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News & Updates: Update: Department of Labor Issues Regulations Interpreting the Families First Coronavirus Response Act

Update: Department of Labor Issues Regulations Interpreting the Families First Coronavirus Response Act

Posted by Susan Ansberry and Joseph Bevington IV

On April 1, the U.S. Department of Labor (DOL) issued regulations concerning Paid Sick Leave and Emergency FMLA Leave required under the Families First Coronavirus Response Act (FFCRA). The DOL regulations clarify and, in some cases, expand or modify, provisions in the FFCRA. The IRS also issued guidance on March 31 concerning procedures and standards for claiming payroll tax credits for costs incurred in providing paid leave under the FFCRA. Below is a summary of key provisions of the leave provisions of the FFCRA, highlighting new information from the DOL regulations and the IRS guidance.

Because the agencies are frequently updating regulations and other guidance, employers should consult with legal counsel about the application of the FFCRA to particular situations.

Update: On August 3, a United States District granted partial summary judgment in a lawsuit brought by the State of New York challenging certain provisions of the DOL’s FFCRA regulations.  State of New York .v United States Dep’t of Labor, Docket No. 20-CV-3020 (S.D.N.Y. 8/3/2020). The court ruled that three key provisions of the regulations exceeded the DOL’s authority: (1)  the rule that employees are not eligible for FFCRA leave if their employers have no work available for them; (2) the broad definition of health care providers whom employers may elect to exclude from leave requirements; and (3) the provisions requiring employer consent for employees to use leave intermittently. It is not yet clear how this decision will impact application of the regulations nationwide or whether an appeal will be filed.

EFFECTIVE DATES
Eligible employees are entitled to take Paid Sick Leave and Emergency FMLA Leave between April 1 and December 31, 2020.

COVERED EMPLOYERS
Most private employers with 500 or fewer employees are covered by the FFCRA. In making the determination as to whether an employer has 500 employees, the employer should include all full-time and part-time employees employed in the United States as of the date an employee would take leave, including employees on leave, temporary employees who are jointly employed by the employer and another employer, and day laborers supplied by a temporary placement agency. Independent contractors that provide services for an employer do not count towards the 500- employee threshold, nor do employees count who have been laid off or furloughed and have not subsequently been reemployed.

FFCRA Small Business Exemption
Employers with fewer than 50 employees may be exempt from providing some or all of their employees paid leave under the FFCRA if “the imposition of such requirements would jeopardize the viability of the business as a going concern.” The exemption is limited to leave for an employee to care for the employee’s child due to the closure of the child’s school or day care or unavailability of a child care provider. For this exemption to apply, the DOL regulations require that “an authorized officer” of the business or nonprofit organization make a determination that:

  1. Granting an employee’s request for Paid Sick Leave or Emergency FMLA Leave would result in the employer’s expenses and financial obligations exceeding available business revenues and cause the organization to cease operating its business at a minimal capacity;
  2. The absence of the employee or employees requesting Paid Sick Leave or Emergency FMLA Leave would cause a substantial risk to the financial health or operational capabilities of the organization 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 work normally performed by the employee or employees requesting Paid Sick Leave or Emergency FMLA Leave and this work is needed for the organization to operate at a minimal capacity.

This is not a blanket exemption from the requirements of the FFCRA. The DOL has explained that an employer may deny Paid Sick Leave or Emergency FMLA Leave only to those otherwise eligible employees whose “absence would cause the small employer’s expenses and financial obligations to exceed available business revenue, pose a substantial risk, or prevent the small employer from operating at minimum capacity, respectively.” An employer that denies a request for leave based on the above exemptions must maintain documentation of the determination that the employer was eligible for the exemption for four years.

Note: Even employers claiming the small business exemption must post the required notices, as outlined below.

PAID SICK LEAVE
With the exception of certain health care employees and emergency responders, all employees of covered employers, regardless of length of service or hours of work, are entitled to two weeks of Paid Sick Leave for specified COVID-related absences, in addition to any other paid time off that an employer already provides (e.g., sick leave, vacation, PTO).

