What Are the Key Takeaways from the IRS’s New Guidance and the DOL’s Proposed Rules?

The federal government continues to provide additional guidance and rulemaking on the Families First Coronavirus Response Act’s Emergency Paid Sick Leave (EPSL) and Expanded FMLA (E-FMLA) requirements, which went into effect on April 1.

  • The IRS’s new guidance is available here.
  • Additionally, the Department of Labor (DOL) has issued proposed rules on the enforcement of the FFCRA, available here.

Below are the highlights. To read our initial write-up of the FFCRA, and our summaries of the IRS’s and DOL’s previous guidance, click here.

Key Takeaways:

  • Requests for leave need to be in writing and contain specific information depending on the need for the leave.
  • Leave to care for an “individual” only covers immediate family members, people in the household and other similar people.
  • Where leave is to care for a child aged 15-18, and provided that work is during daylight hours, employee must provide special justification of their need for leave.
  • Shelter-in-Place and Stay-at-Home orders do constitute government quarantine/isolation orders, but employees can only claim leave for one of these reasons if they are subject to the order (i.e. not essential) and there is work for them to do (i.e. workplace is open) – leaving very few situations where an employee could claim EPSL based on such an order.

IRS Guidance

Is there more information on how to claim the tax credits for providing EPSL and E-FMLA?

Yes! Employers will report the amount of EPSL and E-FMLA (“qualified leave wages”) on their quarterly federal employment tax returns (typically a Form 941).

Employers may receive the tax credit in advance by reducing the amount of federal employment taxes they deposit for that quarter by the amount of the qualified leave wages paid in that quarter.

The IRS provides the following example:

An employer paid $5,000 in qualified leave wages and is otherwise required to deposit $8,000 in federal employment taxes, including taxes withheld from all of its employees, for wage payments made during the same quarter as the $5,000 in qualified leave wages. The employer may keep up to $5,000 of the $8,000 of taxes it was going to deposit, and it will not owe a penalty for keeping the $5,000. The employer is then only required to deposit the remaining $3,000 on its required deposit date. The employer will later account for the $5,000 it retained when it files its Form 941, Employer’s Quarterly Federal Tax Return, for the quarter.

What about tax credits for “qualified health plan expenses”?

Tax credits for qualified leave wages may be increased by the amount employers pay to provide and maintain a group health plan (“qualified health plan expenses”) allocable to each type of qualified leave wages. Qualified health plan expenses are properly allocated to EPSL or E-FMLA if the allocation is made on a pro rata basis among covered employees (for example, the average premium for all employees covered by a policy) and pro rata on the basis of periods of coverage (relative to the time periods of leave to which such wages relate).

What form do I use to request advance payment of tax credits?

Form 7200. The form, and instructions for completing it, are available here.

What information do I need to request from an employee to substantiate the tax credits?

Employers need to request the following information in writing in order to substantiate the need for leave:

  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.

Additional information is also required for the following:

  • If the need for leave is based on a quarantine order, the statement from the employee should include the name of the governmental entity ordering quarantine.
  • If the need for leave is based on the advice of a health care provider to self-quarantine, the statement from the employee should include the name of the health care professional advising self-quarantine.
  • If the need for leave is to care for a person subject to a quarantine order or advised to self-quarantine, the employee will need to provide the person’s name and relation to the employee (in addition to the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine.)
  • If the need for leave is 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.

What records do I need to retain to request the tax credit?

In addition to retaining the information provided by the employee, employers should retain the following documentation:

  • 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.
  • Documentation to show how the employer determined the amount of qualified health plan expenses that the employer allocated to wages.
  • Copies of any completed Forms 7200, Advance of Employer Credits Due To COVID-19, that the employer submitted to the IRS.
  • Copies of the completed Forms 941, Employer’s Quarterly Federal Tax Return, that the employer submitted to the IRS.

How long will I need to retain these records?

For four years after the date the tax becomes due or is paid, whichever comes later.

How long are the tax credits available?

The credits are available for EPSL and E-FMLA leave taken between April 1, 2020, through December 31, 2020, even if paid after December 31, 2020.

DOL’S Temporary Rule

Note that the temporary rule is effective as of April 1, but the DOL has noted that the version currently available may vary slightly from the published rule.

Employees may receive EPSL if they are subject to a quarantine or isolation order or are caring for an individual who is subject to quarantine or isolation order. What is a “quarantine or isolation order”?

A quarantine or isolation order includes quarantine, isolation, containment, shelter-in-place, or stay-at-home orders issued by any Federal, State, or local government authority that cause the employee to be unable to work. It also includes instances where the Federal, State, or local government authority has advised categories of citizens (e.g., of certain age ranges or of certain medical conditions) to shelter in place, stay at home, isolate, or quarantine.

An employee is eligible for EPSL if the employer has work available, but the employee cannot perform available work because of such an order.

