On April 1, 2020, the DOL issued its regulations on the paid leave provision of the Families First Coronavirus Response Act (i.e., the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Act).  While there is a lot to digest in the rule, the most significant aspect is the definition of and commentary surrounding quarantine or isolation orders.

The Rule defines “quarantine or isolation orders” to include a broad range of governmental orders, including orders that advise some or all citizens to shelter in place, stay at home, quarantine, or otherwise restrict their own mobility.  The commentary (page 14) to the Rule explains that:

An employee subject to one of these orders may not take paid sick leave where the employer does not have work for the employee. This is because the employee would be unable to work even if he or she were not required to comply with the quarantine or isolation order. For example, if a coffee shop closes temporarily or indefinitely due to a downturn in business related to COVID-19, it would no longer have any work for its employees. A cashier previously employed at the coffee shop who is subject to a stay-at-home order would not be able to work even if he were not required to stay at home. As such, he may not take paid sick leave because his inability to work is not due to his need to comply with the stay-at-home order, but rather due to the closure of his place of employment.1 That said, he may be eligible for state unemployment insurance and should contact his State workforce agency or State unemployment insurance office
for specific questions about his eligibility.

And just like legal briefs, the best stuff comes in a footnote explaining that:

This analysis holds even if the closure of the coffee shop was substantially caused by a stay-at-home order. If the coffee shop closed due to its customers being required to stay at home, the reason for the cashier being unable to work would be because those customers were subject to the stay-at-home order, not because the cashier himself was subject to the order. Similarly, if the order forced the coffee shop to close, the reason for the cashier being unable to work would be because the coffee shop was subject to the order, not because the cashier himself was subject to the order.

Consequently, the regulations provide that if a business is closed directly or indirectly by a shelter-in-place or stay-at-home order and the business has no work for its workers, paid leave under the FFCRA is not available.

You can see the full rule and commentary here.

 

 

As the paid leave provisions of the FFCRA take effect today, many employers are asking what information they should maintain so they can claim the tax credits that are available to pay for this leave.  Luckily, the IRS has come to the rescue describing the information that should be maintained.  The Service’s guidance explains that:

FAQ 44: An Eligible Employer will substantiate eligibility for the sick leave or family leave credits if the employer receives a written request for such leave from the employee in which the employee provides:

  1. The employee’s name;
  2. The date or dates for which leave is requested;
  3. A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
  4. A statement that the employee is unable to work, including by means of telework, for such reason.

In the case of a leave request based on a quarantine order or self-quarantine advice, the statement from the employee should include the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee.

In the case of a leave request based on a school closing or child care provider unavailability, the statement from the employee should include the name and age of the child (or children) to be cared for, the name of the school that has closed or place of care that is unavailable, and a representation that no other person will be providing care for the child during the period for which the employee is receiving family medical leave and, with respect to the employee’s inability to work or telework because of a need to provide care for a child older than fourteen during daylight hours, a statement that special circumstances exist requiring the employee to provide care.

The Guidance goes on to explain that:

FAQ 45:  An Eligible Employer will substantiate eligibility for the sick leave or family leave credits if, in addition to the information set forth in FAQ 44 (“What information should an Eligible Employer receive from an employee and maintain to substantiate eligibility for the sick leave or family leave credits?”), the employer creates and maintains records that include the following information:

  1. Documentation to show how the employer determined the amount of qualified sick and family leave wages paid to employees that are eligible for the credit, including records of work, telework and qualified sick leave and qualified family leave.

  2. Documentation to show how the employer determined the amount of qualified health plan expenses that the employer allocated to wages. See FAQ 31 (“Determining the Amount of Allocable Qualified Health Plan Expenses”) for methods to compute this allocation.

  3. Copies of any completed Forms 7200, Advance of Employer Credits Due To COVID-19, that the employer submitted to the IRS.

  4. Copies of the completed Forms 941, Employer’s Quarterly Federal Tax Return, that the employer submitted to the IRS (or, for employers that use third party payers to meet their employment tax obligations, records of information provided to the third party payer regarding the employer’s entitlement to the credit claimed on Form 941).

