Effective today, April 1st, the Families First Coronavirus Response Act (FFCRA) is now in effect.
Orange Tree is committed to providing solutions to help employers navigate the ever-changing landscape of COVID-19. To learn more click here.We recently held a webinar with Scott Paler, partner at Dewitt LLC. Scott provided detail on what employers should be aware of with this recent legislation.
Big picture before we begin: there is never there's never been a more important time to have a plan. I would also add that although reasonable minds can always disagree on the right time to reach out to legal counsel, I can suggest to you that this is one of those times where it's more important to have your legal counsel on speed dial than the usual situation.
The legislation and impact surrounding COVID-19 remains entirely fluid.
So, things are going to continue to change on the ground and with these changes it's going to be important for businesses to remain nimble as well. Therefore, please use this article as a starting point. Hopefully a good primer but only as a starting point, there’ll be lots to sort through.
So, let's start out with Coronavirus related issues. All of you by now have heard that the federal government has introduced a new law that provides certain paid sick leave benefits and certain expanded FMLA benefits to employees of businesses that are below a certain size.
FFCRA Effective Date – April 1
The first thing I want to bring to everyone's attention is the effective date because even something as simple as the effective date has been debated since this legislation was passed. The Department of Labor (DOL) in their FAQ's came out just yesterday or the day before and made clear for the first time that the effective date is going to be April 1st.
3 Things to Know Right Now About the FFCRA
I know there were a lot of questions about the possibility of retroactive application to this point. We don't believe any of the rights and responsibilities that I'm going to talk about next are retroactive and the Department of Labor has emphasized in their FAQ's that this is not retroactive. So, everything I'm about to go through with you becomes applicable only starting April 1st.
The first thing to know is that this law does not apply to very large companies. The FFCRA only applies to employers of 500 employees or less. Now, I know that some of you based on the questions that you submitted in advance of this webinar are wondering how you count employees and that can be even a challenging issue right out of the gate.
How do I count my employees?
Here's what I would tell you as a starting point. In general, 500 employees is evaluated by looking only at United States employees. The DOL has said in its guidance that it is not appropriate to look at employees in various other countries around the world. The US territories do count towards the 500 number. Another thing to know is that pretty much anyone that's been on the payroll is included within that five hundred number so that includes both active employees and employees on leave. It also includes temporary employees for which you're a joint employer with a staffing company.
Many people have asked whether 500 employees include related or affiliated businesses. That is a much more complicated question and one that is important to sort out with legal counsel, I would say as a general rule corporations or business entities are treated on their own.
So, it starts as a proposition about whether the particular company at issue is being asked to provide paid sick leave or additional FMLA leave and whether that company has 500 or more employees, but there can be situations in which related employers or affiliated organizations can have their employees also count and usually that comes down to how integrated or associated those two separate businesses are.
It's too difficult in the context of today's brief presentation to go through all the ins and outs of that integrated employer theory, but it is something to talk about with legal counsel if you are close.
So, let's assume it’s April 1 and that you have 500 or less employees, this law only becomes relevant for employees that cannot telework. So, there's a big misconception out there right now that's floating around the media. Just about anyone can claim paid sick leave or expanded FMLA benefits. That is 100% not true.
For those of you who operate businesses where employees can easily work remotely in the majority of circumstances: those employees will not be eligible for the paid sick leave or expanded FMLA benefits.
Now, it does become more complicated than that from time to time. Imagine that employees can telework but let's say they’re a single parent and responsible for caring for their children at home. And let’s say they take the position that they are not able to effectively telework because of their other responsibilities around the house. This is the type of issue that could potentially be litigated if an employer takes a hard line position. So, many employers that hear that sort of complaint or receive that sort of position from employees are going to err on the side of caution and allow employees to exercise PTO or expanded FMLA Rights if it's close.
The third thing to know out of the gate is that employers are eligible for tax credits equal on a one-to-one basis to the sick leave payments and expanded FMLA payments. I've had so many employers come to us and ask, “how in the world can we afford this right?”
One thing to keep in mind is that tax credits are available. Now whenever I say that there's always the follow-up comment which is “wait a second; I can't wait for a year.”
Well, most employers in my experience are paying payroll taxes every month or they're paying them every quarter. The Department of Labor and the IRS have now said is that employers can withhold owed payroll taxes in connection with sick leave and expanded FMLA benefits. So, if an employer, let's say makes $5,000 in sick leave payments in a month, then they likely can subtract that $5,000 from the owed payroll taxes in the upcoming period.
Okay, the other thing that the DOL and IRS have said is that if an employer is owed more in these tax credits than they must pay in over a period of time then the employer can make a request for a refund. The IRS at this point is saying that they are prepared to process those refund requests within two weeks. Is it going to play out that way? I certainly hope so. I don't know for certain, but this is what the IRS is stating at this point. So, those are three very important things to understand right out of the gate.
FFCRA - PTO Provisions
We're going to cover some of the details related to the PTO provision and then separately the expanded FMLA provision. The important thing to keep in mind before we dive in is that these provisions are separate.
There is a PTO, or “sick leave,” provision that we're going to talk about first and then there's an expanded FMLA provision that we're going to talk about second. They each have their own criteria. They each have their own amount of payments that are owed by the employer. They are not the same.
The PTO provision under the law states that employees are eligible for up to 80 hours of paid PTO at capped amounts. The reason I say “up to 80 hours” is because for employees that are part-time and work less than 80 hours in a typical two-week period, they are only eligible for a proportional amount of PTO.
Let's say they’re working a 60% schedule. They're going to be eligible for 60% of the 80 hours. The PTO provision has certain qualifying criteria. There are six different bases that employees can rely on to claim that they are qualified for PTO. And again, this is in situations where they cannot telework.
