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Human Resource Solutions for a Changing World

March 30, 2020

On Friday, March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This Act is designed to bring immediate relief to small businesses, employees, and individuals affected by COVID-19. Among many economic initiatives designed to stabilize the economy, the Act includes provisions for forgivable loans to small businesses, a variety of tax incentives, bolstered unemployment benefits, and direct payments to individuals.

 

This e-bulletin provides critical considerations for workforce options that many employers are facing, including options to reduce work hours or lay off or furlough employees and allow them to collect expanded unemployment benefits, obtain a forgivable loan, or remain operating and prepare to provide emergency paid sick and paid family leave when requested.

 

It includes a comprehensive Client Advisory with instructions for obtaining a forgivable loan, a special chart with workforce planning considerations, a link to the new DOL Notice pertaining to emergency paid sick leave and paid family leave, and important updates you need to know about these paid leaves.

NOTE: This is the fourth edition in a series of COVID-19 e-bulletins published by Seawright & Associates. If you would like to request prior editions, click HERE. Provisions of the CARES Act and Families First Coronavirus Response Act (FFCRA)

outlined in this e-bulletin are not all-inclusive. Regulations have not yet been issued for the laws discussed in

this e-bulletin. Once they are issued, provisions in this e-bulletin may change. Information in this

e-bulletin is not intended to be legal, tax, or financial advice; nor is it intended to

provide recommendations for any specific circumstances. 

The CARES Act that was signed into law on Friday includes amendments t o the emergency paid sick and paid family leaves in the Families First Coronavirus Response Act (FFCRA) , including the following:

— Rehired Employees: Employees laid off on or after March 1, 2020, who worked for the employer for not less than 30 of the last 60 calendar days prior to the employee’s layoff and who are rehired by the employer are eligible for emergency paid family leave.

 

— Advance on Payroll Tax Credits for Leaves: In lieu of being reimbursed at the end of the calendar quarter for paying required sick and family leave under the FFCRA, employers can receive advanced payroll tax credits , subject to some limitations . The IRS will issue forms and instructions for employers that choose this option for repayment of emergency paid sick and paid family leave.

 

In addition to the CARES Act amendments to the FFCRA, last week the Wage and Hour Division of the U.S. Department of Labor (DOL) issued emergency guidance addressing several provisions under the Emergency Paid Sick Leave Act (EPSLA) and Emergency Family and Medical Leave Expansion Act (EFMLEA), both part of the Families First Coronavirus Response Act (FFCRA). The FFCRA requires covered employers to provide two weeks of emergency paid sick leave and 12 weeks of family and medical leave (“family leave”), 10 of which are paid. For details about the requirements pertaining to these leaves, refer to our March 19, 2020, e-bulletin.

The DOL’s emergency guidance documents, including an FAQ document, can be found HERE . (Note: If you obtained the DOL FAQ document prior to March 30, it may not be the most updated version. The version available through our link is the most current version as of the morning of March 30, 2020. We recommend you save this link and check back as the DOL continues to update and add to the posted documents.)

 

The FAQ document and other guidance documents are not regulations for the EPSLA or the EFMLEA. These documents were issued to provide immediate guidance to employers about select matters while the DOL prepares the regulations. The regulations are expected to be published in April.

The DOL Notice (English version) that employers are required to post can be obtained HERE . The Spanish version of the Notice is available HERE . Notices must be posted before April 1 in conspicuous places on the premises of the employer where notices to employees are customarily posted. (Note: If you obtained the DOL Notices prior to March 26, we recommend comparing them to the ones available through our links, since the first releases contained errors. The DOL corrected the errors and replaced the Notices with the ones we are providing.)

Key provisions in the latest DOL guidance documents include:



— Effective Date:   Covered employers must provide emergency paid sick leave and paid family leave beginning on April 1, not April 2, as we and others previously reported.

 

— 500-Employee Threshold: An employer has fewer than 500 employees (and, thus, is a covered employer that must provide paid sick and paid family leave) if, at the time the employee’s leave is to be taken, the employer employs fewer than 500 full- and part-time employees in the United States. Active and inactive employees (those on a leave of absence) must be included in the count. For more information about how joint employment and integrated employers are treated when counting 500 employees, see question 2 in the DOL FAQ document . 