Employers should maintain their records for at least four years.  The IRS FAQ is full of other information related to the tax credits and other tax aspects of the FFCRA and can be found here.

Yesterday, a U.S. District Judge enjoined enforcement of the Dallas Paid Sick Leave Ordinance.  The law, effective August 1, 2019, was scheduled to start being enforced by the City of Dallas on April 1, 2020.  Dallas’s law, similar to laws passed by the City of Austin and San Antonio, will now wait until the Texas Supreme Court rules on the appeal it is considering the legality of Austin’s ordinance.  Meanwhile, the Emergency Paid Sick Leave Act and Family and Medical Leave Expansion Acts will take effect tomorrow.

A copy of the Preliminary Injunction is here.

On March 27, 2020, Congress passed and the President signed, the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Act appropriated $2 Trillion to preserve and stimulate the U.S. economy during the Coronavirus crisis. In addition to important economic relief provided to individual tax payers and government backed loans and grants to especially hard hit industries, the Act establishes a $349 Billion program to issue payroll protection loans intended to encourage small businesses to retain their employees and remain in business during this crisis.

Because the law only passed 48 hours ago, there are no regulations or guidance published by the Small Business Administration outlining how to apply for and take advantage of the paycheck protection loans. Here is what we know from the text of the Act. The Act amends the Small Business Act and will be administered by the Small Business Administration.

Who Businesses are Eligible?

  • Eligible businesses are small business concerns and business concerns as that terms is defined by the Small Business Act.
  • Business concerns are entities that are organized for profit, have a place of business in the U.S. and make a significant contribution to the U.S. economy through the payment of taxes or use of American products, materials or labor and have fewer than 500 employees. Small business concerns have the same meaning as used in the Small Business Act.
  • Loans are available to small businesses in operation on February 15, 2020 that paid, and reported to the IRS, compensation (and in the case of employees paid payroll taxes) to employees or independent contractors.
  • Eligible business must certify that the uncertainly of current economic conditions make the loan necessary to support ongoing operations, funds will be used to retain workers and pay payroll/mortgage/lease/utility payments; the business does not have a duplicative loan pending under the Small Business Act and the business has not received a similar loan from February 15, 2020 to December 31, 2020.

What Loan Can A Small Business Apply For?

  • Small business may be eligible for a payroll protection loan totaling the lesser of: the average total of monthly payments for business payroll costs during a one-year period plus the amount of any outstanding disaster loan that has been refinanced into a paycheck protection loan multiplied by 2.5 or $10 Million.

How can the money be used?

  • Payroll protection loans may be used to pay for: payroll taxes (including salary, wages, commissions or other similar compensation up to $100,000); payment of interest on mortgage obligations; rent; utilities; interest on debt; and costs related to group health care benefits.

What are the terms of the Loan?

  • Loan interest rates are not to exceed 4 percent. Payments of loan principle, interest and fees are deferred for at least the first six months following issuance.
  • Personal guarantees or collateral is not required to obtain a loan.
  • Loan forgiveness is available for certain costs incurred during the period from February 15, 2020 to June 30, 2020. Costs incurred that may be included in loan forgiveness include: payroll costs, mortgage interest payments, rent and utility payments. Loan forgiveness can be reduced or denied if the employer lays off employees or reduces employee salaries.

This is an important stop-gap measure that may provide small business with much needed cash to weather the 90-120 day period when much of the economy is closed for business.

I would like to thank Kelly Hart associates Joanna McKinney and Jonathan Petree for their contributions to this post.

On March 26, 2020, the U.S. Department of Labor published a Field Assistance Bulletin and additional answers to what it anticipates are Frequently Asked Questions about the FFCRA’ s posting obligations.

