By: Abbey Furlong
Since President Trump signed the Families First Coronavirus Response Act (“FFCRA”) on March 18, 2020, things have continued to evolve as the Department of Labor began issuing additional guidance for employers and employees. And you may have heard about the $2 trillion stimulus bill that President Trump signed on March 27, 2020, formally known as the Coronavirus Aid, Relief, and Economic Security Act (or the “CARES Act”). Let’s take a look at the most recent developments and their impact on employers:
Families First Coronavirus Response Act Updates
Effective Date: The effective date has been moved up by one day. The FFCRA’s paid leave provisions (including the expanded FMLA leave and the emergency paid sick leave) are effective on April 1, 2020.
Posters: The Department of Labor has issued posters in English and Spanish that employers subject to the paid leave provisions must post in a conspicuous place on their premises. The notice requirement can also be satisfied through emailing or direct mailing the notice to employees (this may be the best option for employers whose employees are working remotely). The notice only needs to be provided to current employees so to the extent employees have already been laid off or furloughed, notice is not required to be given to those individuals.
Documentation: Employers who provide paid sick leave and expanded FMLA leave under the FFCRA must retain appropriate documentation in their records to substantiate their claim for the payroll tax credit. The IRS intends to issue further forms, instructions, and information for the procedures that must be followed to claim the tax credit in the coming week. Employers are not required to provide leave if the employee requesting the leave has not provided sufficient documentation for the employer to adequately support its claim for the payroll tax credit.
For leave taken under the expanded FMLA, employers may require their employees to provide documentation in support of that leave to the extent permitted under the FMLA certification rules for conventional FMLA leave requests. In the context of the FMLA expansion, which applies only to employees taking leave to care for a minor child whose school or care provider has closed for a reason related to COVID-19, this may include things such as a notice that has been posted on a government, school, or day care website, or published in a newspaper, or an official e-mail from the school or child care provider.
Requirements Not Retroactive: The paid leave requirements under the FFCRA are not retroactive to the date the legislation was signed. Employees who were laid off or who were placed on unpaid leave before April 1, 2020, are not entitled to paid sick leave or expanded family and medical leave (but may be eligible for unemployment insurance benefits). Similarly, if an employer voluntarily provided paid leave to its employees before April 1, 2020, it does not affect the amount of paid leave available to its employees under the FFCRA beginning on April 1 nor is the employer entitled to receive tax credits for any paid leave offered prior to April 1.
Closures and Layoffs After April 1: If an employer closes its worksite, lays off, or furloughs employees after April 1, 2020, due to lack of business or because the employer was required to close in response to a Federal, State, or local directive, employees are no longer entitled to paid sick leave or expanded FMLA leave other than for any such leave they took prior to the closure, layoff, or furlough (but may become eligible for unemployment insurance benefits at that time). If the employer reopens and its employees resume work, they will again be eligible for any remaining paid leave available during the effective dates of the FFCRA (April 1, 2020 – December 31, 2020).
CARES Act Impact on Employers
FMLA Expansion for Re-Hired Employees: The CARES Act further expands the emergency family leave provided in the FFCRA for re-hired employees by allowing individuals who were laid off on or after March 1 and who are re-hired before December 31, 2020, access to the expanded FMLA leave provided under the FFCRA as long as the employee worked in their job for at least 30 of the last 60 calendar days before the layoff. The employee would not be entitled to paid leave on a retroactive basis for any dates during the layoff period but, upon re-hire, will be entitled to immediately access the expanded FMLA leave provisions under the FFCRA rather than having to re-qualify for such leave by working for a period of 30 days.
Payroll Tax Delay: The CARES Act delays payment of 50% of 2020 employer payroll taxes until December 31, 2021, with the other 50% being due by December 31, 2022, subject to certain exceptions (most notably, the payroll tax delay will not apply to employers who also take advantage of the Small Business Act loan forgiveness, discussed in more detail in my colleague Kyle Day’s blog post).
Advance Refunding of Tax Credits: But what about employers’ payroll tax credits intended to offset the paid leave required by the FFCRA? In light of the above payroll tax delay, the CARES Act provides that the payroll tax credits to which employers are entitled (including the refundable portion, if any) can be refunded in advance using forms and instructions the IRS will provide. Additionally, the IRS has been instructed to waive any penalties for failure to deposit payroll taxes if the failure was due to an anticipated payroll tax credit.
Employee Retention Credit: For eligible employers subject to closure due to COVID-19, the CARES Act allows an employee retention credit against applicable employment taxes for each calendar quarter in an amount equal to 50 percent of the qualified wages for each employee (up to $10,000 per employee per calendar quarter). The retention credit is refundable to the extent the amount of the credit exceeds the employer’s employment taxes. To be eligible, employers must have been carrying on a trade or business during 2020: (1) which was fully or partially suspended due to orders from a governmental authority limiting commerce, travel, or group meetings due to COVID-19 OR (2) which experienced gross receipts for the 2020 calendar quarter that were less than 50 percent of gross receipts for the same calendar quarter in the previous year (until the gross receipts are greater than 80 percent of gross receipts for the same calendar quarter in the previous year). For employers with greater than 100 employees, eligible wages for the credit are wages the employer pays to its employees who are not providing services due to the suspension of the business or the drop in gross receipts. For employers with 100 or fewer employees, all wages paid qualify for the credit.
Abbey joined Lane & Waterman in 2010. Her trial law practice primarily consists of professional malpractice, employment law, and products liability.