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.

 

 

On March 18, 2020, President Trump signed the Families First Corona Virus Response Act.  The Families First Act requires small and midsized employers to provide paid sick leave benefits and expanded FMLA leave to employees needing time away from work due to COVID-19 reasons.  While the Act provide others benefits, the FMLA Expansion Act and Emergency Paid Sick Leave Act are summarized here.

Family and Medical Leave Expansion Act

The Emergency Family and Medical Leave Expansion Act also takes effect on April 2, 2020 and expires on December 31, 2020. The Act requires covered employers provide up to 12 weeks of FMLA leave for a qualifying need related to a public health emergency.

     Covered Employers and Eligible Employees

Most private employers with fewer than 500 employees are covered by the Act. Employees eligible to take public health emergency leave are employees who have been employed for at least 30 calendar days by the covered employer when public health emergency leave is requested.

Leave under the Act is allowed for a qualifying need related to a public health emergency. A qualifying need related to a public health emergency means the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency which includes an emergency with respect to COVID-19 declared by the Federal, State or local authority.

     Pay While on Leave

The first 10 days of public health emergency leave may be unpaid. However, the Emergency Paid Sick Leave Act may provide an eligible employee with pay during this time period. After the initial 10 day period, the employer must pay the employee at a rate not less than 2/3 the employee’s regular rate of pay for the balance of the FMLA leave not to exceed $200 per day and $10,000 in the aggregate.

     Restoration of Position

Employees of employers with 25 or more employees are entitled to be restored to an equivalent position at the end of their leave. Employees of an employer with fewer than 25 employees are not entitled to job restoration if the position held by the employee when the leave commenced does not exist due to economic conditions or other changes in operating conditions of the employer that affect employment; and are caused by a public health emergency during the period of leave.

In that case, the employer must make reasonable efforts to restore the employee to a position equivalent to the position the employee held when the leave commenced, with equivalent employment benefits, pay, and other terms and conditions of employment. If these reasonable efforts to find an equivalent position fail, the employer must continue to make reasonable efforts to contact the employee if an equivalent position becomes available. This contact period runs from the 1-year period beginning on the earlier of the date on which the qualifying need related to a public health emergency concludes; or the date that is 12 weeks after the date on which the employee’s leave commenced.

Employers will be entitled to take certain payroll tax credits for payment of required paid family leave and paid sick leave.

Emergency Paid Sick Leave Act

The Emergency Paid Sick Leave Act requires most employers having fewer than 500 employees to provide up to 80 hours of paid sick leave taken for full time employees (part time employees receive the number of hours they worked on average over a 2 week period) who are unable to work for certain COVID-19 caused absences. Employees are immediately eligible to take paid sick leave under the Act regardless of how long the employee has been employed by the employer.

     Permissible Uses of Sick Leave

A covered employer shall provide paid sick leave to each eligible employee to the extent that the employee is unable to work (or telework) due to a need for leave because:

(1) The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID–19.

(2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19.

(3) The employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis.

(4) The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).

(5) The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID–19 precautions.

(6) The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

When an employee is taking leave for a qualifying reason, the employer cannot require the employee to search for or find a replacement employee to cover the hours that the employee is using paid sick time.

   Amount of Pay

The amount of paid sick leave is calculated based on the amount of compensation the employee would otherwise been scheduled to work. The amount of compensation due for paid sick leave is capped at $511 per day and $5,110 in the aggregate for a use described in paragraph (1), (2), or (3) above and $200 per day and $2,000 in the aggregate for a use described in paragraph (4), (5), or (6).

Accrued, but unused paid sick leave is not paid on termination of employment and is not carried over into 2021.

     Notice and Posting Provisions

Employers may require an employee follow its reasonable notice procedures in order to continue to receive paid sick leave after the first workday (or portion thereof) an employee receives paid sick time under this Act. Employers must post notice of the provisions of this Act and the Secretary of Labor is required to provide a model notice not later than April 7, 2020. The notice must be posted conspicuously in places where notices to employees are customarily posted.

     Potential Narrow Exemption for Small Employers

The Secretary of Labor is given the authority to issues regulations to exempt small businesses with fewer than 50 employees when the imposition of such requirements would jeopardize the viability of the business as a going concern. It is unclear what procedures the Secretary will apply to grant industry-wide exemptions or exemptions on an employer-by-employer basis. Presumably, a small employer will have to petition the Secretary for an exemption, but this is unclear and may not be known until the Secretary issues the contemplated regulations.

The Act also contains anti-retaliation provisions that prohibit employers from retaliating for employee’s taking leave under the Act or because the employee filed a complaint under the Act.