Six Criteria for Determining PTO/Sick-Leave
- Employee subject to “stay at home” order related to COVID-19
- Employee advised by health care provider to self-quarantine due to concerns associated with COVID-19
- Employee experiencing symptoms of COVID-19 and seeking medical diagnosis
- Employee caring for an individual subject to (1) or (2) above
- Employee caring for child if school of childcare unavailable due to COVID-19 precautions
- Employee experiencing substantially similar conditions specified by HHS
Most of us (US employees) now are becoming subject to these stay-at-home orders where we're essentially having to work out of our house. And in those situations, employees can potentially claim these sick leave benefits. And again, I'm talking about situations where they cannot telework.
All right, there are other situations where they can as well and those are situations in which they themselves are sick with COVID-19 or they're seeking medical diagnosis related to COVID-19 or they're caring for others that are in those situations or they have a child that has a closed school due to COVID-19, which is pretty much everyone at this point and they are having to take care of a child in those circumstances. We are almost at the point now where just about everyone across the country has employees that fit into one of these categories.
Thus, by and large, we are positioning away from the qualifying criteria since just about everyone is going to be qualified, and instead it becomes a question of whether they're able to telework or not.
So, assuming they can claim PTO, what are the amounts that they're owed? It's important to understand that employees do not get a one-for-one reimbursement for their dollars regardless of their income. Imagine an employee that has an income of $100,000 or $150,000 or $200,000. It doesn't mean that they are going to get paid PTO exactly equal to what their salary or wages would have been for a day of work.
The provisions’ benefit is capped and so the employees’ reimbursement is capped at $511 dollars per day if it's their own illness and it's their own reason that they're out. The overall aggregate cap is $5,110.
The amount is lower for employees caring for family members. It's two-thirds of regular rate of pay so their qualifying criteria is that they're caring for another individual in these COVID-19 circumstances. If they're caring for family members, the amount that they are entitled to for reimbursement is capped at $200 per day and $2,000 total.
How is the “regular rate of pay” calculated?
Yes, this is a “lawyer phrase” and one which requires consideration.
Regular rate of pay means that we have to factor in more than an hourly employee’s base wage. We also have to factor in additional amounts that they may receive during the course of their work.
For instance, the employee may be receiving commissions, or earning overtime pay for working extra hours. Possibly, the employee is working late night hours and they're receiving premium hourly rates.
In these circumstances, among others, the employee is eligible for additional reimbursement. Even so, keep in mind that these reimbursements are subject to the stated caps.
For more information, please refer to the DOL FAQ's. I strongly recommend that you review them. They talked about this issue of regular rate of pay and what they say is the way we should determine regular rate of pay is to look back over a six-month period and figure out the average.
FFCRA - FMLA Provisions
The other part of the new law is an expanded FMLA provision. Now, as you know, usually the FMLA only applies to employers that have at least 50 employees.
Therefore, if you are an employer that has less than 50 employees, typically you don't have to worry about FMLA. This is not the case regarding the FFCRA.
This e x p a n d e d FMLA law applies to employers that are smaller than 50 employees. It applies to every employer under 500 employees.
Some of you, and I've seen this in the questions that you raised with Orange Tree going into today’s session, are saying “wait a second. Isn't there a provision in the law that says employers smaller than 50 employees may be able to take the position that paying these benefits is going to break the company and therefore ask for a get-out-of-jail-free card?” Conceptually that's true, thus far.
The Department of Labor has not defined the criteria by which employers smaller than 50 employees can claim that exception. The DOL has just said its forthcoming in hopefully the next few days but they've also said is that it will be up to those smaller employees to document the reason why they can claim the exception.
Once the DOL lays out the criteria, small employers will not be required to submit a request formally to the DOL to ask for that “permission slip.” They'll just be able to claim it and it would be up to individual employees to raise an issue if they believe something is amiss.
There are many challenging questions that come up with this expanded FMLA provision. One of them is concerns when an individual can claim this expanded FMLA.
What can an employee claim and how does it intersect with the usual FMLA stuff?
On the first issue, employees are eligible to claim up to 12 weeks of FMLA if they're caring for children home from school due to COVID-19.
So, look at how narrow that is compared to the sick leave provision that we talked about a moment ago. The sick leave provision has six different bases for employees to claim that their qualifying for while the FMLA provision is limited exclusively to caring for children that are home from school due to COVID-19. It's a much more narrow qualifying criterion.
Second thing. I wanted to mention is that at this point most of the lawyers believe that this sort of FMLA related leave will be taken on an intermittent basis; meaning that employees don't have to take it all at once. They don't have to take, for example, 10 or 12 weeks at one time. They can take the leaves more sporadically, for instance, in one or three day, or one or two-week periods. These shorter periods of time may become more relevant. A good example would be if kids start going back to school and then the schools end up closing again during the school year. We can imagine this happening.
Unlike the usual FMLA which is totally 100% unpaid under federal law, this particular expanded FMLA right comes with the ability for employees to claim a payment to get reimbursed. Employees can get reimbursed up to $200 per day and $10,000 in total if they are eligible.
How do the sick leave and FMLA provisions work together, if at all? The answer is that the DOL has said that 12 weeks is the maximum. If an employee takes two weeks of the paid sick leave benefit, then they're eligible for 10 weeks of FMLA. The maximum reimbursement is $12,000. This is calculated by considering the cap of $2,000 an employee could claim under the sick leave provision when taking care of kids as well as the $10,000 FMLA cap.
If you would like to listen to Scott Paler’s remarks in their entirety, please click here.