Employees may receive EPSL if they are advised by a health care provider to self-quarantine. What type of advice does this cover?

An employee qualifies for EPSL if a health care provider advised them to self-quarantine based on a belief that (a) the employee has COVID-19, (b) the employee may have COVID-19, or (c) the employee is particularly vulnerable to COVID-19; and following the advice to self-quarantine prevents the employee from being able to work at the workplace or by telework.

Employees may receive EPSL to care for an individual subject to a quarantine or isolation order or advised by a health care provider to self-quarantine. Does this mean any individual the employee cares for?

No, but the definition of “individual” is broad. “Individual” means an employee’s immediate family member, a person who regularly resides in the employee’s home, or “a similar person with whom the employee has a relationship that creates an expectation that the employee would care for the person if he or she were quarantined or self-quarantined.” It does not include persons with whom the employee has no personal relationship.

How may employers provide notice to employees of the FFCRA?

The FFCRA requires employers to post a notice on its premises, in conspicuous places. Employers may also satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website.

What documentation may I request from employees?

The DOL does not require employees to provide all of the information that the IRS requires employers to retain in order to support the tax credit (see above) to be eligible for EPSL or E-FMLA, but it permits employers to deny leave if the employee does not provide all information required to request a tax credit.

Note that for leave taken under the FMLA for an employee’s own serious health condition related to COVID-19, or to care for the employee’s spouse, son, daughter, or parent with a serious health condition related to COVID-19, the normal FMLA certification requirements still apply.

What type of notice may an employer require of the employee’s need to take EPSL or E-FMLA?

Notice may not be required in advance, and may only be required after the first workday (or portion thereof) for which the employee takes EPSL or E-FMLA. After the first workday, the employer may require the employee to follow “reasonable notice procedures.” Generally, the following notice requirements will be reasonable:

  • Requiring notice as soon as practicable under the facts and circumstances of the particular case.
  • Requiring notice to be given by the employee, or the employee’s spokesperson if the employee is unable to do so personally.
  • Requiring oral notice and sufficient information for an employer to determine whether the requested leave is covered by the EPSL or E-FMLA.
  • Requiring employee to comply with the employer’s usual and customary notice requirements for requesting leave, absent unusual circumstances.

Employers may not require employees to provide more information beyond what is needed to support the tax credit when providing notice.

How do I elect the small business exemption?

Employers with fewer than 50 employees may be exempt from having to provide E-FMLA and EPSL Category #5 (leave to care for a child due to the school or childcare provider being closed/unavailable due to COVID-19).

To elect this small business exemption, the employer must document that a determination has been made pursuant to the criteria for the exemption. The employer does not need to submit this documentation, but must simply retain the records in its files.

Does the employee maintain health benefits during EPSL or E-FMLA leave?

Yes. Employers must maintain the employee’s coverage under any group health plan (on the same conditions as coverage would have been provided if the employee had been continuously employed during the entire leave period.

What documentation do I need to retain?

In addition to the documentation required to be maintained to request the tax credits (see above), employers must retain all documentation provided by employees requesting leave, regardless of whether leave was granted or denied. These documents need to be retained for four years.

 

Assessing Workforce Options: Amid Financial Pressures, What’s The Right Plan Of Action For My Business?

Many businesses have faced significant economic challenges due to the coronavirus pandemic. If your business is considering making personnel decisions to improve financial stability, you have a number of options and considerations.

Generally, employers have four options for reducing their workforce costs:

  1. Reducing employees’ hours
  2. Reducing employee compensation
  3. Furloughs/temporary layoffs
  4. Termination/permanent layoffs

You do not have to select one alternative – these options can be used in combination to address the unique needs of your business. For example, a portion of the workforce could be furloughed and a different portion could be laid off. Or, some employees may have their pay reduced and may later be laid off if conditions do not improve.

The attached chart summarizes key considerations when determining the right plan for your business. Keep in mind that if your business has applied for or received a loan from the Small Business Administration’s Paycheck Protection Program (put in place as part of the CARES Act) a reduction in the number of employees, in work hours, or in payroll during the eight weeks after receiving the loan may impact the loan forgiveness. Employers, in some cases, have the opportunity to rehire employees or make up for wage reductions by June 30, 2020 and still receive loan forgiveness. Consult our specific guidance on the CARES Act or speak to your accountant or bank concerning the loan terms.

 

Click here to download a full PDF of the guide.

 

For more resources and LP’s response to COVID-19, visit this webpage.

Additional Guidance from DOL on FFCRA – including rules for small employer exemption and definitions of “health care provider” and “emergency responder”

Over the weekend, the Department of Labor (DOL) issued its latest round of guidance on the FFCRA’s Emergency Paid Sick Leave (EPSL) and Expanded FMLA (E-FMLA) requirements. The additional guidance is found in Questions #38-59 of DOL’s running Q&A document. Below are the highlights. You can find our initial write-up of the FFCRA, and our summaries of the DOL’s first and second guidances, here.

