We understand these are extremely uncertain times with the rapid spread of COVID-19 impacting virtually every facet of business and resulting in a wave of emergency legislation.
Recently, the Families First Coronavirus Response Act (“FFCRA”) was passed requiring employers with fewer than 500 employees to provide employees with paid leave in certain circumstances related to the pandemic and providing payroll tax credits to employers to cover their costs of the qualifying paid leave. In addition, the President signed the $2 trillion Coronavirus, Aid, Relief, and Economic Security Act (the “CARES Act”) to provide various forms of financial assistance and tax benefits for businesses and expand unemployment insurance benefits for individual workers impacted by the pandemic.
Below are some important frequently asked questions to help your business make effective decisions while navigating COVID-19’s impact on the workplace. Don’t hesitate to contact the experts at RPNA to discuss the specific facts and needs of your business and to ensure compliance with the various federal, state and local laws at issue.
1. How Much Paid Leave Am I Required to Provide to My
The FFCRA contains two interrelated paid leave requirements, the Emergency Paid Sick Leave Act (“EPSLA”) and the expansions to the Family Medical Leave Act (“expanded FMLA”).
The EPSLA requires eligible employers to provide employees with 80 hours of paid sick leave if the employee is unable to work (including telework) due to any of the following qualifying reasons:
1. The employee is subject to a federal, state or local quarantine
due to concerns related to COVID-19;
2. The employee was advised by a health care provider to
self-quarantine due to COVID-19 concerns;
3. The employee is experiencing COVID-19 symptoms and
seeking a medical diagnosis;
4. The employee is caring for an individual subject to a federal,
state or local quarantine or isolation order or advised by a
health care provider to self-quarantine due to COVID-19;
5. The employee is caring for the employee’s child if the child’s
school or place of care is closed or unavailable due to a
public health emergency; or
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.
An employee who is unable to work for the circumstances described in 1, 2, or 3 above, is entitled to 80 hours of paid sick leave, paid at their regular rate of pay, up to $511 per day, with a cap of $5,110, per employee. An employee who takes leave to care for others, as described in 4, 5, or 6, above, is entitled to 80 hours of paid sick leave at two-thirds their regular rate of pay, up to $200 per day, and capped at $2,000, per employee.
The expanded FMLA provides that any employee employed for at least 30 days prior to the first day of leave, may take up to 12 weeks of job-protected leave to allow the employee, who is unable to work or telework, to care for the employee’s child if the child’s school or place of care is closed or the childcare provider is unavailable due to a public health emergency. The expanded FMLA requires employees taking this leave be paid two-thirds their regular rate of pay, up to $200 per day and $10,000 in the aggregate per employee.
The Department of Labor (“DOL”) has released a poster for the FFCRA, which will need to be posted in many workplaces and distributed to remote workers. A copy of the poster may be found on the DOL’s website.
Employers are eligible for two refundable payroll tax credits that will “immediately and fully reimburse them,” dollar for dollar, for the amount paid to employees for qualified leave in compliance with the FFCRA.
It is important to maintain appropriate documentation in order to qualify for the tax credits. Your company must retain documentation demonstrating the amount of paid sick leave wages paid to each employee and how that amount was calculated, as well as, copies of all completed Forms 7200, and Forms 941 submitted to the IRS.
2. Does My Business Have to Provide Paid Leave to Furloughed
or Laid Off Employees?
The DOL has attempted to clarify under what circumstances an employee is or is not entitled to the paid leave under the FFCRA when the employee is laid off or furloughed.
The most complicated issue for employers is likely going to be whether or not to provide paid leave due to the first qualifying reason under the FFCRA: “The employee is subject to a federal, state or local quarantine due to concerns related to COVID-19.”
According to the DOL, the key question in the analysis is “whether the employee would be able to work or telework ‘but for’ being required to comply with a quarantine or stay at home order.” Thus, if the employee’s inability to work is due to the closure of their place of employment or because of a downturn in business, even if those reasons are related to the pandemic, then the employee is likely not eligible for paid leave.
Whether or not an employee is entitled to paid leave is extremely fact specific and can be perplexing. In addition, laying off or furloughing employees may implicate several other federal, state, and local laws. For instance, even if an employee is not eligible for paid leave under the FFCRA, the employee is still protected by the California Fair Employment and Housing Act, which may require the employer to engage in the interactive process or provide a reasonable accommodation, and protects employees from retaliation and discrimination.
Further, any reduction in salary or hours may be considered an improper deduction from an exempt employee’s salary or could remove the exempt status of an employee entirely, subjecting the employee to overtime and meal and rest break requirements.
If an employee is furloughed or laid off, the employee is also likely entitled to the final pay requirements under Labor Code section 201, resulting in an obligation to pay the employee all accrued vacation and PTO hours. This also could cause issues with remote workers receiving their final pay timely.
While some companies may have to make the difficult decision to lay off or furlough employees, the CARES Act also expanded unemployment assistance. Under the CARES Act, employees who are unemployed, partially unemployed, or cannot work due to COVID-19, are entitled to the weekly unemployment benefit as provided for under state law, plus an additional $600 a week.
The analysis of what paid leave an employee is entitled to if the employee has suffered a reduction of hours, or has been furloughed or laid off, is complicated and subject to varying interpretations. In addition, reducing hours, or furloughing or laying off employees, can implicate a variety of federal, state and local laws in addition to the FFCRA. These difficult business decisions should not be taken lightly and only be implemented after consulting with the legal experts at RPNA.
3. What Can I do If I Cannot Afford the Paid Leave as Required by
Small employers with fewer than 50 employees may qualify for an exemption from the requirement to provide paid leave if the leave payments would jeopardize the viability of their business.
The DOL has promulgated certain factors that would allow an employer or a business with fewer than 50 employees to deny an employee qualified paid leave, and these factors largely pertain to circumstances under which the leave would seriously jeopardize the viability of the employer’s business.
The DOL explained that if a business is going to deny an employee from taking qualified paid leave, the business must document the facts and circumstances that meet the criteria to justify such denial. The business should not send the material to the DOL, but rather should retain the records for its own files.
While there is no guidance as to how this provision will be enforced, presumably if the DOL chooses to challenge a small businesses’ decision to deny leave, the burden will fall on the business to produce the well documented justifications. If you are considering denying an employee’s request for paid sick leave, please contact RPNA for additional consultation.
There remains much uncertainty and further clarity on these points will be made by the various federal agencies, including the DOL, IRS, and SBA. This guidance is a general overview to flesh out some of the more important aspects of complying with the law and operating your business. The rules and regulations in play are extensive and nuanced.
If you would like more complete guidance on these issues, please contact Drew E. Pomerance, Gary A. Nye, Michael B. Adreani, or Trevor R. Witt at RPNA at (818) 992-9999.