 

— Grace Period: The DOL has adopted a temporary nonenforcement policy that provides a 30-day period for employers to come into compliance with the FFCRA. During this period, the DOL will not bring an enforcement action against any employer for violations of the EPSLA and EFMLEA as long as the employer acted reasonably and in good faith to comply with the acts, violations are not willful, the employee is made whole as soon as practicable, and the DOL receives a written commitment from the employer to comply with the FFCRA in the future. Nonenforcement ends on April 17, 2020.

 

— No Retroactive Application: Employers that provided paid sick or paid family leave prior to April 1, 2020, cannot retroactively classify that time as emergency paid sick leave or paid family leave under the FFCRA and obtain the payroll tax credit. Although employees may have taken sick or family leave prior to April 1, they can still qualify for and must be given the opportunity to take leaves under the FFCRA.

 

— Tax Credit for Paid Sick Leave:  Employers can pay more than the required amount of paid sick or paid family leave under the FFCRA; however, they will not receive a tax credit for amounts they pay over the maximum payment amounts in the FFCRA.

 

— No Leave for Furloughed or Laid Off Employees: Employees who have been or will be furloughed before April 1, 2020, are not eligible for emergency paid sick leave or paid family leave. Employees must be actively working (or out of work on another type of leave that can transition to leave under the FFCRA if the circumstances qualify) to be eligible for paid emergency sick leave or paid family leave under the FFCRA.

 

— Intermittent or Reduced Work Schedule Leave: Intermittent or reduced work schedule leave is not required under the FFCRA, although employers may allow it if they choose. If an employer elects to permit this, the practice should be applied consistently and a minimum increment of leave should be defined (e.g., one full day). In addition, employees who use emergency paid sick leave for a quarantine or illness-related reason should not be permitted to use the sick leave intermittently to avoid spreading germs.

According to the DOL, if an employee uses part of their emergency paid sick leave for one reason , returns to work, and then needs to use the remaining balance of paid sick leave for another reason , it must be available to the employee. In other words, two blocks of emergency paid sick leave are permitted if the leave is taken for separate qualifying reasons .

Unless an employee is working from home, once an employee begins taking leave for an EPSLA-qualifying reason, the employee must continue to take the leave until he or she uses the full amount of paid sick leave or no longer has a qualifying reason for taking paid sick leave.

— Essential Businesses: Employees working at businesses that are deemed “essential” in locations where stay-at-home orders are in effect are eligible for emergency paid sick leave and paid family leave. Working at a business that is designated as an "essential business" does not disqualify an employee (who is otherwise eligible for leave) from using emergency paid sick or paid family leave under the FFCRA.

 

— Documentation for the Leave: Employers can required employees to provide documentation in support of the reason for emergency paid sick leave and paid family leave. The IRS is expected to issue forms, instructions, and information for the procedures that must be followed to claim a tax credit. According to the DOL, employers are not required to provide paid sick or paid family leave if materials sufficient to support the applicable tax credit have not been provided. Employers that plan to claim the tax credit for emergency paid sick and paid family leave should retain the documentation required by the IRS.

— Calculating the Regular Rate: The regular rate of pay that is used to calculate the rate of pay for paid sick and paid family leave is the average of their regular rate earnings for the six-month period prior to the date the leave is taken. All earnings from commissions, tips, and/or piece rates must be included in the calculation.

— Counting Scheduled Hours When Determining Amount of Paid Sick Leave Over a Two-Week Period: Employers must pay employees using paid sick leave for the number of hours the employee would have been normally scheduled to work, even if this is more than 40 hours. Since e mergency paid sick leave is only available up to 80 hours, it must be paid over a two-week period . This means that if an employee regularly works 50 hours per week, week one of the paid sick leave the employee will receive pay for 50 hours and week two the employee will receive pay for 30 hours. The rate of pay for this time off is not the overtime rate; it is the employee’s regular rate or 2/3 the regular rate, depending on the reason for the leave.

Full-time employees with 30 days of employment who take paid family leave to care for a child whose school or place of care is closed (or whose childcare provider is unavailable) are eligible for up to 12 weeks of leave at 40 hours a week (10 of which are paid at 2/3 the regular rate), regardless of the number of hours the employee is normally scheduled to work.

