Well, here we are! 

I’m not going to sugarcoat it, things are…not good. I’m comforted in knowing that we will get to the other side, eventually. Until then, it will be a challenge. We are collecting our best tips and recommendations to help your agency in these craptastic times. We’ll add to this periodically with what we see working and not working for our other clients.

This post has gotten big, so a little directory for finding your way around:


Client Contracts

  • New Engagements. If you are fortunate enough to be signing up some new engagements right now, DO NOT simply reuse your old contract and contract terms. 
    • Payment Terms. 50% down and 50% on delivery was maybe fine when the economy was good. But it is a nonstarter now. Payment should be front-loaded to the fullest extent possible. Yes, you have the leverage to negotiate this. If you get money front-loaded, you can ease up on things like kill fees, late fees, interest, and the like. You might even be able to give a more aggressive delivery schedule since you know you can cover staff expenses.
    • Expenses. For the same reasons as above, do not be fronting any expenses for clients right now. Get the money up front or have them contract directly with the provider.
    • Legal Review. We are strongly recommending a full legal review of all new engagements to think about how terms can be adjusted to manage risk in the current environment. This applies even if you have an MSA drafted by Matchstick or the Bureau Standard Form of Agreement. 
  • Existing Engagements. Job 1 here is to get the cash you are owed in the door. 
    • Ask for Help. If you are in a bit of a spot on project that can be remedied by a little more time or getting a payment sooner rather than later, ask your client for help. Everyone knows the situation and is just trying to get through. So start here and see what you can work out.
    • Client Requests for Payment Delays or Other Adjustments. If a client asks for any sort of concession or adjustment to your project such as payment delays, more work, less work, schedule change — know that you do not need to grant this for free! They are asking for an amendment to your contract. You have the leverage to ask for something in exchange. For example, if a client asks to scale back a project, consider doing so in exchange for all payments being up front.
    • Project Management. Time is your enemy now — the longer a project goes on the more risk you have of nonpayment. You need to get merciless as a project manager. No more extra free rounds of revision or doing work outside of scope in the name of client service or letting the client push back deadlines. Hold the client’s feet to the fire of timely feedback and an engaged team.
    • Interest / Late Fees. If your contract allows you to charge interest and late fees, you should start doing so right away and point it out to the client. While those tools are sometimes more trouble than they are worth in good times, in bad times every dollar counts. They can also be useful negotiation tools (i.e., forgo interest and late fees if client pays by Friday).
    • Slow Pay / No Pay. If a client is currently late with a payment, you need to stop work until they get caught up. Don’t dig a bigger hole. If a client is routinely slow, you need to have a conversation with them now before the next invoice about expectations (pay on time) and consequences (stop work, declare breach, terminate).
    • Early Termination. In some cases, you might be better off getting out of a contract now. This is more likely if a client is already in breach (nonpayment, missing client deliveries, etc.) but can be true even with a project that hasn’t encountered trouble yet. Talk to your lawyer as to whether there are ways you can mitigate risk by terminating a contract before completion
  • Force Majeure. This is a clause in some contracts that a party can use to excuse non-performance due to occurrence of an unforeseen event. If you don’t have this type of clause in your contract, as a general rule, we do NOT recommend adding it. The reason is that we think it is more likely that your client will try to use that clause to excuse them from paying what they owe you (as opposed to an agency needing relief from its obligation to complete its work). There are certainly exceptions (agencies that produce events or provide field agents), but for the most part, WFH for digital agencies will not get in the way of the work. If you do have this clause in your contracts, talk to your lawyer about whether it creates risk for you (that a client may use as a way to excuse nonperformance) or whether your agency can take advantage of the clause.


  • Termination. Remember that when you terminate someone, you need to pay them everything they are legally owed through the date of termination at the time of termination or shortly thereafter. What they are owed at termination varies by state so consult with your lawyer if you are unsure. 
  • Unemployment. If you need to lay people off, point them toward your state’s unemployment division. They should submit paperwork right away. Remember that unemployment is a type of insurance and that the unemployment benefits do not directly cost your business money. Yes, you may have a higher unemployment insurance premium percentage in future years, but likely everyone will. And it is peanuts in the grander context. Remember, this is just a benefit for employees, not contractors.
  • Severance. If you are paying severance to terminated employees, consider whether to ask terminated employees to sign a release in exchange. The release protects you against many types of future lawsuits from the employee. Releases may need to be customized depending on the employee and the circumstances surrounding termination, so talk to your lawyer about what is appropriate in your circumstance.
  • COBRA. If you provide your employees health insurance, remember that they generally will have the option to continue on your plan at their own expense under COBRA for 18 – 36 months following termination. You or your health insurance provider will need to promptly issue a notice to terminated employees of their rights under COBRA.
  • Work Share Programs. Many states have programs allowing you to reduce an employee’s hours and allow that person to collect a percentage of unemployment for the missed time. This keeps the person on your payroll at a reduced rate. They are required to report to duty if you call them in for a project. You are also generally required under these programs to continue paying the employee’s benefits.

