COVID-19: Obligations for businesses and rights of employees taking effect this week
March 30th, 2020 by David Minces
Families First Coronavirus Response Act
We posted about the key provisions of the Families First Coronavirus Response Act (FFCRA) on our blog last week (accessible here). At that time, the FFCRA was just signed into law and there were numerous unanswered questions and wrinkles to be ironed out by the Department of Labor (DOL) and Internal Revenue Service (IRS). While not all of the details of the FFCRA have been clarified, we enter this week with a better handle on what employers’ obligations are and what rights are given to employees. Below are the main questions the DOL and IRS have provided answers to.
Effective date – April 1, 2020
The FFCRA’s paid leave provisions are effective beginning April 1, 2020 and will apply to leave taken between April 1, 2020 and December 31, 2020. There are notice posting requirements (detailed below) that begin on April 1, 2020 as well.
Small business exemption from child care-related paid sick leave and expanded FMLA
Small businesses (less than 50 employees) may be exempt from providing the child care-related paid sick leave and expanded family and medical leave under the FFCRA. The DOL has stated that employers should not send any materials to the Department to seek the exemption. The exemption is available to businesses with less than 50 employees when providing the leave would “jeopardize the viability of the business as a going concern.”
To claim this exemption, an authorized officer of the business must determine that:
- The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
- The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
- 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 or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.
Employers should internally document why their business meets one or more of these criteria. Businesses should note that this exemption only applies to child care-related leave and expanded family and medical leave, not to personal sick leave (if the employee themselves is quarantined or experiencing COVID-19 symptoms and seeking a medical diagnosis).
Leave benefits not available if business closed or employee is furloughed
Businesses that close before or during an employee’s paid leave will not be obligated to pay the benefits from the time of closure onward. This applies for any closure reason, whether elective (for lack of business, or any other reason), or by federal, state, or local directive to do so. If a business furloughs an employee due to lack of business or work at any time on or after April 1, 2020, that employee will not be eligible for paid leave.
Health care provider and emergency responder exemptions
Employees who are health care providers or emergency responders may be exempt from the paid leave requirements of the FFCRA.
A health care provider for the purposes of this exemption is defined as: 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. This includes any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions or anyone employed by an entity that contracts with any of the above institutions, employers, or entities institutions to provide services or to maintain the operation of the facility. This also includes anyone employed by any 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.
An emergency responder for the purposes of this exemption is defined as an employee who is necessary for the provision of transport, care, health care, comfort, and nutrition of such patients, or whose services are otherwise needed to limit the spread of COVID-19. 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.
These definitions may also be expanded by the highest official of a state or territory, if that official determines that doing so is necessary for the state or territory’s response to COVID-19.
Notice requirements take effect April 1, 2020
All employers subject to the FFCRA (businesses with less than 500 employees) must post the DOL’s notice on or before April 1, 2020. The notice must be posted in a conspicuous place on the employer’s premises. Since many employees are already working remotely, an employer may also email or direct mail this notice to employees, or post the notice on an employee information website (internal or external). The notice may be downloaded and printed from the DOL here.
Additional answers to frequently asked questions are available on the DOL’s website here.
Coronavirus Aid, Relief, and Economic Security Act (CARES)
On Friday, March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES) was signed into law. CARES provides $2 trillion in aid via loans to small businesses. These loans may be eligible for complete forgiveness.
Businesses with less than 500 employees, and certain businesses with more than 500 employees total, but less than 500 employees per location, are eligible for payroll protection loans. These loans are available to help small businesses cover payroll costs and other expenses.
Loan amounts will generally be capped at the lesser of $10 million or 2.5 times the average monthly payroll costs incurred in the one-year period before the date of the loan. For each employee paid over $100,000 annually, only a prorated amount of $100,000 for the covered period will be used to calculate average monthly payroll costs.
Businesses are eligible for loan forgiveness in the amount equal to the qualifying costs spent during the eight-week period after the loan’s origination. Qualifying costs include: payroll costs (up to $100,000 in annual wages per employee), rent and utilities paid during the eight-week period after the loan’s origination. If the business lays off or furloughs employees, or reduces the wages paid to an employee by more than 25% during this eight-week period after the loan’s origination, the forgiveness for the loan will be proportionally reduced. However, this reduction can be avoided if the business rehires all employees that were laid off since February 15, 2020 or increases the reduced wages by June 20, 2020.
The deadline to apply for a payroll protection loan is June 30, 2020. These loans will be expedited to ensure funds are quickly issued to businesses.
SSI tax credits and deferment
Businesses that do not obtain a payroll protection loan may be eligible for a refundable tax credit for their share of the 6.2% Social Security tax, up to 50% of the first $10,000 in wages paid to each employee beginning on March 13, 2020. Businesses with over 100 employees (in 2019), will only be eligible for 50% of the first $10,000 in wages paid to employees who were not providing services due to the coronavirus. Eligibility depends on the following criteria:
- The business must have operations fully or partially shutdown due to an order from a governmental authority; or
- The business must have experienced a decline in gross receipts by over 50% in a calendar quarter (compared to the same quarter in 2019).
Businesses may also defer the payment of their share of SSI tax on wages paid from March 27 to December 31, 2020. Deferred payments may be made in two installments – half on December 31, 2021 and half on December 31, 2022. Again, employers who obtain a payroll protection loan are not eligible for this benefit.
Unemployment benefit increase
While CARES provides numerous benefits for small businesses, there are also benefits for individuals. The federal government will be increasing individual unemployment wage eligibility by an additional $600 per week for up to 4 months. The federal government will also be funding up to 13 weeks of additional unemployment benefits for employees who remain unemployed after their state benefits have run out. Employees who do not qualify for state unemployment benefits will still be eligible for benefits equal to that of their state’s benefit program between January 27 and December 31, 2020.
The most talked about provision of CARES is the individual recovery rebate. Individuals with adjusted gross income of up to $75,000 will receive $1,200. Joint filers with adjusted gross income of up to $150,000 will receive $2,400. An additional $500 for each child under age 17 will also be available. For individual filers with AGI between $75,000 and $99,000 and those filing jointly with AGI between $150,000 and $198,000, a $50 reduction of the rebate for every $1,000 above the $75,000/$150,000 AGI will apply. AGI will be based on 2018 tax returns if 2019 returns have not yet been filed, or on 2019 returns if they have been filed. Individuals who only received Social Security income, or otherwise made less than the threshold for tax filing will still be eligible for the rebate.
Numerous other aid provisions of the FFCRA and CARES apply. For assistance with compliance and/or to maximize your business’s eligible relief, submit a contact form through our website or schedule a telephone consultation appointment. Minces PLLC is here to help employers and employees through this crisis.
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