— Employer Exemption From Coverage for Providing Paid Leaves for Childcare: Employers with fewer than 50 employees may be exempt from the emergency paid sick and paid family leave requirements related to school closings or child care unavailability when granting the leave would jeopardize the ability of the business to continue. This exemption is NOT automatic based on the number of employees. To claim it, an authorized officer of the business must determine that at least one of the following conditions are satisfied:

These conditions may not be easy for employers to meet. If you believe that your business qualifies for an exemption from the childcare leave provisions under the EPSLA and/or the EFMLEA, we recommend that you document your justification for the applicable condition.

— Healthcare Worker Exclusion: Certain healthcare workers can be denied emergency paid sick leave and paid family leave by their employer. Excluded healthcare workers include, but are not limited to, anyone employed at a doctor's office, hospital, healthcare center, clinic, post-secondary educational institution offering healthcare instruction, medical school, local health department or agency, nursing facility, retirement facility, any facility that performs laboratory or medical testing, and others. If your business employs healthcare workers, provides medical services, or produces medical products, we recommend that you review the expanded list of excluded healthcare workers found under questions 55-57 in the DOL FAQ document available HERE.

 

— EFMLEA L eave for Employees Who Have Exhausted Regular FMLA: Employers covered by FMLA prior to April 1, 2020, can count an employee's FMLA time taken during the employer's designated 12-month period against time requested under the EFMLEA for childcare purposes. In other words, if an employee has exhausted their 12 weeks of regular FMLA, the employee can be denied paid family leave to care for a child whose school or place of care is closed (or whose childcare worker is not available). The employee could, however, take time off for this same reason under the EPSLA and it would have no bearing on FMLA.

A number of unanswered questions about emergency paid sick and paid family leave remain, such as how to treat spouses who work for the same employer and how leave under the EFMLEA is treated when the school year ends. We continue to monitor DOL documents and information and will provide insight about these and other FFCRA issues to clients once answers are provided. In the meantime, if you are a client using our consultation service, you may contact our firm for more information about FFCRA obligations and DOL compliance.

Many employers have been anxiously waiting to learn more about the opportunity under the newly enacted CARES Act to receive a forgivable loan to help with expenses during the COVID-19 crisis. Some employers have already experienced significant losses of revenue and have limited cash remaining to run their operation. For such employers, the Paycheck Protection Program under the CARES Act may provide the funds they desperately need during this global pandemic.

These loans are available to businesses (including nonprofit organizations) with up to 500 employees. Restaurants and franchised businesses will qualify for the loan if they have fewer than 500 employees at each location .

 

Because of the importance of this program, we have developed a comprehensive Client Advisory that provides critical information about the loan process, including, among other topics, eligibility for the loan, the maximum loan amount an employer can receive, what the loan can be used for, criteria for obtaining 100% loan forgiveness, and what must be done immediately to apply for the loan.

Click HERE for a copy of this vital Client Advisory that will help you prepare to obtain a forgivable loan.

As you evaluate the option to apply for this loan and how it impacts decisions pertaining to your workforce, we recommend reviewing our workforce planning chart that includes a number of critical considerations. Click HERE to obtain this chart.

The CARES Act includes a number of t ax-related provisions for both individuals and businesses. Two of the many employment-related tax provisions are highlighted below. We recommend that employers consult with their CPA or accountant to learn more about these and other opportunities for tax relief.

Employee Retention Tax Credit

Businesses that must fully or partially suspend operations due to orders from an appropriate governmental authority with the power to limit commerce, travel, or group meetings for reasons related to COVID-19 OR that experience a significant decline in gross receipts over the same calendar quarter as the year prior may be eligible for a payroll tax credit if they do not receive a forgivable loan under the Payroll Protection Program . This credit is referred to as an "employee retention credit." Tax exempt organizations can qualify for the employee retention credit if they experience a significant decline in gross receipts.

 

If an eligible employer has 100 or fewer full-time employees, all employee wages are qualified wages. For eligible employers with more than 100 employees, qualified wages are wages paid to an employee who is unable to work for the reasons noted above.

 

The payroll tax credit under this provision applies to wages paid after March 12, 2020 , and covers 50% of the qualified wages (including qualified health plan expenses allocable to wages) up to a maximum of $10,000 for each employee over all eligible quarters. The first eligible quarter must have gross receipts of less than 50% over the year prior.