Reasons for Use
Employees must be allowed to use Paid Sick Leave for six specific reasons. The DOL regulations clarify that Paid Sick Leave is only available for one of the situations listed below if the employee would be otherwise working or teleworking. If the employer has no work or telework available for the employee, the employee is not entitled to use Paid Sick Leave. Thus, temporarily laid off or furloughed employees will not be eligible for Emergency Paid Sick Leave because no work or telework is available for those employees.

Absences for Self-Care

  1. 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. The DOL’s regulations have clarified that, contrary to prior definitions from the CDC, an insolation order includes a “shelter-in-place” order issued by any level of government.
  2. The employee is unable to work or telework because the employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19.
  3. The employee is unable to work or telework because the employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis. The DOL regulations provide that an employee must be exhibiting specific symptoms (including fever, dry cough or shortness of breath), and the employee is entitled to sick leave only during the time that the employee is taking affirmative steps to obtain a medical diagnosis.

Absences for Care of Others

  1. The employee is unable to work or telework because the employee is caring for an individual who is subject to an order or medical advice described in items 1 or 2 above. The DOL’s regulations have clarified that for purposes of this type of sick leave, an “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. An “individual” does not include persons with whom the employee has no personal relationship.
  2. The employee is unable to work or telework because the employee is caring for the employee’s son or daughter if the child’s school or place of care has closed or the child’s child care provider is unavailable and no other suitable person is available to care for the child. Although the FFCRA refers to leave to care for a son or daughter under age 18, the DOL’s regulations have expanded the definition of “child” to be consistent with other provisions of the FMLA which include certain adult children. The DOL regulations require Paid Sick Leave to care for “a biological, adopted, or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis, who is under 18 years of age; or 18 years of age or older who is incapable of self-care because of a mental or physical disability.” The IRS requires that if a child is over age 14, the employee must explain special circumstances that require the employee to provide care during daylight hours.
  3. For other substantially similar reasons that may be identified by the Department of Health and Human Services.

Calculating Sick Leave Pay:
The amount of pay an employee will receive for Paid Sick Leave depends on the reason for the absence.

Employees who need sick leave for self-care reasons (categories 1-3 above) are entitled to their full regular rate of pay up to a maximum of $511/day or $5,100 total.

Employees who need sick leave to care for others (categories 4-6 above) are entitled to the greater of 2/3 of their regular pay or of the applicable minimum wage, up to a maximum of $200/day or $2,000 total.

The DOL regulations provide the following guidance on the calculation of Paid Sick Leave:

  • Employees are entitled to Paid Sick Leave for the amount of time that they would have worked during a two week period with a cap of 80 hours of Paid Sick Leave.
  • Full‑time employees (defined as employees normally working 40 hours per week), are entitled to 80 hours of Paid Sick Leave.
  • Part-time employees who work a normal weekly schedule of less than 40 hours are entitled to Paid Sick Leave up to the number of hours they would have worked during a two week period.
  • A part-time employee without a normal weekly schedule is entitled to Paid Sick Leave hours equal to fourteen times the average number of hours the employee was scheduled to work each calendar day over the six-month period ending on the date on which the employee takes Paid Sick Leave, including any hours for which the employee took leave of any type. The regulations include provisions for calculating the entitlement for part-time employees with fewer than six months of employment.
  • Since the regular rate for non-exempt employees may vary week-to-week, for purposes of calculating Paid Sick Leave the regular rate must be calculated based on a weighted average (and include all compensation such as commissions, tips, services charges and piece rates) for six months prior to the start of Paid Sick Leave or, for employees employed for less than six months, all workweeks the employee has been employed.

Intermittent Use of Paid Sick Leave:
Depending on the reason an employee needs to use sick leave and whether the employee is working or teleworking, an employer may agree to allow the employee to take the Paid Sick Leave Intermittently (i.e., in separate periods of time, rather than one continuous period) in any increment agreed to by the employer and employee.