The FFCRA referred to a small business exemption for employers with fewer than 50 employees. Do we have any more information?

Finally we do! The DOL has confirmed that employers with fewer than 50 employees may be exempt from having to provide E-FMLA and EPSL Category #5 (leave to care for a child due to the school or childcare provider being closed/unavailable due to COVID-19). Note that this exemption only applies to E-FMLA and EPSL due to school/childcare closure – not to other types of EPSL.

In order to claim exemption from providing E-FMLA or EPSL Category #5, an authorized officer of a business with fewer than 50 employees must have determined that one of the following is true:

    1. Providing EPSL or E-FMLA would result in expenses and financial obligations exceeding available business revenues and cause the business to cease operating at a minimal capacity;
    2. The absence of the employee(s) requesting EPSL or E-FMLA would entail a substantial risk to the financial health or operational capabilities of the business because of their specialized skills, knowledge of the business, or responsibilities; or
    3. There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee(s) requesting EPSL or E-FMLA, and these labor or services are needed for the small business to operate at a minimal capacity.

We strongly recommend that the company maintain both the records and information on which the officer’s determination is based and a written record of the officer’s determination.

 

Can an employee take EPSL or E-FMLA to care for any child whose school or childcare is closed?

The FFCRA only provides leave to care for a “son or daughter” whose school or child care is closed or unavailable – not any child. The DOL has now clarified that “son or daughter” includes any “biological, adopted, or foster child, your stepchild, a legal ward, or a child for whom you are standing in loco parentis—someone with day-to-day responsibilities to care for or financially support a child.” So the key is that the child is that employee’s responsibility – EPSL is not available where the employee wants to care for someone else’s child.

 

If an employee used FMLA earlier in the year, does that impact EPSL and E-FMLA?

The DOL has clarified that E-FMLA counts toward the total 12 weeks contemplated under the FMLA. So, if an employee has taken FMLA within the last 12-months, their total regular FMLA and E-FMLA can’t exceed 12 weeks. Similarly, an employee who takes E-FMLA, will have that time counted against their annual FMLA entitlement.

 

What is a full-time employee for purposes of EPSL? What is a part-time employee?

For purposes of EPSL, a full-time employee is one who is normally scheduled to work 40 hours or more per week. A part-time employee is one normally scheduled to work fewer than 40 hours. This matters for EPSL, because it determines how many hours of EPSL the employee is eligible to receive.

 

Who is a “health care provider” for purposes of determining which employees can be denied EPSL/E-FMLA?

The FFCRA provides that employers can refuse EPSL and E-FMLA for “health care providers.” The DOL has now clarified that a health care provider is very broad. It includes anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, employer, or entity.

“Health care provider” also includes anyone employed by an entity that contracts with any of these health care institutions to provide service or to maintain the operation of the facility. The DOL states that this includes anyone employed by an entity that “provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, or treatments” and anyone that the highest official of a state or territory (generally, a governor) determines is a health care provider necessary for that state or territory’s response to COVID-19.

However, the DOL encourages employers to be judicious with their reliance on the “health care provider” exemption in order to minimize the spread of COVID-19.

 

Who is an “emergency responder” for purposes of determining which employees can be denied EPSL/E-FMLA?

The DOL has also defined “emergency responders” very broadly, stating that it is an employee who is necessary for the provision of transport, care, health care, comfort and nutrition, or whose services are otherwise needed to limit the spread of COVID-19. The DOL states that this includes, but is not limited to, “military or national guard, law enforcement officers, correctional institution personnel, fire fighters, emergency medical services personnel, physicians, nurses, public health personnel, emergency medical technicians, paramedics, emergency management personnel, 911 operators, public works personnel, and persons with skills or training in operating specialized equipment or other skills needed to provide aid in a declared emergency as well as individuals who work for such facilities employing these individuals and whose work is necessary to maintain the operation of the facility.” In addition, anyone that the highest official of a state or territory (generally, a governor) determines is an emergency responder necessary for that state or territory’s response to COVID-19 is deemed to be an emergency responder.

However, the DOL encourages employers to be judicious with their reliance on the “emergency responder” exemption in order to minimize the spread of COVID-19.

 

Is my company required to return an employee to the same position after his or her leave?

The DOL says yes – in most circumstances. Employers can’t take an adverse employment action (firing, disciplining, etc.) against an employee for taking EPSL or E-FMLA. However, employees aren’t protected from employment action that would have impacted them regardless of their being on leave – such as layoffs or furloughs.

Employers with fewer than 25 employees also have some specific provisions that apply to an employee returning from E-FMLA. If your company is in that position, refer to Question #43 in the Q&A or contact your employment lawyer to discuss.