Events, Vendor Agreements, Loans, Leases

  • Deposits and Kill Fees. If you have an event booked for this summer or fall, you likely are considering canceling. You may have a deposit or sizable kill fee obligation. Many venue / hotel contracts do have force majeure clauses like those discussed above. And in these circumstances, they can be helpful to you. Also, we are finding that many venues and hotels recognize the unique situation and are allowing their customers to reschedule the event without a kill fee. Contact your lawyer to review your options and for assistance in negotiating an event agreement.
  • Loans and Leases. If you think you may have trouble meeting upcoming lease or loan obligations, talk to your landlord and bank. Often in disaster situations, landlords and lenders offer or are willing to accept deferments. Landlords and lenders have lots of customers in the same situation as you are in right now. they likely are developing a plan to work with tenants and borrowers since it will do little good to to evict businesses en masse or declare mass defaults. You may need to have an income statement ready to show how revenue has been affected (or data about canceled / postponed projects) in order to make your case to the landlord. Keep an eye out for local, state, or federal legislation offering additional relief.

New Legislation

By now you have certainly heard of some of the new legislation coming out of Washington D.C. Summarized below are the provisions we believe are most applicable to agencies. There may be other relief offered in your state or locally. Check with your local authorities for information on these programs.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law on March 27. CARES Act does a lot of things. Among other things, It enhances unemployment benefits, helps hospitals, and provides direct cash payments to individuals. We are focused on the provisions of interest to agencies and that is the loan program.

CARES Act / Payroll Protection Program Loan (PPP Loan).

The Payroll Protection Program creates a mechanism for small businesses (under 500 employees) and independent contractors/​freelancers to obtain an expedited SBA loan from their local bank that is eligible for forgiveness if spent on payroll, rent, utilities, and interest on loans.

We think this is huge and could make the difference between life and death for many agencies, large and small. This is a very focused program though so read on for details.

The maximum loan a borrower can obtain is 2.5 times your average monthly payroll costs for the twelve months prior to obtaining the loan. The term payroll costs” is expansive and includes: gross pay; vacation, parental, family, medical, or sick leave; group health insurance; employer side of retirement benefits; and state and local tax on wages. If you are an independent contractor or freelancer, payroll costs” means wage, commission, income, net earnings from self-employment, or similar compensation.

Subject to some exceptions described below, to the extent you use the loan toward payroll costs, rent, utilities, and interest on loans (“Qualifying Expenses”), the loan will be forgiven. When you apply for forgiveness, you’ll need to provide documentation that you used the loan for approved purposes (canceled checks, receipts for payments, etc.). 

You have until June 30 to apply for one of these loans and it must be used toward Qualifying Expenses within 8 weeks of receipt to qualify for forgiveness. Use of loan proceeds toward payroll costs of an individual employee earning in excess of $100,000 per year do not constitute Qualifying Expenses. Also, no more than 25% of your Qualifying Expenses can be for things other than payroll costs.

The amount of forgiveness will be reduced if the borrower

  • Has a lower headcount of employees during the eight-week period compared to prior periods; or
  • Reduces the salary or wages paid to an employee earning less than $100,000 by more than 25% during the 8‑week period (compared to the most recent quarter)

Based on guidance released by the Treasury Department, if there is a remaining balance on a loan after forgiveness, it will have a maximum maturity of 2 years, be payable monthly, and bear interest at a maximum interest rate of 1%. No personal guarantee is required and the loan will be unsecured. Repayment will be deferred for six months. And there is no prepayment penalty. For the real details, see the just finalized Treasury Regulation on the program.

If you applied for a regular SBA disaster loan prior to the effectiveness of CARES, you can still get the benefits of the new loan program (forgiveness) to the extent proceeds are spent on eligible expenses.

A business can only obtain one loan under the program.

While these loans are backed by the SBA, you obtain them from local banks that are approved SBA lenders. Check whether your current bank is currently an SBA lender (if not, find another local bank that is that you may like to work with). Loan application fees will be waived and there is expected to be an expedited process for obtaining these loans.

Based on our review of the documentation requirements being requested by certain banks, we recommend you assemble the following in anticipation of seeking a PPP loan:

  • Payroll records for 2019 (copy of IRS Form 941) and first 2 – 3 months of 2020.
  • Payroll ledger for 2019 and 2020 showing payroll costs” itemized for each employee 
  • Calculate your average monthly payroll costs” for the most recent 12 months
  • Average FTEs Feb 15, 2019 through June 30, 2019
  • Average FTEs Jan 1, 2020 through Feb 29, 2020
  • Expected FTEs during 8 week period for use of loan proceeds
  • How much of payroll during 8 week period goes toward employees earning more than $100,000
  • Whether any layoffs or salary reductions have been made recently (and monthly salary costs associated with those layoffs and salary reductions)
  • Names and ownership percentages of each business owner owning 20% or more of the business. 
  • Your EIN number
  • If you are a corporation, get a copy of your articles of incorporation, bylaws, and shareholders agreement. If you are an LLC, have a copy of your articles of organization and operating agreement handy.

