New "MUST CONSIDER" Factors for Employers Regarding Emergency Leave and the CARES Act
With the Families First Coronavirus Response Act (FFCRA) set to go into effect in less than two days, a number of new factors for small businesses to consider have come to light. The Department of Labor (DOL) issued additional guidance at the end of last week, and a new law, known as the Coronavirus Aid and Relief for Economic Stimulus (CARES) Act was signed into law on Friday afternoon. These new developments provide additional considerations as small businesses seek to make the optimal calls on their personnel and financial decisions.
Here are a few highlights for the moment:
FFCRA Notice Requirement
The FFCRA requires employers to post in a conspicuous place on employers’ premises, a notice of the FFCRA’s new paid leave requirements. As the notice must be either prepared or approved by the DOL, employers need to ensure that any notice they post will meet DOL’s scrutiny.
On Thursday, March 26th, the DOL released a Model Notice poster to meet the posting requirement. Here is the link to the poster. Using this poster will meet the notice mandate.
If an employer does not have an conspicuous place to post the notice on its premises, the employer should find an efficient method to provide a copy of the notice to all of its employees. This could include a group e-mail and would show a good faith effort in complying with this requirement.
Eligibility for Stimulus Loan Forgiveness
The creation, expansion, and increased availability of loans for many small businesses is a large portion of the 2.2 trillion dollar Economic Stimulus package in the CARES Act. Congress is relaxing qualifying standards, decreasing the level of paperwork, and offering very favorable terms on these loans to lessen the economic harm that is being caused by the nation’s efforts to stop the spread of COVID-19.
The CARES Act establishes the Paycheck Protection Program (PPP) loans that can be used for different ongoing operating expenses, such as payroll, rent, and utility payments. In addition, the new law expands the availability and enhances the terms of loans under the Economic Injury Disaster Loan (EIDL) program. This is also the first time that EIDLs are being made available for a pandemic.
A very attractive feature of PPP loans is that all or a part of these loans can be forgiven. In other words, the federal government is offering businesses money that the they may not have to give back. In addition, the amount forgiven will not be counted taxable income to the business. Thus, the forgiven amount is not only free money, but also non-taxed money for the business.
If a small business plans to seek a PPP loan on the chance of having it forgiven, it needs to recognize that the amount forgiven will be reduced proportionately by reductions in the number of employees or wages from February 15 – June 30, 2020. If the employer has already made reductions, there are provisions to allow the employer to have such reductions not count against it, as long as the employee is rehired by June 30th.
Since the forgiveness element of PPP loans provides such a benefit, small businesses are strongly advised to take the value of the amount forgiven into account in their decisions about reductions to their workforce or to their employee’s wages.
Effect of “Stay at Home” Orders on New Paid Leave
As more and more States and local governments are issuing “stay at home”/”shelter in place” orders that require non-essential businesses to close, many businesses have been asking whether they must still provide their employees with pay for Emergency Paid Sick Leave (EPSL) and leave eligible for payment under the emergency expansion of the Family Medical Leave Act (EFMLEA).
The DOL has now answered this question on its webpage late last week. The DOL has stated clearly that if the employer has closed the worksite in compliance with a Federal, State, or local directive, the employees do NOT get FFCRA paid sick leave or expanded family medical. This is true whether the worksite was closed before April 1, 2020 (the effective date of the law) or after that date if the employee has not yet started such leave. If the employee starts FFCRA leave before the worksite is closed, the employer is only responsible to pay for that leave that has been taken up to the time that the worksite is closed.
The DOL has further provided guidance that employees similarly do NOT get either type of the FFCRA-mandated paid leaves if the business is closed due to lack of business either before or after April 1. As in the case of a business having to close because of a “stay at home” order, if the employee starts FFCRA leave before the worksite is closed, the employer is only responsible to pay for that leave that has already been taken.
In addition, even if the employer remains in business, but places an employee on furlough (i.e., puts them on an unpaid leave status) before the employee begins taking FFCRA-mandated leave, the furloughed employee cannot get EPSL or EFMLEA paid leave while on that status. However, the employee is likely eligible for the expanded unemployment insurance benefits established by CARES.
Weathering the Storm
Additional guidance continues to be issued by the Department of Labor and other agencies implementing the CARES Act. I will continue providing additional highlights in the coming days. These are difficult and fast-moving times for everyone and I recognize that making decisions in this environment is daunting. The bad news is that everyone is in the same boat, but the good news is that everyone is in the same boat. It will be as a community and together that we will weather this storm.
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