 

The opportunity for this tax credit ends in the calendar quarter in which gross receipts are greater than 80% over the year prior OR January 1, 2021, whichever occurs first. Also, this credit cannot be used against wages paid for emergency leaves under the FFCRA.

Delay of Employer Social Security Payroll Tax Deposits

 

Under the CARES Act , employers can delay the payment of employer Social Security payroll taxes until January 1, 2021. Fifty percent of this deferred amount must be paid by December 31, 2021, and the remaining 50% by December 31, 2022.

Under the provisions of the Relief for Workers Affected by Coronavirus Act (RWACA) that is part of the CARES Act, states that elect to enter into an agreement with the federal government will receive funding to dramatically expand their unemployment benefit programs and increase the amount of benefits available to workers temporarily.

 

To receive federal monies for the expanded and increased unemployment benefits, the state must have an adequate system for administering such assistance through its agency, as determined by the Secretary of Labor. In addition, states must agree to the following: waive the one-week waiting period to receive unemployment compensation (UC) benefits (if one exists); when necessary, take steps to collect any overpayments of UC benefits made to workers; provide flexibility to workers who are unable to search for work because of COVID-19, when this is a requirement for eligibility of benefits; and make payments for regular UC benefits to individuals in amounts and to the extent that they would receive without regard to RWACA.

 

All states are expected to enter into the agreement with the Secretary of Labor, although many states have antiquated unemployment systems . Given the volume of the claims that are expected, despite efforts to boost hiring at state unemployment agencies, concerns are growing about the ability of state systems and workers to handle excessive numbers of anticipated claims. No doubt, there will be delays in payments to workers eligible for expanded and increased unemployment benefits. 

 

Once an agreement is reached with the state, the U.S. Department of the Treasury will provide funding to the state through December 31, 2020 , for workers to receive the following types of expanded and increased UC benefits:

 

— Federal Pandemic Unemployment Compensation: Individuals who are qualified to receive unemployment benefits under existing state laws will receive the amount of UC benefits they would normally receive plus an additional $600 per week, from the point at which the state effects its agreement with the federal government through July 31, 2020 . States can elect to pay the additional $600 at the same time and in the same manner as any regular UC benefits or by payments made separately in the same week.

 

— Pandemic Emergency Unemployment Compensation: This program provides an additional 13 weeks of UC benefits to individuals who exhausted the maximum amount of UC benefits available in their state (in terms of number of weeks and average weekly benefit amount). To qualify for benefits under this program, claimants must meet the requirements under state law that apply to claims for regular UC benefits, such as those related to availability for work, refusal to accept work, and actively searching for work (keeping in mind that states must provide flexibility to workers who are unable to search for work because of COVID-19).

 

Individuals who are approved for the additional 13 weeks of UC benefits will receive an additional $600 per week up to July 31, 2020 . Any remaining weeks of UC benefits are paid at the state’s regular UC benefit rate.

 

— Pandemic Unemployment Assistance Program: This program expands each state’s usual benefits eligibility to include individuals who are not eligible for regular UC benefits (or Pandemic Emergency Unemployment Compensation benefits) and self-employed individuals, gig workers, individuals seeking part-time employment, individuals who do not have sufficient work history to qualify for UC benefits, and those who have exhausted all rights to regular unemployment or extended benefits under the RWACA.

 

This expanded group of individuals will receive UC benefits if they are otherwise able and available to work (within the meaning of the applicable state law), except that they are unemployed, partially unemployed, or unable or unavailable to work for reasons related to COVID-19 . Some of these reasons include being diagnosed with COVID-19 (the individual or a member of the individual’s household), providing care for a family member or member of the individual’s household who has been diagnosed with COVID-19, needing to serve as the primary caregiver of a child whose school or place of care has closed due to COVID-19, being scheduled to commence employment and not having a job or being unable to reach the job as a direct result of the COVID-19 public health emergency, having to quit a job as a direct result of COVID-19, and being unable to work because the individual’s place of business is closed as a result of the COVID-19 public health emergency.

 

Individuals who have the ability to telework with pay and who are receiving paid sick leave or other paid leave benefits are not eligible for unemployment benefits under this program.

