CLIENT ALERT: IRS, DOL Announce Informal Guidelines for Employers Before “Families First” Goes Live
Last week, Congress enacted the Families First Coronavirus Response Act (the “Act” or “Families First”). The Act imposed sweeping new requirements on many employers, including most government employers and private employers with 500 or fewer employees (including full-time and part-time). The IRS, the Treasury Department (“Treasury), and the Department of Labor (“DOL”) have issued preliminary, informal guidance. Read below for a summary of the major announcements, as well as a refresher on employers’ obligations under the Act.
The DOL stated on March 24, 2020 that the official “effective date” of the Act is April 1, 2020. Thus, mandatory leave will only apply to leave taken between April 1, 2020 and December 31, 2020. The DOL further explained that, if employers provided paid leave before April 1, 2020, they may not deny additional paid leave under the Act beginning on April 1, 2020. In other words, any leave being paid out in March will not count toward the leave mandated by the Act.
Qualifying Reasons for Paid Leave
Families First is now in effect, and covered employers must provide paid leave to an employee who is unable to work or telework because the employee:
- Is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
- Has been advised by a health care provider to self-quarantine related to COVID-19;
- Is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
- Is caring for an individual to whom reasons (1) or (2) applies;
- Is caring for a child whose school or childcare is closed or otherwise unavailable for reasons related to COVID-19; or
- Is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.
We read reason (1) to apply to all non-essential employees who are required to stay home by state or local order and who are unable to telework.
Nature and Duration of Paid Leave Available
The nature and duration of paid leave available depends on the length of the employee’s employment and the qualifying reason for leave:
- Employees who have been employed 30 days or more who qualify for leave due to reason (5):
- 12 weeks’ leave (including 40 hours per week for full-time or the typical number of hours over the same period for part-time) paid at 2/3 the employee’s regular rate, up to $200 per day and $12,000 in the aggregate over 12 weeks.
- All employees, regardless of length of employment:
- Who qualify for leave due to reasons (1), (2), or (3):
- Two weeks’ leave (up to 80 hours for full-time or the average number of hours the employee is normally scheduled to work over a two-week period for part time) paid at 100% of the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate over two weeks.
- Who qualify for leave due to reasons (4), (5), or (6):
- Two weeks’ leave (up to 80 hours for full-time or the average number of hours the employee is normally scheduled to work over a two-week period for part time) paid at 2/3 the employee’s regular rate, up to $200 per day and $2,000 in the aggregate over a two-week period.
- Who qualify for leave due to reasons (1), (2), or (3):
No Rules Yet for the Small Business Exemption
We are still waiting for official regulations implementing certain provisions of Families First, including rules governing the small business exemption. This exemption will be available with respect to reason (5) for small businesses (those with fewer than 50 employees) where the viability of the business is threatened. The DOL will be providing emergency guidance on the requirements for this standard, but it is not expected until April 2020. In the meantime, a Q&A posted by the DOL, available here, instructs employers to document why the employer believes it may meet the requirements of the small-business exemption. Employers also can provide input to the DOL on the substance of the regulations until March 29, 2020 at https://ffcra.ideascale.com. We strongly encourage clients to educate the DOL on employers’ needs by participating in this process, and our Labor and Employment team is available to assist with drafting compelling submissions.
Special Rules for Employers of Health Care Providers and First Responders
Employers of health care providers and first responders may elect to exclude such health care provider and/or first responder employees from leave mandated by the Act. “Health care provider” is defined by reference to the FMLA and accompanying regulations to include: doctors, podiatrists, dentists, clinical psychologists, optometrists, chiropractors, nurse practitioners, nurse-midwives, clinical social workers, and physician assistants. The permissive exclusion therefore does not appear to apply to non-provider employees, such as medical assistants or non-clinical staff in a health care provider’s office. Further regulations relating to the Act’s applicability to employers of health care providers and first responders are expected in April 2020.
Model Notice of Rights Expected Soon
Employers must post a notice of employees’ rights under the Act in a conspicuous place on its premises. Presumably employers operating remotely due to state or local stay-at-home orders will be permitted to provide the notice electronically. The DOL intends to issue a model notice no later than March 25, 2020 and we will post updates as soon as the model notice is available.
Penalties for Violations
Violations of the required first two weeks of leave will be enforced pursuant to the Fair Labor Standards Act (“FLSA”). Violations of the remaining 10 weeks of leave will be enforced pursuant to the Family and Medical Leave Act (“FMLA”).
The DOL has stated that it will not enforce the Act during the first 30 days after the Act takes effect, but only if it determines that the noncompliant employer acted reasonably and in good faith. Good faith is defined to mean that the employer remedied violations and made employees whole as soon as practicable; the violations were not willful; and the DOL receives a written commitment from the employer to comply in the future.
Payroll Tax Credits More Expansive Than Originally Anticipated
Employers can begin taking advantage of refundable payroll tax credits created by the Act immediately beginning April 1, 2020, when the act becomes effective. The credits are available on a dollar-for-dollar basis to reimburse employers for all costs associated with providing paid leave mandated by the Act. The amount of credit for qualifying paid-leave wages is capped at the daily and aggregate maximum mandatory payments described above (e.g., $200/$2,000 or $511/$5,110). In addition, employers can claim a credit for amounts paid to maintain an employee’s health insurance coverage during Families First leave.
The IRS states that the credit is available as an immediate offset against payroll taxes. If the offset results in a refund, the IRS will send a refund payment to the employer. Preliminary IRS guidance, available here, states that employers can “retain and access funds that they would otherwise pay to the IRS in payroll taxes” in order to “take immediate advantage of the paid leave credits[.]” These funds include withheld federal income taxes, the employee’s share of Social Security and Medicare taxes, and the employer’s share of Social Security and Medicare taxes owed for all employees. Employers can contact the IRS for an “expedited advance” if the retained amounts are insufficient to cover the cost of paid leave. Claim forms for this purpose will be released this week, and employers should receive advance payments from the IRS within two weeks after submission of the form.
The Labor & Employment team at Potter Anderson & Corroon LLP will continue to monitor the situation for the latest developments and will keep you updated as further guidance becomes available.