WARNING TO ALL EMPLOYERS – FFCRA GOES INTO EFFECT TOMORROW, APRIL 1st

On March 18, 2020, the President signed the Families First Coronavirus Response Act (the “FFCRA”) into law. The FFCRA requires employers to provide employees with paid sick or family leave if they are unable to report to work for specified reasons related to COVID-19. There are two parts to the FFCRA – an expansion of the Family Medical Leave Act (FMLA) and a new Federal Emergency Paid Sick Leave. Both are effective starting April 1, 2020. Please see DDWK Update No. 2 for our initial discussion of the FFCRA.

The purpose of this DDWK Update is to address the DOL’s most recent FFCRA guidance

 

New FFCRA Guidance

The DOL has issued new guidance on the FFCRA, which can be found here.

  • Limited exemption available to small businesses – Small businesses (less than 50 employees) must beware, the majority of the FFCRA leave requirements do apply! The small business exemption is limited to sick leave and expanded family leave requests due to public school closures/childcare closures for COVID-19 related precautions. A small business can claim the exemption for employee school closure-related leave requests only if providing the leave would jeopardize the viability of the small business as a going concern.
    • In order to claim the exemption, an authorized officer of the business must have determined that at least one of three conditions, below, is satisfied:
      1. 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;
      2. 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
      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 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.
  • Furloughed employees are not eligible for FFCRA leave – If your business furloughs employees because it does not have enough work or business, you are not required to provide the furloughed employees with paid sick leave or expanded family and medical leave under the FFCRA.
    • CARES Act issues – Businesses seeking financial relief and loans under the CARES Act must carefully strategize employee furloughs and/or wage reductions due to the impact on loan forgiveness conditions.  The intersection of the FFCRA and CARES Act is incredibly complex. Specifically, the timing and length of any furlough or wage reduction can have an effect on loan forgiveness for loans received under the Payroll Protection Program in the CARES Act. To avoid adversely impacting the loan forgiveness amount, furloughs or wage reductions in excess of 25% must be initiated between February 15, 2020 and April 26, 2020, and that furlough or wage reduction must be eliminated by June 30, 2020.
    • Furlough and wage reduction decisions must be based on the business’s current financial condition, whether they are seeking CARES relief, and the duration of the furlough. If your business is seeking CARES Act relief, please contact us for guidance before implementing any furloughs or wage reductions.
  • During temporary business closures, employees are not eligible for FFCRA leaves – If your business closes while an employee is on federal paid sick leave or expanded family and medical leave, the employer must pay for any paid sick leave or expanded family and medical leave used before the closure. As of the date a business closes, employees are no longer entitled to paid sick leave or expanded family and medical leave, but may be eligible for unemployment insurance benefits. This is true whether a business closes for lack of business or because it was required to close pursuant to a Federal, State or local directive.
    • If a business closes, even for a short period of time, employees are not entitled to take paid sick leave or expanded family and medical leave during that time.
    • EDD Reminder – During a business closure or significant reduction in hours or wages, employees will likely qualify for EDD unemployment insurance benefits and should be encouraged to apply. On top of the normal California EDD benefits amount, eligible employees would also receive an additional $600 per week from the federal CARES Act.
      • EDD qualifications have been loosened quite a bit, meaning, if an employee qualifies due to a wage reduction or temporary closure, they are not required to be actively looking for work and the waiting time period has been eliminated, so benefit funds should come faster.
  • A reduction in hours limits FFCRA leave usage – If employee hours are reduced because a business does not have work for them to perform, affected employees may not use paid sick leave or expanded family and medical leave to replace hours they are no longer scheduled to work. This is because employees are not prevented from working those hours because of a COVID-19 qualifying reason, even if the reduction in hours was somehow related to COVID-19.

 

FFCRA Reimbursement

The bottom line for employers: Retain documentation if you want to claim FFCRA tax credits!

If an employee takes paid sick leave under the Emergency Paid Sick Leave Act, you must require the employee to provide appropriate documentation in support of the reason for the leave, including: the employee’s name, qualifying reason for requesting leave, statement that the employee is unable to work, including telework, for that reason, and the date(s) for which leave is requested. Documentation of the reason for the leave will also be necessary, such as the source of any quarantine or isolation order, or the name of the health care provider who has advised you to self-quarantine.

  • Flexibility is still necessary. The need for documentation must be balanced with public health orders and medical guidance. Employers must be flexible and should not condition the leave on the employee providing documentation prior to the leave. Set appropriate, flexible policies for when the employee must provide the documentation. During a pandemic, employers should give employees additional time to provide such documentation; otherwise, they risk violating state and county level public health orders.
    • For example, this documentation may include a copy of the Federal, State or local quarantine or isolation order related to COVID-19 applicable to the employee or written documentation by a health care provider advising the employee to self-quarantine due to concerns related to COVID-19.

If an employee takes expanded family and medical leave to care for his or her child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19, under the Emergency Family and Medical Leave Expansion Act, you must require the employee to provide appropriate documentation in support of such leave, just as with conventional FMLA leave requests.

  • For example, this could include a notice that has been posted on a government, school, or day care website, or published in a newspaper, or an email from an employee or official of the school, place of care, or childcare provider.
  • This requirement also applies when the first two weeks of unpaid leave run concurrently with paid sick leave taken for the same reason.

If you intend to claim a tax credit under the FFCRA for your payment of the sick leave or family and medical leave wages, you should retain such documentation in your records.  Consult Internal Revenue Service (IRS) applicable forms, instructions, and information for the procedures that must be followed to claim a tax credit, including any needed substantiation to be retained to support the credit.

 

Supplementing paid leave is risky and not claimable for tax credits

Employers are not required to permit an employee to use existing non-federal paid leave to supplement the amount the employee receives from FFCRA paid sick leave or expanded family and medical leave. Most importantly, an employer may not claim, and will not receive tax credit, for such supplemental amounts.

  • Under the FFCRA, only the employee may decide whether to use existing paid vacation, personal, medical, or sick leave from your paid leave policy to supplement the amount your employee receives from paid sick leave or expanded family and medical leave. The employee would have to agree to use existing paid leave under your paid leave policy to supplement or adjust the paid leave under the FFCRA.

 

Tips for Implementing FFCRA Leave:

Sick leave usage – Unless an employee is working remotely, paid sick leave for qualifying reasons related to COVID-19 must be taken in full-day increments. This is to avoid virus transmission to others.

Intermittent leave available – You may offer your employees intermittent FFCRA leave in any increment, but are not required to do so.

  • For example, if you agree on a 90-minute increment, you could allow an employee to work remotely from 1:00 PM to 2:30 PM, take leave from 2:30 PM to 4:00 PM, and then return to working remotely.

Flexibility is encouraged – The DOL encourages employers and employees to collaborate to achieve flexibility and meet mutual needs. The DOL is supportive of voluntary arrangements that combine remote work and intermittent leave.

The above is intended only to be an overview summary of the FFCRA and general sick leave guidance. DDWK is available to help business owners with specific questions and guidance about local and state sick leave laws.  Contact us to discuss how the FFCRA applies to your business.

You can find additional information and resources related to helping business owners and their businesses through COVID-19 challenges on our website.

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