  • If the employee is using the Paid Sick Leave for care of a child due to the closure of the child’s school or day care or the unavailability of child care provider (reason 5 above) the employee may use up to the full amount of Paid Sick Leave on an intermittent basis, with the employer’s agreement, whether the employee is teleworking or working at the employer’s worksite.
  • For the remaining reasons for Paid Sick Leave (1-4 and 6), an employee may take Paid Sick Leave intermittently only if the employee is teleworking and with the employer’s permission. If the employee is working at the employer’s worksite, the employee may not take Paid Sick Leave intermittently and must instead use the permitted days of leave consecutively until the employee no longer has a qualifying reason to take Paid Sick Leave (e.g., until the employee or family member is no longer sick).  This rule is intended to ensure that an employee who is ill or has been exposed to COVID-19 will remain isolated until there is no longer a risk of exposing others to the virus.

EMERGENCY FMLA LEAVE
This FFCRA temporarily amends the federal Family and Medical Leave Act (FMLA) to add an additional reason for an employee to take FMLA leave—to care for the employee’s son or daughter due to the closure of the child’s school or place of care or the unavailability of the child’s child care provider for a COVID-19 related reason (“Emergency FMLA Leave”).

The DOL Regulations clarify the requirements for Emergency FMLA Leave

  • The same definition of “son or daughter” applies to both Paid Sick Leave and Emergency FMLA Leave: “a biological, adopted, or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis, who is under 18 years of age; or 18 years of age or older who is incapable of self-care because of a mental or physical disability.”
  • To be eligible for leave, an employee must be unable to perform work or telework due to the need to care for the employee’s child and there must be no other suitable person available to care for the child.
  • Employers are not required to provide Emergency FMLA Leave on an intermittent basis, but they may agree to do so.

Eligibility:
An employee is eligible for Emergency FMLA Leave if (a) the employee was on the employer’s payroll for thirty calendar days before leave begins or (b) if the employee was laid off or terminated on or after March 1, 2020 and rehired before December 31, 2020, the employee was on the employer’s payroll for thirty or more of the sixty calendar days prior to the employee’s layoff or termination. An employee is not eligible for Emergency FMLA Leave, however, while on layoff or furlough.

Note: Unlike other FMLA leaves, there is no minimum hours-worked requirement for Emergency FMLA Leave.

Amount of Leave:
An eligible employee is entitled to twelve weeks of leave during the period from April 1 through December 31, 2020. Note: If an employee has already used FMLA leave during the same year, that earlier FMLA leave will reduce the amount of Emergency FMLA Leave available to the employee.

The DOL regulations provide that, if the employer agrees, an employee may take Emergency FMLA Leave intermittently (i.e., in separate periods of time, rather than one continuous period) in any increment of time to which the employer and employee agree. The DOL regulations also provide that allowing employees to take intermittent Emergency FMLA Leave will not affect an employee’s exempt status under the Fair Labor Standards Act.

Pay and Benefits:
As with other FMLA leave, the employer is required to continue to pay for the employee’s group health benefits during an Emergency FMLA Leave.

The first two weeks of an Emergency FMLA Leave are unpaid, although an employee may elect to use Paid Sick Leave or other accrued paid time off provided by the employer for purposes of caring for a child (PTO, vacation or personal days). The employee can elect the sequence to use these forms of paid time off. The employer may not require the employee to use Paid Sick Leave or accrued paid time off during the first two weeks of Emergency FMLA Leave, and may not dictate the sequence of an employee’s use of PTO, accrued leave and Paid Sick Leave.  If an employee elects to use Paid Sick Leave, the employee may use other accrued time off to supplement the 2/3 Paid Sick Leave only if the employer agrees.

The DOL regulations clarify that employers are not required to allow employees to use accrued sick leave for the first two weeks of Emergency FMLA Leave. San Francisco employers may be required to allow employees to use sick leave accrued under the San Francisco Paid Sick Leave Ordinance for this purpose.

