Important Guidance from the Department of Labor and the IRS Regarding the Families First Coronavirus Response Act
Since we published our initial alert regarding the Families First Coronavirus Response Act (FFCRA) – which seems like a lifetime ago – the United States Department of Labor (DOL) has published several rounds of guidance to assist employers in interpreting the extremely dense and not-exactly-the-model-of-clarity FFCRA. And the Internal Revenue Service (IRS) just weighed in as well. In an effort to be brief, when we know many of you are receiving notifications from multiple sources every day, we'll focus on the questions we are receiving in real time from employers every day.
First things first, here are links to each of the DOL's publications since you last heard from us on the FFCRA, so you can access them yourself anytime:
Here is the DOL's summary of the FFCRA's requirements for employers.
Here are the DOL's FAQs regarding the FFCRA. Please note that the DOL has updated their FAQs three times as of the date of this article, and very well may continue to do so after you read the information we are providing here. So keep an eye on them. And we will too.
Here are the IRS's FAQs, hot off the presses.
And, finally (a last-minute add-on just before we go to press with this article), the DOL published this afternoon its 124-page "Temporary Rule: Paid Leave under the Families First Coronavirus Response Act," with a very prominent disclaimer that the rule is not yet final and is subject to change before publication in the Federal Register.
Below are many of the questions our team is being asked, and the answers we can glean from the DOL's and IRS's guidance (except for the DOL's Final Rule which, as mentioned above, is pending). Naturally, we can't possibly answer every question that may come to mind regarding the FFCRA, but these seem to be the most frequently asked:
When is the Act effective?
Strangely, although Congress told us the FFCRA would be effective April 2, the DOL says the effective date is April 1.
When do we count how many employees we have?
Only employers with fewer than 500 employees are required to comply with the FFCRA. According to the DOL, you look at your headcount "at the time your employee's leave is to be taken." This seems to suggest that if your business is seasonal, such that you have fewer than 500 employees on the FFCRA's effective date, and for example, your business ramps up to 500 or more employees for the summer, the FFCRA will no longer apply to your workforce after you onboard your 500th employee. Similarly, if you presently have 500 or more employees, your employees will not be entitled to paid leave under the FFCRA, but if you implement workforce reductions in the future, once your workforce shrinks to fewer than 500 employees, your employees will be eligible for paid leave under the FFCRA.
We operate our business through several entities. Do we aggregate employees of our entities to decide if we have 500 or more employees?
If you operate your business through multiple entities, the DOL's FAQs explain that for purposes of both the Emergency Paid Sick Leave (EPSL) and the Emergency Family and Medical Leave Expansion Act (EFMLA) portions of the FFCRA, you should apply both the Fair Labor Standard Act's "joint employer" test, which can be found here, and the Family and Medical Leave Act's "integrated employer" test, which can be found here (see section (c)(2)). If you determine that your entities are either joint employers or an integrated employer, you should aggregate your employees for purposes of assessing whether you meet the 500 employee threshold under the FFCRA. If you need assistance applying these tests to your business, please let us know.
We are a small business. Do the requirements of the FFCRA apply to us?
There are very limited exceptions for small employers in the sole circumstance that an employee needs leave under the FFCRA due to school or place of care closures or child care provider unavailability for COVID-19 related reasons. Specifically, according to the DOL, an employer with fewer than 25 employees is not required to restore an employee to the same position following the employee's leave taken in such circumstance if four specific hardship reasons exist:
The employee's position no longer exists due to economic or operating conditions that affect employment and due to COVID-19 related reasons during the period of the employee's leave;
The employer made reasonable efforts to restore the employee to the same or an equivalent position;
The employer makes reasonable efforts to contact the employee if an equivalent position becomes available; and
The employer continues to make reasonable efforts to contact the employee for one year following the earlier of (a) the date the employee's leave ends or (b) 12 weeks after the employee's leave began.
