other industry information leaders, and share how COVID-19 is affecting your business.

Be sure to contact CACC or your local SBA office to see what assistance your company may qualify for. Email CACC with “COVID-19 IMPACT – Technical Assistance Needed” in the subject line. Cha Xiong: 916-389-7489, cxiong@calasiancc.org; Linda Thor: 916-389-7478, lthor@calasiancc.org

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Forage Kitchen – Local Food Economy Evolving in a Global Epidemic

Written by Callie Waldman, Forage Kitchen

First Friday at Forage Kitchen in Oakland, Calif., Friday, Oct. 5, 2018. Photo by Alison Yin/Alison Yin Photography

INTRO

Forage Kitchen is a commissary and shared incubator kitchen in the heart of Uptown Oakland. Nestled amongst retail locations and maker warehouses, we exist to support the local food economy by supporting its producers. Our community members find this support through our physical shared kitchen space, business support & promotional help, and through our network of like-minded food business owners. We’re a lot of other things as well. Beyond just our commissary, we’re also a small batch copacking facility as well as an event space for both private bookings and community gatherings.  Attached to our kitchen we have a small cafe that houses rotating up-and-coming restaurants, offering low rent to minimize risk as they transition towards moving into their own permanent space. 

HISTORY

Though we officially opened our doors in 2016, leading up to that moment took years of thoughtful decisions and physical build-out.  In 2012, cousins and co-founders Iso Rabins and Matt Johansen began their journey in building Forage inspired by their own experience as food entrepreneurs. Their driving motivation was to create an experience and a kitchen for others that they wished they’d had themselves while navigating the industry. 

Iso, having worked in shared kitchens for years while hosting his Wild Kitchen underground dinners, had seen all the ways shared spaces fell short, and the destructive impact that had on the community. This experience was motivation enough to want to create something better. Iso’s focus had always been food and food makers; launching Forage Kitchen just felt like the right next step.  

If you ask the cousins, Iso will tell you that getting Matt onboard took some courting.  Matt’s expertise in business management, his previous partnership in opening SF’s still-thriving Hayes Valley Biergarten, and his effortless knack for connecting with just about anyone, balanced Iso’s vision and made him the perfect co-founder.  Iso knew he needed Matt onboard and over a handful of beers and long talks at family reunions, the motivation and the dream was mutual. 

Once established and open, Iso and Matt needed someone to flesh out programming and act as a direct line of support for the growing community, and so they introduced a third partner, Callie Waldman, to run daily operations. Callie also came from extensive food industry experience but also brought with her the relationship building component, having overseen employee engagement and company culture during the early stages of Imperfect Foods. Focused on honesty, communication and trust, this small but mighty trio oversees all aspects of the business.  

STRUCTURE

When operating at full capacity, Forage congruently runs four arms of business: membership, small batch co-packing, events, and a cafe. Each functions as an integral piece of the puzzle, harmoniously interwoven to support our community at a multitude of crossroads.

Membership

Our primary focus and the reason Forage exists, is to support our members. Each of our members own and operate their own small food business and have 24/7 access to our kitchen through reserving tables using our online booking system. Pricing is tiered and ranges from $21-28 per hour depending on frequency. Additionally, we offer an $18 per hour rate between 10pm-6am to accommodate those chefs who prefer off-peak schedules.  Once in the kitchen, members have equal access to our industrial equipment as well as the option to rent storage depending on their needs. Folks are surprised to hear that we typically fluctuate between 40-50 memberships at a time, however the variety of scheduling needs means that we hardly see conflicts in booking or overcrowding. Our members range from pastry chefs to soul food caterers, bagel producers to homemade pickle and boutique sauce companies. A vast majority are women-owned. The kitchen is equipped with a gamut of industrial equipment in order to accommodate many types of businesses. We have grills and deep fryers, 4 convection ovens, a total of 12 burners, a 30qt standup mixer, and an entire rack of smallware equipment available.  

Small Batch Copacking

Through our small batch copacking program, we lay out a pathway for businesses to grow with us. Once companies are a little further along, this program enables food producers to scale even bigger, while we take care of everything operationally from sourcing ingredients to label compliance to packaging.  For small scale food producers, outsourcing production allows for their time and energy to focus on sales and marketing so that they can get one step closer towards their dream of large scale distribution. We’ve worked with a wide variety of clients but our areas of expertise mainly focus on bone broth, cookies, sauces and spice blends.  

Events

One of the joys of running Forage is to foster our growing community. We find significance in this not just among our members, but within the greater community of Oakland. Our central location and spacious outdoor area makes Forage ideal for bringing people together. We’re a short walking distance from bars, cafes, and venues in every direction, and BART is just a 10 minute walk down the street, making us accessible to the rest of the Bay.  Outside of the current covid circumstances, our summer calendar is typically stacked with all kinds of events. We host weddings and rehearsal dinners, holiday parties and cooking classes, birthdays and anniversaries. In the warmer seasons we offer monthly outdoor movie nights and we partner with Sofar Sounds, hosting regular live music nights. Every First Friday of the month, we open our doors once again and participate in the city of Oakland’s monthly First Friday event where our members are encouraged to set up vendor tents and sell their food; an excellent opportunity for their own exposure and testing out the market. 

Cafe

Connected to the kitchen and facing the street, our cafe serves as a rotating space for new restaurants to launch their temporary home and gain traction as they test menu concepts, hire staff, and work out operational kinks before moving into their permanent retail location. Some of these restaurants include:  Smokin Woods BBQ, World Famous Hotboys, and Shawarmaji. Regardless of who’s serving food, patrons can enjoy patio seating and a cold, local beer on tap. 

HOW WE FOSTER INNOVATION AND ENTREPRENEURSHIP

Under most circumstances, the production and sales of food in California requires the use of a certified commissary kitchen. At the most basic level, this is what we provide. In addition to that, there’s a lengthy list of permits and licences that producers need to apply for, some which come from the county, others which come from the city or state. There’s a lot of red tape and often, even knowing where to begin with the administrative side of this industry can be daunting enough to cause roadblocks. This is again where we come in. As part of our onboarding service and at no extra charge, we offer additional support with new members by identifying and helping complete all the applications they need. 

Undeniably, our biggest avenue of support exists through our active community. It’s inspiring to see members helping one another as some have been in the industry for decades, while others are stepping foot into a commercial kitchen for their very first time. We’ve seen collaborations emerge, like Gourmet Puff (a Nigerian doughnut company) popping up with Shawarmaji (a Jordanian Shawarma restaurant). Internally, we use slack as a way to make sure all members can easily connect with one another and we have a couple channels specifically intended for companies to post things like kickstarter campaigns, new product launches, or simply to spread the word that they’re hiring. In the last few months we also set up a little shelf in our cafe where patrons can purchase shelf staple items, all made at Forage. We sell products like The Final Sauce, Goldi’s Spice Blends, and Claudine Hot Sauce.  In this sense, we find ways to interweave the various components of Forage such that our members’ businesses are amplified. 

CURRENTLY

Since the pandemic began affecting California in mid March, It’s no secret that small food businesses have suffered. As event cancellations soared and remote work within the bay area tech scene became status quo, most of the catering companies that worked out of Forage suddenly had nothing to cook for.  In an effort to get creative, we worked with members to develop a ghost kitchen model, offering our space as a pickup site for any catering companies willing or able to shift into strictly pickup & delivery. We’ve seen several companies successfully make the switch, however with the exorbitant percentage that corporate delivery platforms take from each ticket item, relying strictly on the apps is hardly feasible. In this vein, we’re huge proponents of encouraging customers to pick up food directly from the restaurant whenever possible.