 

If qualified, an individual under this program will receive the regular weekly amount of UC benefits   under state law for up to 39 weeks (not to extend beyond December 31, 2020), plus an additional $600 per week through July 31, 2020.

The Opportunity for a Pay Increase

An additional $600 per week of UC benefits is extraordinary. At this rate, workers in some states who qualify for benefits will receive more income from unemployment than they would from working. Many employers are concerned that the additional $600 per week will create a disincentive to return to work before July 31, 2020, when the benefit ceases. Of course, workers who are recalled after being on furlough or layoff will, presumably, not be eligible for continued benefits; however, this determination is based on state unemployment laws and policies.

 

If you're wondering what the maximum weekly unemployment amount is in your state without the $600 per week, click HERE . Add $600 to determine how much an employee in your state can receive weekly in unemployment benefits up to July 31, 2020.

As you evaluate how the increased unemployment benefits impact decisions pertaining to your workforce, we recommend reviewing our workforce planning chart that includes a number of critical considerations. Click HERE to obtain this chart.

Short-Time Compensation Programs and Partial Unemployment

In most states, employees working less than customary full-time hours can collect unemployment compensation. This is referred to as "partial unemployment." State rules pertaining to partial unemployment are unchanged. If an employee in your state qualifies for partial unemployment, he or she will receive these benefits, plus an additional $600 per week, up to July 31, 2020.

Many states also have short-time compensation (STC) programs (also called Shared- Work programs) that can help employers avert layoffs. These programs are different from partial unemployment. STC programs allow employers with state-approved plans to reduce the hours of employees in lieu of layoffs, while permitting employees to receive payment for a portion of the regular unemployment. STC is not available to individuals who are employed on a seasonal, temporary, or intermittent basis.

 

An STC program can help an employer retain workers and temporarily reduce labor costs. Currently, there are 28 states that have enacted STC programs. Under the RWACA, states that do not have STC programs can receive grants from the federal government to enact such programs and to promote and enroll employers in the program. Although noble in cause, it’s unlikely that many states will have time to enact such programs right now.

 

If your state offers an STC program and you arrange to participate, an employee who qualifies for STC unemployment benefits will generally receive an amount of unemployment that equals the difference between the weekly benefit amount and their earnings. When determining monetary entitlement to benefits, each state usually specifies a maximum dollar amount that can be received and may have requirements pertaining to the number of days or hours that can or must be worked to be eligible for benefits.

 

Until July 31, 2020, employees who receive benefits under their employer's state-approved STC program will receive an additional $600 per week.

Employer Costs and Options



Regarding the cost of additional unemployment benefits for workers—unfortunately, there is no guarantee that the additional benefits paid to workers under the CARES Act will not impact an employer’s experience rating and future unemployment taxes. Each state determines how UC benefits impact the experience rating; however, federal guidance to the states suggests that when determining, in the context of COVID-19, whether certain unemployment benefits should be charged to employers, states should consider how to fairly distribute the costs to employers. The decision by a state to charge employers’ unemployment accounts for benefits received under the RWACA will likely depend on the state's current trust-fund solvency status. States with lower solvent funds in their trusts may be pressured to charge employers’ accounts for benefits under the new temporary programs, which in turn will increase future unemployment tax rates.

 

When weighing the options  for layoffs, furloughs (a temporary layoff that is typically less than eight weeks in duration), reduced hours, and participation in the Paycheck Protection Program, employers should consider employees’ current earnings and the potential for each employee to try to maintain eligibility for unemployment benefits through July 31. If business interruptions are expected to be shorter in duration, taking advantage of a forgivable loan under the Paycheck Protection Program may make the most sense.

As you evaluate how the increased unemployment benefits impact decisions pertaining to your workforce, we recommend reviewing our workforce planning chart that includes a number of critical considerations. Click HERE to obtain this chart.

As a client of our firm, if you have questions about HR practices or solutions, state or federal employment regulations, or any other HR need, call or email our office for assistance.

Seawright & Associates

(407) 645-2433

[email protected]

seawright.com

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The information in this bulletin and in any attachments is for general purposes only. Please speak with a Seawright & Associates consultant about your specific needs before taking any action. Seawright & Associates does not engage in the practice of law. Information in this bulletin is not intended to be legal advice. Should you wish to have a legal opinion, we recommend that you speak with a qualified attorney.