DOL Provides Additional Guidance on Families First Leave Provisions, Including Treatment of Employees on Furlough and Handling of Intermittent Leave

More Guidance from DOL on Paid Sick Leave and Emergency FMLA

Late Thursday the Department of Labor (DOL) issued more guidance for employers on the Families First Coronavirus Relief Act (FFCRA) emergency paid sick leave (EPSL) and expanded Family and Medical Leave Act (E-FMLA) requirements. The additional guidance is in the form of 22 new Q&As (#15-37 in the Guidance, which you can find here).

The guidance finally answered several important questions that had left employers confused by their obligations, including how to handle furloughed employees and whether intermittent leave is available to care for a child who is home from school or childcare because of a COVID-19-related closure.

Here are the key questions and answers from this new guidance:

What are the records the employee must provide and the employer must keep?

To be eligible for the tax credit, employers must require, and employees must provide, appropriate documentation in support of the reason for the leave. The documentation should include the employee’s name, the qualifying reason for the leave, a statement that the employee is unable to work (or telework) for that reason, and the dates for which they require the leave. While it appears that the employee’s own declaration will satisfy part of the requirement, the employee must provide documentation supporting the reason for the leave. Examples of such documentation are a copy of the Federal, State, or local quarantine or isolation order related to COVID-19, written documentation by a health care provider advising self-quarantine, or the notice demonstrating the closure of a school or place of care.

The DOL Guidance makes clear that this documentation must be retained by the employer to support the tax credit.

May EPSL and E-FMLA be taken intermittently?

Employees who are working at their usual worksite may use EPSL and E-FMLA intermittently only if the reason they are taking the leave is to care for a child whose school or childcare is closed or unavailable (Category #5) and the employer agrees. The DOL encourages employers and employees to collaborate to achieve flexibility in this area.

Employees who are teleworking may take EPSL and E-FMLA intermittently with the employer’s agreement, in whatever increments the employee and employer agree to. The DOL encourages employers and employees to collaborate to find ways to allow for a combination of telework and intermittent leave.

What happens if I close a worksite? Are employees eligible for EPSL/E-FMLA?

In general, employees are not eligible for EPSL or E-FMLA during the period when a worksite is closed. This is true even if the worksite closes on or after April 1, 2020 and even if an employee already has begun EPSL or E-FMLA leave. In this situation, the employee would receive EPSL or E-FMLA only for the period from April 1 to the date of the closure.

Are furloughed employees eligible for EPSL/E-FMLA?

No. If the employer implements a furlough because it does not have enough work or business, then the impacted employees are not eligible for EPSL/E-FMLA. Note that this remains the case even if the employer indicates that they plan to reopen.

Employees who are furloughed should apply for unemployment benefits.

If an employer reduces an employee’s hours, can employees use EPSL or E-FMLA to make up the difference?

No.

May I require employees to use other available paid leave (vacation time, PTO, etc.) to supplement the EPSL/E-FMLA pay? May I allow them to?

Employers may not require employees to use paid leave to “top off” their EPSL/E-FMLA pay, but may allow it if the employee wishes to do so.

What if I want to pay an employee their full pay during EPSL or E-FMLA even though they only receive 2/3 pay under the FFCRA?

Employers can choose to pay more, but they will not receive a tax credit for the excess payments.

When is an employee able to telework for purposes of the FFCRA?

An employee is able to telework (and thus ineligible for EPSL and E-FMLA) if the employer permits or allows them to perform work at home or a location other than their regular workplace and pays them their normal wages for such work.

When is an employee unable to work or telework?

An employee is unable to work or telework, and thus potentially eligible for EPSL, if the employer has work for them and one of the EPSL qualifying reasons keeps them from being able to perform that work (either at their worksite or via telework).

Do state and local “stay at home” and “shelter in place” orders constitute “quarantine or isolation” orders so as to satisfy Category #1 for EPSL?

The guidance doesn’t specifically address whether the current broad government orders to “stay at home” or “shelter in place” constitute a “quarantine or isolation order” as is required to fall under Category #1 for purposes of EPSL. However, language in one of the questions regarding workplace closures further supports what we already thought – namely that these orders do not meet the requirements for Category #1.

 

 

DOL Releases COVID-19 Mandatory Notice to Employees: What Do I Need to Do?

Yesterday, the Department of Labor (DOL) released the poster that all employers with fewer than 500 employees are required to display in the workplace that outlines employee leave rights under the Families First Coronavirus Response Act (FFCRA). A link to the poster can be found here.

This poster is required to be posted in a conspicuous place on the premises where employees can see it. However, given that many workplaces are now remote, the DOL has indicated that employers may meet their notice requirement by emailing the notice to employees or posting it on an employee information internal or external website.

For more resources and LP’s response to COVID-19, visit this webpage.