And an employer with fewer than 50 employees is exempt from providing paid sick leave or EFMLA leave at all due to school or place of care closures or child care provider unavailability for COVID-19 related reasons when doing so would jeopardize the viability of the small business as a going concern, provided that an authorized company officer has determined that:
Providing paid sick leave or EFMLA leave would result in the small business's expenses and financial obligations exceeding available business revenues and cause the business to cease operating at a minimal capacity;
The absence of the employee requesting paid sick leave or EFMLA leave would entail a substantial risk to the financial health or operational capabilities of the business because of the employee's 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 requesting paid sick leave or EFMLA leave, and these labor or services are needed for the small business to operate at a minimal capacity.
If my employee won't come to work because she is scared she's going to be exposed to the Coronavirus, is she entitled to paid leave under the FFCRA?
No. Remember that the FFCRA applies in only limited circumstances. Specifically:
An eligible employee is entitled to paid leave under the EFMLA only when the employee is unable to work or telework due to a need to care for a child when the child's school or daycare provider is closed, or child care provider is unavailable, for reasons related to COVID-19.
An eligible employee is entitled to EPSL only when the employee is unable to work or telework because the employee:
Is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
Has been advised by a health care provider to self-quarantine due to reasons related COVID-19;
Is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
Is caring for a person subject to a quarantine or isolation order related to COVID-19 or who has been advised by a health care provider to self-quarantine due to reasons related to COVID-19;
Is caring for a child of the employee whose school or daycare provider is closed, or child care provider is unavailable, for reasons related to COVID-19; or
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.
And before you ask: No, we don't know yet what that last reason means. We expect guidance will be issued at some point that will explain it. Once we know, we'll let you know.
Remind me – who is an "eligible employee" under the FFCRA?
Under the EFMLA, any full-time or part-time employee is eligible for paid leave once the employee has worked for the employer for at least 30 calendar days.
For EPSL, all employees (full-time, part-time, and temporary) are eligible for paid sick leave, and there is no minimum service requirement.
This is so confusing. How much paid leave is an eligible employee entitled to?
The DOL distills it like this:
Two weeks (up to 80 hours) of paid sick leave at the employee's regular rate of pay if the employee is unable to work or telework because the employee is quarantined (pursuant to a federal, state, or local government order or the advice of a health care provider), and/or is experiencing COVID-19 symptoms and seeking a medical diagnosis; or
Two weeks (up to 80 hours) of paid sick leave at two-thirds the employee's regular rate of pay if the employee is unable to work or telework because of a need to care for an individual subject to quarantine (pursuant to a federal, state, or local government order or the advice of a health care provider), or to care for a child whose school or day care is closed, or childcare provider is unavailable, for reasons related to COVID-19; and
Up to an additional 10 weeks of paid expanded family and medical leave at two-thirds the employee's regular rate of pay if the employee, who has been employed for at least 30 calendar days, is unable to work or telework due to a need to care for a child whose school or day care is closed, or childcare provider is unavailable, for reasons related to COVID-19.
Who decides if an employee can telework?
Keep in mind that the paid leave provisions of the FFCRA do not apply unless an employee is "unable to work or telework." According to the DOL, employees are able to telework when their employer allows them to perform tasks remotely. An employee is unable to telework if the employer has work available the employee can do remotely, but "one of the COVID-19 qualifying reasons set forth in the FFCRA prevents [the employee] from being able to perform that work, either under normal circumstances at [the employee's] normal worksite or by means of telework."
Are furloughed, laid off, or terminated employees entitled to paid leave under the FFCRA?
No, and the answer doesn't matter whether the furlough, layoff, workforce reduction or other termination was implemented before, on, or after the effective date of the FFCRA. The DOL has made clear that employees who have been furloughed, laid off, or terminated are not entitled to paid leave under the FFCRA. Employers can suggest to these employees that they apply for unemployment benefits.
