COVID-19 What Businesses Need to Know Update No. 4

Temporary Closures and Employee Furloughs May Trigger Final Pay Requirements.

As the coronavirus pandemic continues, employers who already have, or are considering, implementing employee furloughs or temporary closures face uncertainty regarding the duration of closures and furloughs. Businesses that offer employees zero hours of work per week, during a furlough or temporary closure, with no anticipated return to work date in sight, may find themselves in a situation where temporary closure or furlough is later deemed a termination, thereby triggering final pay requirements under the California Labor Code. This is because, generally, when employment is terminated, all earned wages at the time of termination or layoff are due and payable immediately, along with all accrued, but unused, vacation time. All business expenses must also be reimbursed to the employee following termination of employment. The questions facing California employers now are: When will work be available and when will a furloughed employee become effectively a terminated employee?

In light of the penalties available under the California Labor Code for an employer’s failure to pay all wages at the time of separation of employment, these are important questions. Maintaining compliance with California’s final pay laws when implementing temporary closures or furloughs is key:

• In the event of a temporary closure, employers should establish and communicate a return-to-work date to avoid triggering the final pay requirements.
• With respect to employee furloughs, employers should avoid lengthy furloughs and communicate a return to work date to avoid the risk of triggering final pay obligations in the event the furlough is later deemed a termination.

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The U.S. Department of Labor Issues Guidance for New Federal Sick Pay and Expanded FMLA Laws

The effective date for the new Federal Sick Pay and Expanded FMLA laws (collectively, the “FFRCA”) is April 1, 2020. But many questions about how the FFRCA works are unanswered. As that date draws near, employers should expect additional guidance and updates from the federal government regarding the new laws.

Department of Labor Publishes FFCRA FAQ

On Tuesday, March 24th, the federal Department of Labor (DOL) published initial FFCRA guidance for employers, which can be found here.

Highlights from the FFCRA FAQ includes the following: 

• Temporary non-enforcement period– The DOL published a field bulletin regarding temporary non-enforcement of the FFCRA for the period of March 18, 2020 to April 17, 2020. Based on the bulletin, the DOL has indicated that it will not bring enforcement actions against employers during this period, provided they are taking reasonable, good faith steps to comply with the FFCRA. This temporary non-enforcement period is intended to give employers some time to perfect their compliance.

• • However, employers should not breathe a sigh of relief yet. The bulletin indicates that the DOL will not take enforcement actions against employers for the time period of March 2020, which is concerning because it seems to imply that employers may have compliance obligations beginning on March 18, 2020 (the date the FFCRA was signed into law). This timeframe is directly at odds with other DOL published guidance indicating that the FFCRA takes effect on April 1, 2020. 
    

• • The bottom line – if your business has already commenced complying with the FFCRA by providing federal paid sick leave to your employees, it is unclear if your business is eligible for payroll tax credits for sick leave payments made between March 18, 2020 to March 31, 2020. More guidance is needed from the federal government on this question, and we expect clarification will come soon.
    

• • • If your business has not already commenced providing federal sick leave to your employees, you should prepare to start offering such leave time on April 1, 2020 and no earlier, due to the ongoing uncertainty surrounding eligibility for payroll tax credits prior for leave taken prior to April 1, 2020.

• The FFCRA expands upon the FMLA. Employees may now take up to 12 weeks of FMLA leave to care for a child whose school/childcare has been closed due to the coronavirus pandemic. An employee need only be employed for 30 days in order to be eligible for this leave.

• • It does not appear that this is an additional 12-week leave time on top of an employee’s 12-week FMLA leave offering for other qualifying FMLA reasons. Thus, if an employee has already exhausted his or her 12 weeks of FMLA leave for other reasons, it does not appear that an employer needs to provide another 12 weeks for a virus-related school closure.

• • Again, California employers must beware: The expanded FMLA leave does not run concurrently with CFRA leave and its use will not count toward an employee’s CFRA leave entitlement.

• Furloughed employees’ entitlement to leave under FFCRA remains unclear. Employers and the legal industry expect further guidance will clarify that if the employees are not working for reasons other than those specified by the paid sick leave and paid family leave provisions of the FFCRA (i.e. they are not working because of lack of work, not because of illness/school closure, etc.), then they would not qualify for the paid leave provided under the FFCRA.

• Ten weeks of the expanded FMLA leave must be paid. An employee can use paid sick leave for the other two weeks.

• The FFCRA provides for valuable payroll tax credits for employers for providing paid leave benefits under the Act. The Department of Treasury/IRS is expected to issue details for employers on the procedure to obtain these tax credits by the end of March.

• Employers with less than 50 employees can seek an exemption and employers of healthcare providers/first responders can exempt these employees

• Further guidance from the federal government is expected later this week.

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FFRCA Model Notice and FAQ

Today, March 25th, the DOL published the model notice for employers to use to educate employees about the FFCRA’s provisions. The model notice can be found here.

The DOL also published helpful Frequently Asked Questions (and Answers) on the notice posting requirements, including guidance on how and where to post the notice or otherwise communicate its contents to employees and whether it needs to be provided to laid off workers (no), new hires (yes), and applicants (no).

FAQ regarding the model notice can be found here.