FUTURE

Though business has been undeniably slow for the first several months, our kitchen remains open, 24/7 as it’s always been. And, as it’s become increasingly clear that we’re in this for the indeterminable long haul, we’re starting to see some shifts. We’ve started hearing from folks who’ve completely changed direction to make ends meet; A previously touring musician who decided to bottle and sell chili oil; A furloughed Pastry Chef who shifted her focus to participate in a national bake sale, benefiting the Black Lives Matter movement. When outdoor dining opened in Oakland, that enabled us to once again capitalize on our outdoor space after months of it laying dormant. We replaced our large picnic tables with wine barrel seating designed to fit 2-4 people instead of 8-10. Our cafe extended its hours, and we folded in a Happy Hour to encourage customers to stay and have a drink rather than just taking their food to go. 

In all honesty it’s hard to say exactly when we’ll be operating at full capacity again, or what that will even look like as it’s a constant moving target. That said, we’re optimistic. We’re seeing the beginnings of private event inquiries for 2021, and we’re also starting to talk about hosting small, distanced gatherings. Additionally, we’re working on launching our own cafe concept in the fall of 2020, focused on maximizing our outdoor space. While uncertainty is always the case, covid has been an abrupt and potent awakening to this truth and so we move forward with flexibility, creativity and patience; committed now more than ever, to offer a space and a community that supports our local food economy. 

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African American Farmers of California (AAFC)

“We need to make sure African-American farmers are visible because, for a long time, we’ve been invisible. We, as a people, have played a tremendous part in agriculture throughout the U.S.”  – William Scott Jr., AAFC President

According to the 2018-2019 California Agricultural Statistics Review through the California Department of Food and Agriculture (CDFA), California is home to over sixty nine thousand farms. The United States Department of Agriculture (USDA) 2017 Agriculture Census noted that, of those farms, only 429 were run by African American producers–operating over seventy five thousand acres. That is barely over a half percent of farms in the state–and less than two percent nationally, due to historically discriminatory practices within the USDA causing black farmers to lose 80 percent of their farmland from 1910 to 2007, from lack of access to loans or insurance needed to sustain their businesses.

A non-profit in California’s Central Valley hopes to combat that historical discrimination by empowering African-American growers to provide their communities with fresh, wholesome food.

“We take care of the land, the land will take care of us. Then we’ll take care of the community.” – William Scott Jr., AAFC President

Tractor tilling soil at the AAFC demonstration farm.

Tucked behind Kearney Park on the outskirts of Fresno, California, at the intersection of California and Fair, a sixteen acre farming demonstration site serves as the homebase for African American Farmers of California (AAFC.) Established in 1997, founders William Scott Jr. and Ken Grimes started by doing door-to-door outreach for members in the nearby west Fresno neighborhoods. In the past twenty years, they’ve built a community of over twenty farmers to support current growers through agro-tourism, farmers markets, and educational awareness, while training future farmers in operating equipment and basic farming skills. To further this cause, they have begun the process of becoming a healthy soils demonstration project in collaboration with the Fresno State UC Extension, which will qualify them for additional equipment to manage the land, train their members, and more efficiently grow their crops under the program’s grant funding.

“If we can get the message across about supporting a variety of farmers, and get more people interested and taking quality food to where it should be, then I’ve done my job. This is what I was born to do.” – William Scott Jr., AAFC President

Line of crops at the AAFC demonstration farm.

Scott and Grimes have been pivotal in reintroducing Southern specialty crops, which have long been a part of the traditional African-American diet, into the central valley. These crops grow seasonally, with summers bringing black-eyed, crowder, and purple hull peas, okra, turnips, and tomatoes, while winters serve up mustard, turnip, and collard greens, spinach, broccoli and carrots. The AAFC hopes to provide their growers with an outlet to distribute these crops via the USDA Farmers to Families Food Box program, next year.

If you are interested in attending their monthly meetings‒starting at 5:30pm every second Tuesday‒you can reach out to their Vice President, LaKeishia Martin, at africanamericanfarmersofca@gmail.com. Follow them on Facebook to stay tuned for their field day showcase next year.

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Volt Institute

Written by Tyler Richardson and Kevin Fox

It’s an exciting time at VOLT Institute. Two years of planning for scaled-out manufacturing training is finally coming to fruition. New equipment is arriving and being assembled. Additional instructors are coming onboard. Guided by an advisory board comprised of local employers, the organization seeks to adjust and move forward quickly. This includes changes to allow for operations amidst a global pandemic.

While the debates over masks, indoor dining, and county-specific guidelines continue, VOLT Institute never missed a beat. VOLT staff developed and implemented a comprehensive plan to keep students engaged and progressing toward in-demand careers in manufacturing with higher wages and job security. When school closures began in late March, VOLT had remote learning in place and students transitioned seamlessly. By April, other VOLT Institute training opportunities also moved into the virtual realm. 

The Supervisor Development Academy operated in partnership with Ag Safe began meeting online with workshops adjusted to two hour time blocks instead of four. Admittedly, there were concerns that this training for frontline supervisors to tackle real world situations while managing teams would not be as effective in a virtual space, but Ag Safe trainer Angelina Ceja reported that feedback from participants in this workshop remains positive. Volt’s Supervisor Development Academy gives supervisors a foundation to develop skills essential to furthering their personal and organizational success. The program addresses leadership, communication, conflict resolution, planning, and team building with an emphasis on building peer-to-peer relationships.

VOLT Institute’s popular efficiency training, Career Accelerator Program (CAP), taught by Beaudette Consulting INC. was made available remotely as well. This valuable curriculum focuses on organizational change management, continuous improvement, employee engagement, process improvement, and critical thinking problem solving are the “soft skill” training industry demands. Student survey results indicated that the length of time for each of the online training sessions was appropriate and engaging and either met or exceeded expectations. 

VOLT Institute campus reopened June 15 it was with strict COVID-19 protocols in place including mandatory wearing of masks. To ensure social distancing, students comfortable returning to the downtown Modesto campus continued their training on campus by appointment. One-on-one instruction is being offered by VOLT instructors to help students make up time lost during the mandatory shutdown.

Through it all, VOLT administration continues developing new partnerships with regional manufacturers such as the new internship program with Flowers Baking Co. This partnership gives VOLT students an opportunity to receive valuable work experience. Recently, two VOLT graduates have been accepted into E. & J. Gallo Winery’s maintenance apprenticeship program. Other VOLT graduates have started new careers in manufacturing at California’s oldest family-owned dairy, Crystal Creamery and the world’s largest plastic pipe manufacturer, JM Eagle.  Reports from VOLT alumni about promotions and wage increases are too numerous to list but VOLT is especially proud of its 96% job placement rate. 

VOLT also partnered with Valley First Credit Union to provide loans to students. This allows students looking to improve their long-term wage outcomes to apply for funding with most payments deferrable until the program is complete. The application process is online and very user-friendly. In addition, students get to participate in financial wellness training. Before the availability of the loan program, some potential students were deterred by the cost, which is low compared to similar programs of VOLT’s caliber but still represented a modest financial investment.

VOLT’s Senior Leadership Series in partnership with Next Gear Consulting is back. The series is designed to teach top level manufacturing and other executives important skills in strategic planning, building a positive company culture and leadership. Taught by Kristi Marsella, CEO of Next Gear Consulting, and former VP of Human Resources at G3 and E. & J. Gallo Winery, this series is a great opportunity to improve leadership skills. 

One of the most in demand technical skills for plant maintenance mechanics to have as the fourth industrial revolution progresses is a solid understanding of the internet of things. The implementation of complex automation has become the standard throughout industry. VOLT Institute’s partnership with Automation Group to teach both introductory and intermediate Programmable Logic Controls (PLC) courses as part of the award-winning industrial maintenance mechanics programs in a 20-hour boot camps are efficient and helpful for participants. Three boot camps are being offered for the summer session through August and September with assistance from California Manufacturing Technology Consulting (CMTC). Reduced student capacity for the training helps accommodate social distancing protocols.

