Latest Details: Framework for Employer Implementation of New Emergency Leave

The Families First Coronavirus Response Act (FFCRA) which became law on March 18, 2020, established new leave categories for most businesses with less than 500 employees. Congress provided the Department of Labor (DOL) with authority to issue implementing regulations regarding the new laws, but as of today, they have not yet been issued.

As a result, though the overall provisions of the law are known, many of the details about the practical workings of the law are still unclear. Recent communications from relevant agencies do provide us with important insights about what employers will need to do. Here are a few highlights.

Earlier Effective Date

An important change included in the Department of Labor’s March 24th publication of FFCRA Questions and Answers on the DOL website is the effective date of the FFCRA’s paid leave provisions are effective on April 1, 2020.  The Act states that the FFCRA would go into effect “within 15 days” of it being signed into law by the President, and since Congress passed the FFCRA and the President signed it into law on March 18, 2020, most analyses of the Act’s provisions (including those authored by me) had indicated that the law would not go into effect until April 2, 2020.  Apparently, the DOL decided that it wanted the law to go effect “within” the time period and at the beginning of a month.

Reimbursement

One of the larger concerns that small businesses have is trying to figure out how -- and if -- they can afford the new expense of guaranteed paid leave under the FFCRA, namely the 80 hours of Emergency Paid Sick Leave (EPSL) and the 12 weeks of paid leave under the Emergency FMLA expansion (EFMLEA).  A summary and comparison of the EPSL and EFMLEA leaves can be found HERE.

The good news is that the FFCRA provides for the federal government to fully cover this new expense mandated on covered employers.

The bad news is that the law does not provide that employers will receive direct reimbursements for their payments of the EPSL and EFMLA leave pay to eligible employees. Instead, reimbursement will take place in the form of tax credits.  The Department of Treasury, Internal Revenue Service, and DOL jointly announced in a March 23, 2020 news release that employers would receive the tax credits in their Quarterly Payroll Tax Reports (Form 941).  The next Quarterly Payroll Reports and Tax Deposits are due on April 30, 2020.

If the employer’s paid leave expense exceeds their payroll tax liability for that quarter, employers will be able to file an application for an accelerated payment with the IRS.  The joint statement states that the IRS expects to “process these requests in two weeks or less.” [NOTE: hopefully, IRS will be able to meet this ambitious timetable].

Which employees are included in determining head count

Employers have known that the FFCRA covers businesses with less than 500 employees.  What has not been clear is which employees need to be counted. The DOL’s Questions and Answers provide guidance for this threshold question:

• There is no geographic limitation on which employees need to be considered for employers with more than one location.  Thus, all employees within any State of the United States, the District of Columbia, or any Territory or possession of the United States are to be counted.

• Employers are to count the number of employees as of the date that the employee’s leave is to be taken.

• Include in the total count:

  • Part-time employees

  • Employees on leave

  • Temporary employees who are jointly employed by the employer from whom leave is being sought and another employer

  • Day laborers supplied by a temporary agency (if there is a continuing employment relationship)

• Do NOT include                 

  • Independent Contractors

Record-keeping

Record maintenance regarding leave taken under the FFCRA will be important, as it will provide the basis for the employer’s ability to claim the reimbursements from the IRS for this expense.

There has been no formal guidance about what records employers are to maintain.  But based on the law’s provisions, records of the leave will need to include at least the following:

• Separate characterization of leave taken under the EPSL provision and EFMLEA. These are separate leave banks that are not treated the same as any other employer-provided or government-required leave that employees can already take.

• The specific reason for the leave, with supporting documentation when applicable, as the FFCRA has new bases for being eligible for the leave

• Employers should also record the specific reason for any EPSL taken because different eligibility requirements result in different maximum levels of pay.  Likewise, pay for EPSL is not paid at the same rate (full regular rate of pay) as pay for EFMLEA leave (only 2/3rds regular rate) .

The DOL has indicated that new regulations will be coming out in the next week. We’ll do our best to keep you updated along the way.

Here to work with you,

David Quan

**DISCLAIMER: The Law Office of David J. Quan provides this communication for general information only. This communication does not, nor does it intend to, provide legal advice or create an attorney-client relationship. Each legal problem is unique, and past performance does not guarantee future results. Persons with legal issues should consult their attorney for specific advice regarding their individual situations