The Field Assistance Bulletin No. 2020-1 announced that the Department would take a nonenforcement position during the first 30 days when the Act is in effect so long as the employer 1) remedies any violations by making the affected employees whole as soon as practicable; 2) the violations were not willful (i.e., the violations were not knowingly made or made recklessly); and 3) the employer commits, in writing, to future compliance with the Act.

The new FAQ answers a variety of questions about the mandatory posting of rights and responsibilities under the Emergency Paid Sick Leave Act and the Family and Medical Leave Expansion Act.  The Families First Coronavirus Response Act Notice – Frequently Asked Questions can be reviewed here.

This morning the government reported a record number of new unemployment benefit claims: 3.283 Million new claims.  Meanwhile, based on directive from Governor Abbott last week, the Texas Workforce Commission Unemployment Division is waiving the seven day waiting period for receipt of unemployment benefits and temporarily suspending the work search requirements for unemployment eligibility.

The Families First Coronavirus Response Act that provides emergency paid leave and expanded FMLA rights to employees of small and mid-sized employers requires covered employer to post notice of rights and responsibilities under the Act in the workplace.  The U.S. DOL has posted model posters employers can use and post in conspicuous places where employees can review them.  Here are the links the model postings.

Employee Rights: Paid Sick Leave and Expanded Family and Medical Leave under The Families First Coronavirus Response Act (FFCRA)

Federal Employee Rights: Paid Sick Leave and Expanded Family and Medical Leave under The Families First Coronavirus Response Act (FFCRA)

When the Families First Coronavirus Response Act was passed, it was to take effect within 15 days of March 18, 2020.  Most assumed that the Act, thus, was effective on April 2, 2020.  Yesterday, the U.S. Department of Labor announced that the effective date of the Act will be April 1, 2020 (not an April Fool’s Joke) which is technically “within” fifteen days.  Consequently, employers with fewer than 500 employees will have one less day to prepare for the paid sick leave and expanded FMLA leave provisions.

The U.S. Department of Labor published Questions and Answers on the soon-to-be effective Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act.  The new guidance offers guidance on some important questions such as:

    1. How do I know if my business is under the 500-employee threshold for coverage?
    2. How does a small employer take advantage of the small business exception if providing child care-related paid sick and expanded family leave would jeopardize the viability of my business?
    3. Are overtime hours counted with calculating pay due to employees?
    4. How much are employees entitled to be paid while taking paid sick leave or expanded family and medical leave?
    5. Can an employee take 80 hours of paid sick leave for my self-quarantine and then another amount of paid sick leave for another reason provided under the Emergency Paid Sick Leave Act?
    6. How to paid sick leave and expanded family and medical leave interact if the parent is at home with my child because his or her school or place of care is closed, or child care provider is unavailable?
    7. Is all leave under the FMLA now paid leave?
    8. Is an employer required to pay 80 hours of paid sick leave if it provided it prior the Act going into effect?
      leave for a reason identified in the Emergency Paid Sick Leave Act prior to the Act going into effect?

You can read the DOL’s answers to these questions here.

 

Beginning at 6:00 p.m. March 21, 2020, the City of Fort Worth has amended is Emergency Disaster Declaration closing all non-essential businesses.

Non-Essential Businesses Closed by the Emergency Declaration

The following are identified as non-essential businesses: bars, lounges, taverns, commercial amusement and entertainment establishments, bingo halls, theaters, gyms, fitness classes, yoga and personal training facilities, similar facilities and classes, private clubs, tattoo and piercing parlors and tanning salons, residential meeting spaces, event centers, hotel meeting spaces and ballrooms, outdoor plazas and markets, and non-essential retail establishments including barber shops, hair salons, nail salons, spas, massage parlors, estheticians and related personal care businesses.

Also prohibited are all in-person worship services.

Essential Businesses that May Operate

The Declaration identifies the following as essential businesses: convenience and package stores, pharmacies and drug stores, day care facilities, medical facilities, veterinary facilities, non-profit service providers of essential services, homeless and emergency shelters, office buildings, jails, essential government buildings, airports and transit facilities, transportation systems, residential buildings and hotels, manufacturing and distribution facilities.