As VOLT continues to receive deliveries from Amatrol, unpack and install new mechatronic, process control, and advanced electrical training equipment from the shipping crates, the vision first conceived three years ago starts to fall into place. Unskilled or semi-skilled workers have the opportunities to acquire the aptitude and the attitude to be competitive in a fast-paced manufacturing environment. They can earn higher wages with job security while fueling a vibrant, healthy economy in the Central Valley Region by strengthening each company’s most valuable asset: their people. All this happens while simultaneously hearing the voices from the advisory board and responding to the needs of investor partners in a rapidly evolving manufacturing industry. Training in electro-mechanical work with advanced programmable logic controls experience and access to nationally-recognized certifications such as National Institute for Metalworking Skills (NIMS) coupled with the new technology training are a pathway for long term sustainability for California’s Central Valley manufacturing industry. 

In the midst of a global pandemic, one thing stands out. Strategic planning is how to move forward. The ability to be nimble is a key component to the success of any strategic plan. If the plan doesn’t work, change the plan, not the goal. VOLT Institute is proud to be part of the solution for California’s Central Valley manufacturing industry. Higher wages and job security are very good ways to attract new talent to the California manufacturing industry and grow quality of life for those already living in the area. Whether the talent is new to the area or locals with deep roots one thing is certain: VOLT will continue to thrive and provide the quality of training everyone in the area deserves. 

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Alternatives to Bankruptcy: What Should Business Owners Know?

Bennet G. Young
Jeffer Mangels Butler & Mitchell LLP

The coronavirus pandemic has upended many sectors of the economy in unprecedented ways. Supply chains are disrupted. Businesses that rely on face to face interaction with their customers such as retailers and restaurants, are subject to financial distress. In turn, companies that supply products to businesses impacted by COVID-19 may also experience pressure as their customers delay or cancel purchases or are unable to pay their bills.

These stresses are likely to cause some owners of distressed businesses to explore their legal options. Bankruptcy is only one alternative for a struggling company Two other options are an assignment for the benefit of creditors (ABC) and a voluntary workout. These strategies are available to address a failing company; which can be faster and equally or more effective, at a lower cost, without the publicity of a bankruptcy filing. Business owners should be aware of these non-bankruptcy options and the circumstances in which they can be useful. 

Any discussion of bankruptcy alternatives must start with bankruptcy. Bankruptcy is the most widely known insolvency proceeding and, as the usual course taken by a failing company, forms the baseline. Any alternative should be compared to the likely outcome of a bankruptcy case. The business owner then can balance the bankruptcy and non-bankruptcy alternatives available to him or her to choose a strategy that is the best fit. 

One useful alternative to bankruptcy is an assignment for the benefit of creditors. This procedure, commonly known as an ABC, is a recognized state law procedure to sell the assets of a failing business while shielding the purchaser from liability for the old company’s debts. Usually, a distressed company is running out of cash and has limited runway to sell itself; an ABC provides a non-bankruptcy method to effectuate a prompt sale of the business. 

In an ABC, the company, called the assignor, transfers its assets to a third party, called the assignee, that typically is selected by the company. In legal terms an ABC is a trust in which the assignor transfers title to its assets to the assignee in trust for its creditors. The assignee is a fiduciary tasked with selling the assets and paying the proceeds pro rata to creditors. The assignee must give notice to creditors of the assignment and of the deadline to file claims and creditors can file claims with the assignee.

In California, no court filing is required to commence an ABC. This lowers the publicity dramatically. The proceeding is not secret or confidential, but it is not public in the way that filing a bankruptcy case is. Instead, an ABC is a matter of contract between the distressed company and the proposed assignee. The company’s board and shareholders must approve the ABC. 

The process is fast and flexible. Because the company picks the assignee, an ABC lends itself well to pre-packaging. A distressed company seeking a prompt sale, a potential buyer of the business, and the proposed assignee can negotiate a sale in advance of the ABC occurring on the understanding that the sale will be completed through the ABC. All parties know what to expect and the process can proceed on the parties’ schedule, with no delays imposed by court processes or availability. This enables a sale of a distressed business as a going concern to take place quickly with little uncertainty and minimal disruption to operations. 

Used in this manner, an ABC is a viable alternative to a sale of the business in a bankruptcy chapter 11 case. The speed and flexibility of the ABC process are its chief virtues. Since there is no court the process is usually less expensive than a chapter 11 bankruptcy case and the sale can often be completed more quickly than would occur in a chapter 11. The process provides an efficient method to sell a small to medium size failing company on a going concern basis. 

The ABC process is not without its downsides. A distressed business must weigh these downsides against the speed, flexibility and lower transaction costs of the ABC process. The most important is that the purchaser will not get a court order validating its purchase as it would in a bankruptcy. The purchaser must rely on the integrity of the process to shield it from the distressed company’s creditors. Furthermore, there is no automatic stay to restrain foreclosure as there would be in a bankruptcy case, so the cooperation of the assignor’s secured lenders is essential. Unlike in a bankruptcy case, there is no power to assign leases or contracts without consent. This can cause complications if the company’s contractual relationships are a major asset. Finally, by handing the company to the assignee, the business owner will lose control. This is not necessarily a negative, as it enables the business owner to move on to new opportunities. 

Another useful option is for the distressed company to attempt a voluntary workout with its creditors. This is not a formal process. Instead, a workout is a matter of negotiation between the distressed company and its creditors. The usual concept is to engage in a process that is substantially similar to what would occur in a chapter 11 bankruptcy case by agreement of the parties, without filing a bankruptcy case and without incurring the large legal fees or impact on the business that will result if a bankruptcy case is actually commenced. Chapter 11 thus forms the backdrop for the negotiations. 

Typically, in a voluntary workout the debtor will invite its creditors to a meeting. At the meeting, the debtor will make a presentation to the creditors in attendance regarding its financial condition, how it got there, and what the debtor intends to do to extricate itself from its predicament. The debtor will request that the creditors agree to a moratorium on collection action, similar to the automatic stay in a bankruptcy case, and that the creditors appoint a committee of creditors to negotiate a workout plan with the debtor. In return, the debtor will usually offer to be completely transparent with its creditors, to provide information regarding the business, and to refrain from engaging in any out of the ordinary course transactions. This creates a structure that mirrors what would occur in a chapter 11 case.

The goal of the process is for the debtor and the appointed committee to negotiate a repayment plan on behalf of all creditors. The plan can take whatever form the parties negotiate. Often the plan will consist of the debtor’s agreement to pay a percentage or even all of its profits or positive cash flow to its creditors over a period of time in exchange for the creditors agreeing to discount their debts in some amount. Another common structure is for the creditors to agree to a discount in return for an immediate cash payment funded by new capital contributed by a new investor. 

Once the debtor and committee have negotiated a plan, the plan is circulated to creditors to accept or reject it. Participation is voluntary. Only creditors that accept the plan are bound, so the debtor generally will insist that a high percentage of creditors accept the plan in order for it to go into effect. If a sufficient number of creditors accept the plan, it will go into effect. If the required majority do not accept, the debtor likely will end up in a chapter 11 case. The plan thus needs to provide a result that is at least as good, if not better, than the result would be in a chapter 11 case.

The voluntary workout thus can be a viable alternative to a chapter 11 case. The benefits of the process are its flexibility and reduced legal fees which can mean more funds available for creditors. A workout often is faster than a chapter 11 case, there is no public filing and therefore less publicity, and the business owner remains in control. On the other hand, a workout depends upon cooperation between the debtor and its creditors. If that cooperation is absent because creditors do not trust the debtor or for other reasons, a voluntary workout might not be possible. The process also depends upon creditors cooperating with one another and accepting equal treatment. There is no automatic stay, so creditors are free to pursue collection actions and to attempt to jump to the head of the line. If some creditors pursue collection actions and seek to improve their position relative to other creditors, the process can break down. Finally, creditor participation in a plan is voluntary. There is no way to bind creditors that reject the plan. Holdouts thus can create major hurdles.