After the first two weeks of an Emergency FMLA Leave, the employer must pay the employee 2/3 of the employee’s regular rate of pay up to a maximum of $200/day or $10,000 in the aggregate. The employer may require that an employee use any accrued paid time off during Emergency FMLA Leave. If the employer requires the use of accrued paid time off, the employer must pay the employee’s full pay until the employee has exhausted available paid leave, although the employer may claim the tax credit for only 2/3 of the employee’s regular rate of pay up to the maximum of $200/day.  Once the employee has exhausted paid time off, the employee will be entitled to 2/3 pay (up to the cap) for the remained of the Emergency FMLA Leave.

Alternatively, if the employer and employee agree, the employee may use accrued paid time off to supplement the 2/3 pay required under the FFCRA after the first two weeks of leave.

Reinstatement:
For employers with 25 or more employees, the reinstatement requirements for other FMLA leaves apply to Emergency FMLA Leaves. Employers must generally reinstate an employee to the same position the employee held before the leave. If that position no longer exists, the employer may reinstate the employee to another position with equivalent pay, benefits and other terms and conditions of employment. Employees are not entitled to any greater job rights than had the employee not taken the leave.

Job restoration obligations for employers with fewer than 25 employees are more limited than for employers with more employees.

Notice and Documentation Requirements:
The DOL has published a notice that covered employers are required to post in a “conspicuous place” on the employer’s premises. The notice must be posted even if small businesses may claim an exemption for the requirement to grant leave requests.

The DOL has indicated that an employer whose employees are working remotely may satisfy the posting requirement by emailing or direct mailing this notice to employees, or posting this notice on an internal or external website used for employee information. A copy of the required notice is available here.

The DOL regulations indicate that employers are not required to provide the same notices required for other FMLA leaves (e.g., the Notice of Eligibility, Rights and Responsibilities) since smaller employers may not otherwise use these forms. Employers already covered by the FMLA may wish to use these notices, in part to clarify for employees that Emergency FMLA Leave counts against their annual FMLA entitlement.

The DOL and IRS require that employees provide the following documentation to support any request for Paid Sick Leave or Emergency FMLA Leave and for employers to claim the payroll tax credit:

  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 and documentation is required for specific leaves:

  • 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 also 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;
    • 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
    • if the child is older than fourteen, a statement that special circumstances exist requiring the employee to provide care during daylight hours.

The IRS requires employers to retain this documentation for all leaves for four years.

PAYROLL TAX CREDIT FOR PAID SICK LEAVE AND EMERGENCY FMLA LEAVES
The FFCRA allows employers to take credits against payroll taxes for each calendar quarter in an amount equal to wages that were required to be paid by the FFCRA during Paid Sick Leave or Emergency FMLA leave, but only up to the caps set forth above. Employers are also given additional payroll tax credits for group health plan costs and Medicare payroll taxes associated with the wage payments required during FCCRA leaves.

The IRS published on its website an overview of the process for taking payroll tax credits for leave required under the FFCRA. The IRS explains that employers are entitled to receive a credit in the full amount of the wages required to be paid under the FFCRA for employees on Paid Sick Leave or Emergency FMLA Leave (“qualified leave wages”) during the period beginning April 1, 2020, and ending December 31, 2020, plus allocable qualified health plan expenses and the employer’s share of Medicare tax.

Employers claim the credit by retaining (rather than depositing with the IRS) all federal employment taxes an amount equal to the total of (a) the amount of the qualified leave wages the employer paid, (b) the qualified health plan expenses allocable to the paid leaves, and (c) the amount of the employer’s share of Medicare tax imposed on qualified leave wages. The federal employment taxes that are available to be retained include federal income taxes withheld from employees, the employees’ share of social security and Medicare taxes, and the employer’s share of social security and Medicare taxes with respect to all employees. If the federal employment taxes yet to be deposited are not sufficient to cover the cost of qualified leave wages, plus the allocable qualified health plan expenses and the amount of the employer’s share of Medicare tax imposed on those wages, the employer will be able file a request for an advance payment from the IRS.