If we closed our business due to a state-issued shelter-in-place order or other government directive, are our employees entitled to paid leave under the FFCRA?
Contrary to our suspicions when we published our original alert regarding the FFCRA, it appears from the DOL's subsequent guidance that the answer is no. According to the DOL's FAQs, "If your employer closes your worksite, even for a short period of time, you are not entitled to take paid sick leave or expanded family and medical leave. ... This is true whether your employer closes your worksite for lack of business or because it was required to close pursuant to a Federal, State, or local directive."
The DOL's Temporary Rule expands on this by saying, "quarantine or isolation orders include a broad range of governmental orders, including orders that advise some or all citizens to shelter in place, stay at home, quarantine, or otherwise restrict their own mobility," However, the Temporary Rule clarifies that an employee may take paid sick leave only if being subject to such an order is the factor that prevents the employee from working or teleworking. If the employer does not have work for the employee to do "as a result of the order or other circumstances," the employee is not entitled to leave under the FFCRA. The DOL goes on to provide several examples, which we are in the process of digesting but which hopefully won't muddy the waters. More to come.
I heard health care providers may not be eligible to take paid leave under the FFCRA. Can you tell me about that?
Yes. In fact, we already did. See our recent article regarding the DOL's recent dramatic expansion of the definition of "health care provider" for purposes of the FFCRA and what that means for employers of individuals who fit within that definition.
How do we document FFCRA leave?
Private sector employers are eligible for a tax credit equal to 100% of the paid leave they provide to employees under the FFCRA. The DOL has made clear that employers may require employees to submit documentation establishing their need for leave.
According to the DOL, appropriate documentation to support EFMLA leave "may include a notice of closure or unavailability from [the] child's school, place of care, or child care provider, including a notice that may have been posted on a government, school, or day care website, published in a newspaper, or emailed to [the employee] from an employee or official of the school, place of care, or child care provider."
The IRS goes further and indicates that in order to substantiate eligibility for a tax credit – whether for EFMLA leave or EPSL leave – the employer must obtain from the employee a written request stating:
The employee's name;
The date or dates for which leave is requested;
A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
A statement that the employee is unable to work, including by means of telework, for such reason.
And the IRS gets even more specific than that:
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.
Is any additional documentation required if I want to claim the tax credit?
According to the DOL, if an employer intends to claim the tax credit, the employer must retain "appropriate documentation" to support the leave. And again, the IRS provides specificity, stating that the employer must create and maintain for at least four years after the later of the date the tax becomes due or is paid 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. See FAQ 31 ("Determining the Amount of Allocable Qualified Health Plan Expenses") for methods to compute this allocation.
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 (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).
What if my employee's spouse is also working from home during the pandemic? Can the employee claim a need for FFCRA leave to care for their child whose school is closed for COVID-19 reasons?
Good question, and before the IRS issued its guidance, the answer wasn't clear. But based on the IRS's prescribed documentation requirements (listed a couple questions before this one, see above), the IRS's view is that unless the employee provides a statement that no other person is providing care for the child, the employee is not entitled to leave under the FFCRA for that reason.
I have a 17-year-old son whose school is closed, and I find it odd that a parent could legitimately claim a need for FFCRA leave for that reason when it's clear he can fend for himself whether I'm home or not. What gives?
Funny you should say that, because I had the same reaction. The IRS has cleared that up by setting forth the requirement (listed a few questions before this one, see above) that in the case of a child 15-17 years of age, the employee must provide a "statement that special circumstances exist requiring the employee to provide care." Presumably, this would apply, in particular, to a child with special needs.
Well, the DOL's Final Rule is next, but we'll need time to get through all 124 pages and decipher them before we can provide additional updates. As the COVID-19 landscape continues to change, further guidance from the DOL and IRS may continue to alter it. Stay tuned, and keep the links to the DOL's and IRS's FAQs handy so that you have them in the event questions pop up in your workforce that are not specifically addressed here.