The selection of the non-bankruptcy alternative depends upon the result the business owner desires to achieve. If the goal is to sell the business as a going concern, an ABC is a useful tool. Usually a distressed company is running out of cash and has limited runway to sell itself, and the ABC provides a non-bankruptcy method to effectuate a prompt sale. On the other hand, if the business owner’s objective is to retain his or her stake in the enterprise and to negotiate a payment plan with creditors globally, a voluntary workout can be a less costly way to achieve this goal.

Bankruptcy is not a one size fits all solution. There are other routes available to a distressed business which can be just as effective at a far lower cost. Owners of troubled companies should be aware of these options and should evaluate whether one of them might provide a better fit.

Bennett G. Young is a partner at the law firm of Jeffer Mangels Butler & Mitchell LLP. He represents parties in insolvency matters and has extensive experience in workouts, restructurings, bankruptcies, and assignments for the benefit of creditors. Ben is a member of the Bench-Bar Liaison Committee for the United States Bankruptcy Court for the Northern District of California and is a former Chair of the California State Bar’s Insolvency Law Committee, a past president of the Northern California Chapter of the Turnaround Management Association, and has been a member of the Board of Directors of the Bay Area Bankruptcy Forum. He is recognized by Best Lawyers in America® in the area of bankruptcy. Contact Ben Young at BYoung@jmbm.com

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Company Profile: MycoKind

MycoKind LLC was incorporated in 2018 when two PhDs talked about changing the world through fungi. A food scientist, a plant pathologist, and a food systems analyst ate dinner over Korean BBQ and the kindness that grows by culturing community kickstarted the fungal venture.

They wanted to take a look into changing the food industry by tapping into novel methods of growing products. “We are not trying to create new supply chains or build completely new infrastructures. Rather, we intend to tap into science and tradition to slightly adapt something that exists (ie fermentation).”

The most significant milestone up to date was having a five course four beverage mushroom themed popup dinner with more than 50 guests and some VIPs. Some of their favorite accomplishments are different conversations and interviews among their colleagues including Daryl of BeerTalkNow, Ilona of Ktchnrebel, Lichen of Asians in America, Adam of My Food Job Rocks, Chef Gigi of Sunday Suppers, Lana of Food Tank, Alex of Cultured Meats and The Future of Food, and Leneia of Artisan Restaurant Collection. Each conversation was fun and engaging.

Some challenges that they face are that they “have a lot of capabilities that are within [their] company and that means a lot of IP. It is just difficult to figure out where to start and which idea is fitting for product market fit.”

Their future plans are to be able to collaborate with more brands, organizations, institutions, and communities to increase the accessibility of fungal knowledge. “Through culturing community, we hope that our kindness grows too.”

Something they wish more people knew about their industry: “Fungi have a lot of applications that we are starting explore in more novel methods. The possibilities have opened up more discussions on fermentation, mycoremediation, health and wellness. “

Check them out on social media @mycokindllc on Facebook or Instagram, @mycokind on Twitter and LinkedIn, or their website: https://mycokind.com/ as they plan to figure out how to host forays, popup meals, and classes.

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Contents of a Good HACCP Plan & Manual

Written by Safe Food Alliance Team
Originally Published in FOOD SAFETY, HACCP, STARTER SERIES

In today’s food manufacturing environment, basic food safety principles are no longer enough to meet customer and regulatory requirements. The rules have changed, in large part due to the Food Safety Modernization Act (FSMA). In addition to new laws from legislators, the standards and demands of customers now far surpass regulatory requirements. What this means is there is now an expectation to not only master Hazard Analysis Critical Control Points (HACCP) but to go one step further and become Global Food Safety Initiative (GFSI) certified. To gain certification with any of these programs, you need to start in the same place. You start with a HACCP plan.

12 Steps to a Good HACCP Plan

When building out your HACCP plan, follow this specific methodology involving 12 steps. If you are having trouble, just reach out to your friendly neighborhood Safe Food Alliance team.

One thing to remember as you build out your plan – a HACCP Plan is a living document, and as such, should be revisited often as your processes change, your company grows, and you discover better ways to produce your product. Now that we have that covered, let’s begin.

1. Assemble the HACCP Team

Your plan will typically include a table where all the names of the HACCP Team members are written and signed, and the team leader is clearly designated. The team functions best when it’s highly cross-functional and includes members of various departments such as sanitation, maintenance, production, and quality. It’s essential to have these varied perspectives and background knowledge. 

In this section, you should include a brief description of each member’s current position, background, and experience. You’ll also need to have a copy of a HACCP formal training certificate for the HACCP coordinator, from an accredited two-day HACCP course.  There should be some sort of documented HACCP training for the rest of the team as well, whether conducted internally or by someone like us. The more knowledgeable the team, the better the plan will be.

2. Describe the Product

This section should include a full description of each product or family of products within the scope of the plan. Product descriptions should consist of details that impact the food safety of the product, including (as applicable):

  • the recipe or formulation
  • the packing materials and any other information such as the modified atmosphere
  • the conditions in which the product is to be stored (e.g., temperature, light, humidity)
  • the shelf life
  • distribution conditions
  • any potential for abuse in the distribution chain or by consumers, which may put the product at risk.

The better you define the product before starting the hazard analysis, the more thorough the review will be.

3. Identify the Intended Use

The intended use is based on the usual consumption of the commodity by the final consumer or user. Again, defining intended use helps ensure a more thorough hazard analysis later. This section includes both your company’s intended purpose based on product design, as well as potential other applications. The more you know your consumers, the better you can take care of them. A classic example, in this case, is cookie dough: it’s a product you typically cook before consumption, but in some cases, it’s eaten raw. For this reason, several companies have had recalls on their cookie dough due to consumer illness.

4. Construct the Flow Diagram

The process flow diagram must be clear and detailed to describe all process steps. Use this diagram to help ensure the hazard analysis is thorough and as a visual reference as your team considers potential hazards to the consumer. The flow diagram must include every process step that occurs on-site, from the very beginning (e.g., receiving and preparing ingredients, storing packing materials, etc.) to the very end (shipping, warehousing, etc.) The clearer the diagram is to the viewer, the easier to understand the process. Others may also use the table during site visits (e.g., customers, auditors, consultants, regulatory officials). Hence, it’s wise to design it in a way that it’s relatively clear to others who don’t know the process as well as you do.

5. On-Site Verification of the Flow Diagram

On-site verification of the diagram helps ensure its accuracy.  Again, the purpose of this is primarily to ensure a thorough hazard analysis. The site will need to provide proof that the HACCP Team has verified the flow diagram.  Some companies like to keep the first version of the diagram with hand-written notes on it, indicating changes made and initialed and dated by the participants. Ultimately, however, proof of the verification is best done with a final, updated copy that is signed; or meeting minutes indicating approval of the final version and signatures of participants.

6. Conduct a Hazard Analysis

The hazard analysis is part of the plan that typically takes the most time to review and update. Here the team collects and examines all relevant data to the product’s safety, including process performance, product defects, customer complaints, results of internal and third-party audits, and various other relevant information.  The team must take the proper time to conduct a thorough analysis.

A Hazard analysis can vary in format, but needs to include these common elements:

  • List of all process steps and ingredients
  • Identification of potential hazards
  • Assessment of each hazard, with consideration of both severity and likelihood
  • Identification of ‘significant’ hazards
  • Justification of the assessment (detailed explanation as to the team’s reasoning)
  • Identification of appropriate controls for each hazard
  • Now, under FSMA, the identification of any Preventive Controls as well. For more information on this subject, take a look at this article. For training, refer to the PCQI course.

7. Determine Critical Control Points (CCP’s)

This one is a simple concept. Based on the hazard analysis described above, you can quickly identify all significant hazards and CCPs. Critical Control Points are those essential steps designed to control a specific hazard so that the product will be safe to consume. The team should use a decision tree like this one when determining CCPs.

8. Establish Critical Limits for Each CCP

A critical limit is a critical control point’s “go/no go” or “acceptable/unacceptable” criteria.  For some processes, such as metal detection, it is as simple as testing with certified metal test pieces to ensure proper function. For other types of CCPs, it can be much more complex and include parameters such as temperature, humidity, product viscosity, or chemical concentration. All these variables and values have to be clearly defined, including both lower and upper limits, as applicable.