Every bank is requiring applicants to fill out an SBA application form. A bank will also likely require you to fill out a bank-specific application form.

If you think you may want to use this loan, please contact us if you’d like help understanding how this program may apply to you or if you have questions about the application.

Employee Retention Credit

Under the CARES Act, businesses are also eligible for the employee retention tax credit. The credit is available to all businesses and covers 50% of wages up to $10,000 in a year. There are two categories of businesses that qualify for the credit:

  • The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter
  • The employer’s gross receipts are below 50 percent of the comparable quarter in 2019. Once the employer’s gross receipts go above 80 percent of a comparable quarter in 2019 they no longer qualify after the end of that quarter.

These measures are calculated each calendar quarter.

The credit cannot be taken against wages that were used for determining forgiveness under the Cares Payroll Protection loan.

Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit. If payroll tax deposits are not enough to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

The Families First Coronavirus Response Act. This was signed into law on March 18. It will become effective on April 2. 

Emergency Paid Sick Leave.

  • Applies to employers with fewer than 500 employees.
  • Grants full time employees 80 hours of paid sick leave (in addition to any leave already provided by the employer) if the employee is sick, under quarantine/​isolation, or caring for others due to Covid-19 
  • Leave is at the employee’s regular rate or 2/3 rate if caring for someone else or caring for a child due to school closure
  • paid sick leave wages is capped at $511 per day up to $5,110 total per employee for their own use and to $200 per day up to $2,000 total to care for others.
  • Employers will receive a refundable tax credit equal to 100% of the wages paid through offsets against payroll tax withholdings.
  • Employers may not require employees to use other available leave before using this emergency paid sick leave
  • Emergency paid leave does roll-over to next year and does not have to be paid out to employees on termination of employment

Emergency Family Medical Leave.

  • FMLA is temporarily amended to apply to all employers with fewer than 500 employees (formerly required over 50 employees).
  • Employees are eligible after working for an employer for just 30 days
  • An employee to take up to 12 weeks of job protected leave to care for a child due to illness or if the child’s school or child care is closed (job protected leave means the employee’s job or equivalent must be made available upon return).
  • The first 10 days of leave may be unpaid (an employee can use accrued vacation or sick pay during this period if they choose). After the 10 days, the employer must pay the employee at 2/3 rate for the number of hours the employee would otherwise be normally scheduled (capped at $200 per day and $10,000 in the aggregate per employee)
  • Employers will receive a refundable tax credit equal to 100% of the wages paid through offsets against payroll tax withholdings
  • For employers with fewer than 25 employees are excused from the obligation to return the employee to an equivalent position at the end of leave if the employee’s position no longer exists due to an economic downtown or circumstances caused by a public health emergency.
  • Employers with fewer than 50 employees may apply to be exempt from the requirement of granting leave due to school closure if doing so jeopardizes the viability of a business as a going concern (DOL regulations to come)

The Department of Labor has issued an extensive Q&A document answering a lot of practical questions about how to apply these leave benefits. A few points of note:

  • an employee may be eligible for both Emergency FMLA Leave and Emergency Sick Leave. 
  • employees forced to stay home due to business closures or shelter in place orders are NOT eligible for these types of leave
  • Furloughed workers (workers that stay on payroll but have zero hours of work) are considered terminated and not eligible for emergency leave (must instead apply for unemployment)
  • Teleworking employees may take emergency leave intermittently within a day or week due to child care or illness.

Other Considerations For Agencies

  • Americans with Disabilities Act. The DOL has issued guidance for employers about what questions they can ask about an employee’s health and not be in violation of the ADA.
  • Tax Return Deadlines. The deadline for taxpayers to file their federal income tax returns has been extended to July 15. Income tax payments can also be deferred to July 15 without interest or penalties. Check with your state to see how local deadlines are being affected. This also extends the deadline for making contributions to your IRA. Many filing and payment obligations under the Internal Revenue Code are tied to the filing deadline” so changing the filing deadline affects other obligations as well. See the IRS FAQ for details about how other deadlines are affected.
  • SBA Disaster Relief Loans. Your business may be eligible for a disaster relief loan from the SBA. Whether you can apply depends in part on whether your area has been declared a disaster (what isn’t a disaster right now?). You can apply for these loans online.
  • Emergency Funds for Creatives and Freelancers. Great list of emergency resource funds for creatives and freelancers. More geared toward fine art, illustration, and similar works — but a helpful collection.

Last updated April 6, 2020 9:00 a.m. Pacific