Documents related to the process and relevant sources used to establish the critical limits must be available to support the limits. These documents could be regulatory standards, guidelines, internal or third-party validation, experimental results, literature surveys, and expert guidance. The stricter the validated limits, the higher the potential efficacy.

9. Establish a Monitoring System

This step is where we define the monitoring method for each CCP.  Monitoring is how we ensure the process has met the critical limit, so the product is safe.  The monitoring procedure should contain the following:

  • What will you monitor?
  • How often shall it be monitored?
  • Who is responsible for performing the task?
  • What instruments will you use?
  • How will you monitor? (method)

The clearer the instructions, the fewer chances of failure.

10. Establish Corrective Actions

Each CCP is required to have predetermined and documented corrective actions for deviations that may occur. The corrective actions plan should comprise at least the following elements: the responsibility for each action, disposition of the non-complying product, the correction of the cause of failure, and recording the event. Keep records of activities readily available. If you need help with conducting root cause analysis for your corrective actions, check out our quick root cause analysis course.

11. Establish Verification Procedures

Much of the discussion in our HACCP courses end up centering around how to conduct verification in the context of HACCP properly.  Verification procedures should be activities designed to confirm that the plan is: 1) being followed; 2) effective for its intended use, and 3) adequately maintained. We are looking for defined procedures here, indicating how we conduct routine verification activities like the sign-off of the CCP monitoring records, as well as how you complete the less-frequent validation. The more exhaustive the verification is, the more confident we can be of the plan.  For more on verification, take a look at our article “The 6th Principle of HACCP: Verification”.

12. Establish Documentation and Record-keeping

This final step includes establishing both record-keeping processes and the company’s documentation system (establishing defined procedures, the company’s methods of document control, etc.). Consider:

  • How will you document your system?
  • What should you include?
  • Who is responsible for doing it?
  • How long are you keeping records? Where are you saving them?
  • Who needs to have access to what documents and how are documents controlled?

A better-documented plan helps ensure better execution.

As you may realize by now, developing and documenting an effective HACCP plan is not an easy task. Training on the methodology, experience, and technical elements are essential aspects of effective HACCP Plan implementation. If you need guidance with training or consultation, Safe Food Alliance is here to help.

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Mitigating Risk through Food Packaging

By George G. Misko and Natalie E. Rainer, Keller and Heckman LLC

Historically, the main function of food packaging has been to safeguard food by providing a physical barrier to help maintain food and beverages in a sanitary condition. Over the years, advances in food packaging technology have resulted in packaging that provides additional protection and other benefits. These more recent innovations include susceptors to aid in the browning of foods cooked in microwave ovens, oxygen scavengers/emitters, ethylene scavengers, time-temperature sensors, and biosensors that can help to prolong shelf life and/or monitor the condition of food.  In fact, it is clear that over the past 100 years or more, packaging technology and food processing equipment has been a major contributor to the manner in which food products of all sorts safely reach the dinner tables of Americans and people throughout the world, while lessening the environmental footprint of this industry.  Indeed, even in these days of the coronavirus pandemic, the U.S. Food and Drug Administration (FDA) has stated that “[T]here is no evidence of food packaging being associated with the transmission of COVID-19.” (1)

(1) See the FDA information sheet, titled, “Shopping for Food During the COVID-19 Pandemic – Information for
Consumers.”

The U.S. and other jurisdictions around the world have implemented food packaging regulations to assure that packaging materials are safe for use and that no off-odors or tastes are imparted from the packaging to food or beverages. And as technological advances in food packaging provide improvements in food quality and safety, some of the regulations governing the composition and use of food packaging regulations have been changed to accommodate these advances. This article will focus on U.S. food laws governing food packaging materials and revisions to those laws necessitated by technological advances. First, though, we provide a brief description of the manner in which food packaging is regulated in the U.S. and the information that is required to assure the safety of food contact materials.

U.S. Food Packaging Laws

The history of formal regulation of food packaging in the U.S. began with the passage of the Food Additives Amendment of 1958.  Prior to 1958, customers sometimes insisted on being assured of a package’s safety and utility by asking to see some documentation from FDA or the U. S. Department of Agriculture (USDA) indicating that it had reviewed and found that the intended use of the materials would not adulterate food or, put another way, were safe for their intended use.  

The Food Additives Amendment of 1958 added, in part, a new section to the Federal Food, Drug, and Cosmetic Act (FD&C Act) that defined the term “food additive” as “any substance the intended use of which results or may reasonably be expected to result, directly or indirectly, in its becoming a component or otherwise affecting the characteristics of any food” unless that substance is Generally Recognized as Safe (GRAS) or subject to one of a number of exceptions or exclusions listed in the Act.”(2) As a result, all food contact substances that may reasonably be expected to migrate to food are regulated as food additives. Conversely, food packaging substances that are not reasonably expected to become components of food are not by definition “food additives” and may be used without prior authorization or clearance by FDA.

 (2) See Section 201(s) of the Federal Food, Drug, and Cosmetic Act.

Food contact substances (FCSs) that are considered food additives must be authorized for use in food packaging by FDA through a food additive regulation or a Food Contact Notification (FCN). The food additive petition process entails clearing food additives (including food packaging materials that meet the definition of a food additive) through a notice-and-comment rulemaking process. Information required to submit a food additive petition for packaging materials includes: the identity and composition of the substance of interest; a description of the manufacturing process; information on its intended use (such as food types, temperature conditions at the time of packaging and during use, and the expected duration of contact with food); and chemistry and toxicology data supporting the safety of that food additive for its intended use. The petition should also include test methods used to verify specifications for the raw materials and the finished products. Finally, the petitioner must include an environmental assessment to established whether the manufacture or use of the substance as intended will likely result in any undue impact that will require further study. Once a food additive is cleared through this process, FDA publishes a regulation, which can be relied upon by the petitioner as well as other manufacturers and users of the additive provided any limitations and specifications listed in the regulation are met. 

The FCN process largely supplanted the petitioning process with passage of the FDA Modernization Act of 1997. Data requirements for an FCN are about the same as those for a food additive petition with respect to the need to estimate dietary intake for an additive and establish safety through the provision of toxicity data adequate to support the estimated exposure. In addition, data identifying the FCS, its intended use manufacturing process and the like are very much required as in the petition process. The primary difference between the FCN and FAP process is that FCNs are proprietary, i.e., they can only be relied upon by the manufacturer of the FCS identified in the FCN and by its customers. Third parties who manufacture the same substance are required to submit their own FCN to be enabled to reach the same market. The other major difference is that  where it could take literally years for FDA to grant a petition, an FCN automatically becomes effective 120 days after it has been accepted for filing by the Agency, unless FDA objects in writing prior to the effective date.

Assuring Safety

FDA applies a tiered approach to the toxicity data needed to support safety of food-contact materials. That is, the higher the level of estimated dietary intake to a substance, the greater the toxicity data needed to support safety.  

Another important consideration with respect to safety is the statutory and regulatory requirement that food contact materials be manufactured in such a way as not to result in the adulteration of food, i.e., be of a purity suitable for the intended use, as  required by FDA’s Good Manufacturing Practices (GMP) regulation for food packaging materials. (3)

(3)  See Title 21 of the Code of Federal Regulations, Section 174.5. 

The suitable purity requirement dictates that FCSs may not impart anything to food that may cause it to be harmful or deleterious to health or result in an off-taste or -odor in food. To meet this requirement, the manufacturer must consider the safety of foreseeable impurities in the FCS, including residual monomers, starting reactants, catalysts, and reaction byproducts and degradation products. 

New Technologies

As new types of food packaging are developed based on technological advances, the safety of the materials used in these packages need to be evaluated. In some cases, revisions in food packaging regulations were made to assure the safety of the food in contact with new technology. We will examine some of these technologies and what new requirements, if any, were implemented to assure their safety.

Microwave Susceptors. The introduction of susceptors in microwave packaging resulted in higher cooking temperatures, which could be used to crisp and brown food by cooking it in a microwave oven. FDA food packaging regulations use the term “Conditions of Use” to describe the typical temperature conditions under which food products may be used in contact with packaging materials or articles intended to process or hold food. In April 2006, FDA expanded its list of Conditions of Use to include two additional categories. One of the new categories, Condition of Use J (“Cooking at temperatures exceeding 250°F”), is applicable to microwave heat susceptor materials. The following year, in December 2007, FDA updated its chemistry guidance for preparing FCN submissions. The new chemistry guidance includes specific protocols on testing for dual ovenable, microwaveable, and microwave heat susceptor materials.

Antimicrobial Agents. The safety of antimicrobials used in food packaging is regulated by FDA similar to other food additives; however, they may also require registration with the U.S. Environmental Protection Agency (EPA) under Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). Additionally, antimicrobials used in or on permanent or semi-permanent food contact surfaces, which are not intended to have an ongoing effect on the food contact surface, are regulated by FDA as food additives. If, however, the intended effect is ongoing, that is, intended to preserve the article from microbes or the protection of the user, EPA exercises jurisdiction over the use and food safety issue. 

In all cases, except those involving processed food, the antimicrobial used will be considered a pesticide for purposes of FIFRA and will require registration with EPA regardless of FDA’s jurisdiction over the matter. In addition, antimicrobials added to packaging materials with the expressed intent of migrating into the food to increase its shelf life by retarding spoilage may be considered food preservatives by FDA or USDA, if meat or poultry, and require labeling of the food product.   

Biobased and Biodegradable Plastics. As interest in sustainability has increased, the use of biobased and biodegradable plastics in food packaging is expanding. “Biobased” means related to or based out of natural, renewable, or living sources, while “biodegradable” means capable of being broken down naturally to basic elemental components (water, biomass, and gas) with the aid of microorganisms. “Biobased plastics” are plastics manufactured from renewable biomass, such as vegetable oil, cornstarch, pea starch, and microbiota. Biobased plastics can also be biodegradable.

While biobased plastics are required to comply with the same regulations with respect to food safety as fossil-based plastics, there are several regulatory issues that need to be considered for new biobased material or new applications for existing materials. These include determining the appropriate food simulants to be used to estimate the potential for migration and demonstrating that the substance is stable for its intended use. In addition, it may be necessary to consider the suitable purity of the finished product with respect to the potential presence of organic matter, such as cellular debris, and naturally occurring contaminants (e.g., mycotoxins and algal biotoxins). 

Recycled Materials. The growing interest in sustainability is also behind recent initiatives by a number of food companies to increase the use of recyclable packaging and the use of post-consumer recycled plastic content in food packaging. Recycled plastic in food packaging must meet the same safety standards as virgin plastic. 

Companies may independently evaluate the status and safety of a polymer produced through a recycling process. However, many companies will submit their determinations to FDA for review through a voluntary program. If FDA agrees with the company’s determination that a given recycling process is adequate to produce suitably pure recycled food-contact material, it will issue a no objection letter (NOL). To assist recyclers, FDA has issued guidance on recycled plastics for use in food packaging, which provides information on how to establish the safety of recycled polymers for food packaging. With respect to secondary (physical reprocessing) and tertiary recycling (regeneration of purified starting materials), FDA stresses the importance of demonstrating that possible contaminants from prior use of the plastic are sufficiently removed by the recycling process. To accomplish this, FDA provides specific recommendation on contaminant testing.

Conclusion

We have provided several examples of new innovations incorporated into food packaging. The use of antimicrobial is just one example of active and intelligent packaging, or packaging that interacts with food or its surroundings to prolong shelf life or monitor the condition of the food, slow the rate of oxidation, and prevent microbial attack. As advances in food packaging technology continue, further regulatory considerations may need to be addressed.

About the Authors:

George Misko is one of Keller and Heckman’s Food and Drug practice group leaders. Mr. Misko’s practice focuses on food and drug matters and environmental concerns, including pesticide regulation, right-to-know laws, and toxic substance control regulations. He has extensive experience counseling clients on regulatory requirements relating to chemical substances, plastics and food products in the U.S. and other jurisdictions, including Canada, the European Union, Latin America, and the Asia-Pacific region. He also represents trade associations, including acting as legal counsel to the Global Silicones Council.

Natalie Rainer practices in the area of food and drug law. She advises clients on regulatory requirements for foods, dietary supplements, cosmetics, and food and drug packaging in jurisdictions around the world, including North America, Latin America, Europe, Asia, and the Middle East. Ms. Rainer’s practice includes evaluating the regulatory status of food-contact materials, food additives, and color additives; advising companies on advertising and labeling requirements (including claim substantiation, nutrition labeling, menu labeling and environmental/green claims); and counseling clients on the Food Safety Modernization Act and its regulations.

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Digital Traceability: Reducing Risks and Finding Efficiencies

Written by Alex Lewis, Parity Factory Corp.

The ongoing crisis has shed light on the need for innovation in the food space, even in the most fundamental processes.

If someone were to ask you which industries were most important to our daily lives, what would you say? Along with things like communications, construction, and clothing, one of the first things that likely comes to mind is also one of the most basic: food. The agricultural and food processing industries provide for our most key needs and enables our continued growth. It is unlikely anyone would argue against the importance of the food and beverage industry to our society, however 2020 has brought us a loud and clear reminder of just how crucial it is, in the form of the COVID-19 pandemic. 

In just a few short months, food and beverage manufacturers saw demand increases that haven’t been seen in a lifetime. At the time of writing, sectors of the food industry have experienced spikes in volume ranging from 32% in milk, 30-47% across the snack sector, and a staggering 77% increase in demand for meat, and this trend holds true for nearly every vertical within the industry.

The stay-at-home orders announced by most governments have sent consumers rushing to the store, clearing shelves and placing new strain on food and beverage processors. As they struggle to keep up with their order volume, many manufacturers are looking for new ways to improve their efficiency and reduce their liabilities. As it turns out, one of the most effective methods may also be the simplest: digitizing their lot tracing.

What is digital lot tracing?

All food and beverage manufacturers track their lots. In fact, it is one of the basic requirements for running a food processing business, with the specific standards and protocols defined at the federal level by organizations such as the FDA. By requiring tracking of all material that is involved in making a product, down to the packaging used, it ensures that recalls can be performed swiftly and protects the health of the public. Manufacturers manage their tracing using a variety of methods, from pen and paper, to Microsoft Excel, to fully integrated traceability software, with many using a combination of methods. Digital lot tracing simply means that a company is capturing and managing their tracing data on a digital platform, often integrating scanning and barcoding into the process. This approach has a drastically lower error rate than more traditional methods and tends to be significantly more efficient.

Despite tracing being a common daily task that all processors contend with, there has been surprisingly little momentum towards automated lot tracing in food. By some metrics, only 1 in 5 operations have fully automated their lot data capture, with a bit more having partially implemented the process. The food industry has always been slow to adopt new processes, but as demand and competition skyrockets, many are finally feeling the need for an upgrade.

The risks of a recall

Executing recalls, specifically executing them quickly and efficiently, is one of the biggest challenges that food and beverage manufacturers face. Under current FDA guidelines, food and beverage processors need to be able to perform a recall within four hours. Many of the major retailers demand even more of their suppliers; if you want your product on the shelves in a Walmart or Costco, you must be able to perform the same process in as little as two hours. The unfortunate reality is that for processors tracing on paper, particularly those producing at scale, these targets are difficult to hit. Also, the human element involved in manual tracing can allow errors to find their way into data, and this has become especially true for those who are dramatically increasing their throughput to keep up with new demand caused by COVID-19. Without true, reliable data, a recall can quickly go from difficult to impossible.

The consequences of a botched recall can be dire: the average recall costs a manufacturer $10 million, not including possible fines from regulators, or losing the aforementioned Walmart or Costco contract. One of the biggest losses is one that may not be immediately obvious: consumer confidence. Over half of consumers will quit purchasing a product once it has been recalled, and studies have shown that a company’s stock price will typically drop as much as 22% following a major recall. Once that confidence is gone, it can take months or even years to get it back, if it can be regained at all.

All these problems can be mitigated, if not completely prevented, through digital lot tracing. With a capable solution in place, recall times can be measured in minutes, not hours, as a few quick searches replaces shuffling through endless forms to find the lot in question (if it was recorded correctly at all). This guarantees compliance with even the most demanding of rules and regulations and eliminates all fear when inspectors and auditors show up for routine recall tests. In addition, the ability to execute a speedy yet thorough recall when problems arise minimizes the risk to both consumers, and the manufacturer’s reputation. The bottom line: most food manufacturers are going to face a recall at some point. It is crucial to have the systems in place to react appropriately when that time comes.

How does it increase efficiency?

Due to the huge importance of lot tracing, manufacturers using manual systems often have some of their most competent and experienced employees devoted to the task. Even if these staff would be better suited to other areas, it’s just not worth taking the risk of assigning less experienced employees to the job. Digital lot tracing solves this by drastically simplifying the tracing process. Scanning a barcode and letting software do the rest is far quicker, easier, and less error-prone than meticulously creating and tracking hundreds of lot codes by hand. Meaning that you end up spending less time on tracing, and therefore less money, while winding up with data that is significantly more reliable. This both frees up an operation’s most capable employees to pursue new opportunities and allows anyone in the operation to take part in the tracing process. New employees can be trained and onboarded quickly, which is particularly useful for processors hiring huge amounts of new labor in the wake of COVID-19. 

All of this allows for greatly increased flexibility when it comes to staffing, and as COVID-19 turns the industry on its head the value of that flexibility has become crystal clear. While many of us have had the luxury to transition into working from home, that’s just not an option for many working in the food space. When employees are unable to attend work, for example if they are sick, someone else must step in. This can be a major threat to efficiency when the few people in your operation qualified to handle lot tracking are missing. In dealing with turnover and staff redistribution, there’s tangible benefit to having a system that allows employees to be effective, regardless of their experience level. 

For those looking to digitize their lot tracing, there is no shortage of solutions to accomplish that task. However, a sufficiently robust solution should go beyond just traceability. If you are tracking each lot as it moves through your facility, it creates great possibility to capture additional data such as yields, storage locations, and quality information. In this way, digital lot tracing can be viewed as a foundation on which to build even more extensive efficiency improvements. These additional features are some of the most important considerations for any manufacturer to make when choosing between available systems.

Preparing for an uncertain future

COVID-19 has proven that swift, unpredictable changes can happen in any industry, even one as foundational as food and beverage. With new issues such as shifting demographics, climate change, and the variable nature of trade on the horizon, it is likely that changes will become more frequent and even the smallest efficiencies will be essential to thrive.

Customer consciousness is also changing rapidly, and businesses that want to stay competitive have no choice but to change with it. As consumers and regulators demand ever more transparency and accountability from the food industry, reliable tracing data is becoming ever more crucial.

Manufacturers will undoubtedly rise to these new challenges in the future, just as they are rising to the challenges of today. And along the way, many will find a comprehensive digital lot tracing system to be one of their most valuable tools. 

Sources/Further Reading:

Acorn Surfaces & Treatments
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Breaux, Randy. “COVID-19 Shows the Need for Automation.” Foodprocessing.com, Food Processing Magazine, 2020, http://www.foodprocessing.com/articles/2020/power-lunch-covid-19-shows-the-need-for-automation/. 

Deloitte. Recall Execution Effectiveness: Collaborative Approaches to Improving Consumer Safety and Confidence. 2010.

Demetrekakes, Pam. “How the Coronavirus Is Affecting Food Processing.” Foodprocessing.com, Food Processing Magazine, 2020, http://www.foodprocessing.com/articles/2020/how-the-coronavirus-is-affecting-food-processing/.

Lelieveld, H. L. M. Hygiene in Food Processing. Woodhead, 2017.

Stier, Richard F. “How Food Processors Can Create a Plan for Traceability and Recalls.” Food Engineering RSS, Food Engineering, 11 May 2020, www.foodengineeringmag.com/articles/98026-how-food-processors-can-create-a-plan-for-traceability-and-recalls.

Torero, Maximo. “How to Stop a Looming Food Crisis.” Foreign Policy, 14 Apr. 2020, foreignpolicy.com/2020/04/14/how-to-stop-food-crisis-coronavirus-economy-trade/. 

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The Case For a Makerspace in Downtown Fresno

Written by Janelle Smith Ozeran

Fresno Ideaworks, established in 2012 in downtown Fresno, California, is a source of a myriad of tools and creative opportunities. But, like makers everywhere, we also value our friendships, collaborative projects, the comfort of our “third space”, and the therapeutic value of getting our hands dirty as we mold clay, wood, metal, textiles, electronics, or plastics into something new and wonderful. 

Over eight years Fresno Ideaworks has grown from a small group of friendly hackers into a community workshop full of curious and creative people, eager to learn and hone new skills and share them with anyone who comes through our doors.  But since the 16th of March 2020 our doors have been closed to all regular activity – a crushing situation for people who come to the Shop for any reason, and a threatening blow to our survival as a non-profit, all-volunteer, member-driven organization. 

We immediately joined the ranks of makerspaces all over the country, manufacturing PPE for healthcare professionals and other essential workers. Collaborating with two other non-profits in Fresno – Root Access Hackerspace, and Pi Shop Fresno – we designed, manufactured, and delivered more than 4000 pieces of PPE by the first week of May to everyone from hospital nurses to bus drivers, and from mail carriers to food service workers.  We are very proud of our role in helping protect our neighbors and caregivers, but we are also very proud of the collaborative effort. We are already trying to imagine what new projects we can undertake together when our spaces are open again! 

Meanwhile, we have lost nearly 15% of our membership, and watching our family shrink is breaking our hearts. A goal for the immediate future is to establish a sponsorship fund for those former members facing financial hardship because of the COVID-19 experience. Although our membership fees are among the lowest for similar spaces, they are suddenly an impossible luxury for some, even though the emotional health benefits of making and creating would go a long way to ease the anxiety those same people are experiencing. 

We also have to focus more intently on the facility upgrades that will enable us to welcome more members with a greater diversity of skills and abilities throughout the entire space. Maintaining a historic building is already a huge challenge (one we makers welcome), but opening the whole structure to more makers will require the help of angels that embrace our mission. Downtown Fresno, and our Cultural Arts District neighborhood in particular, have suffered the adversity of economic downturn for several decades now. Ideaworks is relentlessly dedicated to being part of the growth of both the economic health of the neighborhood, and, through skill-building and fellowship, part of the economic and emotional well-being of everyone who comes through our doors. 

Please help however you can. Donations to Ideaworks general fund can also be made through our website at https://ideaworksmakerspaces.org/Donate, through Venmo at @Fresno-Ideaworksthrough, or through Givebutter (https://givebutter.com/KbPYYR). And thank you, in advance, from all of us at Fresno Ideaworks.

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You’ve Received an SBA Paycheck Protection Loan: Now What?

Written by Jeffrey Markarian, CPA: Dedekian, George, Small & Markarian

COVID-19 has had a devastating effect on the American economy, and agriculture has been especially hard hit.  To help provide economic relief, various federal legislation has been enacted, including the Coronavirus Aid, Relief and Economic Security (CARES) Act.  As part of the CARES Act, the Small Business Administration (SBA) received funding and authority to establish the “Paycheck Protection Program” (PPP).  The PPP is a forgivable loan program that was established as an incentive for small businesses to keep their workers on payroll during this financially difficult time.  As of June 5, 2020, the SBA had received total funding from Congress in the amount of $659 billion, and had approved 4,525,081 loans totaling approximately $511 billion.   

If you are one of the many small business owners in the agricultural industry that has received a forgivable PPP loan, you must apply for forgiveness of your PPP loan by submitting an SBA “Loan Forgiveness Application” to the lender servicing your PPP loan, as the loan is not automatically forgiven.  As a result, it is imperative that you plan now to maximize the forgiveness of your loan.  

The SBA has continued to provide additional guidance throughout the PPP in response to ongoing requests for assistance and clarity.  Also, on June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) was enacted, which provides PPP loan recipients with increased flexibility in utilizing PPP loan proceeds.  Most significantly, The PPPFA has extended the period to use funds from eight weeks after the date of receipt of loan proceeds to twenty-four weeks.  Borrowers receiving PPP loan proceeds prior to June 5, 2020, retain the option to use an eight-week covered period if desired.  Please note that all of the following information includes the changes resulting from the PPPFA.

The original intention of the PPP was to keep employees paid for the eight-week period beginning with the date loan proceeds are received.  As mentioned above, recent legislation has extended this to a twenty-four-week period.  Expenses to be paid with loan proceeds include payroll costs and specific non-payroll costs. 

Payroll costs include the following:

  • Salary, wages, commissions, or tips (limited to $15,384.62 per employee for the covered period)
  • Employee benefits (including payments for vacation, parental, family, medical, or sick leave; allowance for dismissal or severance pay; group health care benefits; payment of retirement benefits; and state and local taxes assessed on compensation)

Non-payroll costs include the following:

  • Interest on mortgage incurred before February 15, 2020
  • Rent on lease agreement in force before February 15, 2020
  • Utilities (including electricity, gas, water, transportation, telephone or internet) for which service began before February 15, 2020

To be eligible for full loan forgiveness, at least 60% of the loan must be used for payroll costs and not more than 40% for allowable non-payroll costs.  If less than 60% of the loan is used for payroll costs, the borrower is still eligible for partial loan forgiveness.  The first iteration of the PPP required 75% of the funds to be used for payroll or only part of the loan would be forgiven, but the PPPFA decreased the required percentage.  

What happens if your PPP loan is not forgiven?  Any portion of your PPP loan that is not forgiven will be required to be paid back over a 2-year period at 1% interest, with payments deferred for ten months from the date of the PPP loan disbursement.  However, for PPP loans approved by the SBA on or after June 5, 2020, the PPP loan maturity is increased to 5-years.

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On May 15, the SBA released its long-awaited PPP forgiveness form and instructions for borrowers to apply for forgiveness (please note that a modified forgiveness form is pending as a result of the PPPFA).   The form also provides detailed information related to the documentation required to be provided with your loan forgiveness application. It is important to review the documentation requirements; as extensive documentation may be required to be submitted depending upon your eligible expenses submitted for forgiveness.  Although the release of the form by the SBA brought with it significant changes to the interpretation of some components of forgiveness that were not previously known, additional guidance and clarity is still needed on some of the components of forgiveness.  Changes were made to the following components of the program based on the release of the form:

Covered payroll periods – Under original guidance, the covered payroll period began immediately after loan disbursement and lasted eight weeks. The PPPFA has increased the covered payroll period to twenty-four weeks.  For those with payroll schedules that did not align with the disbursement and covered period, this generated many questions and concerns. However, this latest guidance indicates that the eight-week period may begin starting with the borrower’s first payroll following disbursement, not necessarily on the day of disbursement. This alternative period only covers payroll costs, not other allowable expenses, although adjustments do exist for other allowable expenses.

Incurred and/or paid expenses – The CARES Act originally indicated that, for costs to be covered under PPP, they would need to be incurred and paid during the eight-week period (increased to twenty-four weeks by the PPPFA). The latest guidance, however, forgives costs that are incurred, but not paid, as long as they are paid on or before regular billing date. This expansion applies to costs such as mortgage interest, rent, utilities, and payroll incurred during the loan period. Payroll costs incurred during the last payroll period but not paid during the covered or alternative periods (mentioned above) may be forgiven if those payroll costs are paid on or before the next regular payroll date. 

Full-time equivalent (FTE) employee counts and wages – The guidance also included several clarifications to the FTE employee count and wage calculations necessary for forgiveness including:

  • FTE calculation can be rounded to the nearest tenth – The formula to calculate an FTE is average number of hours paid per week per employee/40, rounded to nearest tenth (differs from Affordable Care Act calculation).
  • Wage reductions must be analyzed on a per employee annualized basis – Salary or hourly calculations should be done on an average annualized basis compared to period of Jan. 1, 2020, to March 31, 2020. If the average for the twenty-four week period is 25% less than first quarter of 2020, loan forgiveness will be reduced, unless the reduction is restored at equal to or greater levels by December 31, 2020, then forgiveness will not be reduced.
  • Safe harbor exists for borrowers who rehire lost employees by December 31, 2020, at the same level as of Feb. 15, 2020. Forgiveness will not be reduced. 
  • Safe harbor exists for borrowers who made good faith written offer to rehire employees who then refused. Forgiveness will not be reduced.
  • Safe harbor exists for borrowers who fired employees for cause, voluntarily resigned, or voluntarily requested and received reduction in hours. Forgiveness will not be reduced.

Here is a quick rundown of the changes made by the PPP Flexibility Act.

CriteriaPrior GuidanceCurrent Guidance
Covered Period*8 weeks from PPP loan disbursementThe earlier of 24 weeks from date of loan disbursement or Dec. 31, 2020
Usage of FundsMinimum of 75% of funds must be used for payroll to with a maximum of 25% for non-payroll costs to achieve forgivenessMinimum of 60% of funds must be used for payroll with a maximum of 40% used for non-payroll costs to achieve forgiveness. If 60% of loans are not used for payroll, forgiveness is calculated on a sliding scale.
Extension of Safe Harbor for Compensation & FTE ReductionsSalary or hourly wage reductions must be reinstated by June 30, 2020, to avoid reduced forgivenessSalary or hourly wage reductions have until Dec. 31, 2020, to be restored to avoid reduced forgiveness
Deferral of Loan Payments6 months from loan origination dateEarlier of 10 months after the last day of Covered Period or when SBA remits the loan forgiveness funds to lender
Loan Maturity2 yearsLoans originated after June 5, 20205 yearsLoans originated prior to June 5, 2020 – Borrowers and lenders may mutually agree to extend the maturity date of loans to 5 years
Safe Harbors Based on Employee Availability, Rehiring, New HiresNoneForgiveness would not be reduced if borrowers can document in good faith:-Inability to rehire individuals employed on Feb. 15, 2020-Inability to hire similarly qualified employees by Dec. 31, 2020
Safe Harbors Based on Employee Availability in Compliance with HHS, CDC, or OSHA guidelinesNoneForgiveness would not be reduced if borrowers can document in good faith the inability to return to same level of business activity as before Feb. 15, 2020, due to compliance with requirements issued by HHS, CDC, OSHA from the period of March 1, 2020, to Dec. 31, 2020

Also of note:

  • *Borrowers may elect to stick with the 8-week covered period for loans originating prior to June 5, 2020. However, it is not clear if the June 30, 2020, safe harbor deadline still applies.
  • The amount of any Economic Injury Disaster Loan (EIDL) refinanced will be factored in when determining the percentage of proceeds for payroll costs.
  • It is unclear whether compensation limits formerly prorated based on 8 weeks now prorated based on 24 weeks.
  • It is unclear if the covered period may end prior to 24 weeks if funds have been used.

Further rules and guidance are expected to be issued from the SBA, including a modified borrower application form, and a modified loan forgiveness application that will included the changes resulting from the recently enacted PPPFA; however, please do not hesitate to contact us for further assistance with your PPP loan questions and help maximizing your loan forgiveness.  

Dedekian, George, Small & Markarian Accountancy Corporation
8080 North Palm Avenue, Suite 201
Fresno, California 93711-5797
P: 559.431.5500 
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