The congressional response to the COVID-19 outbreak continues while the agencies tasked with administering recently passed legislation have begun issuing guidance or in the case of the IRS issuing parameters around which they will be issuing guidance. Addressed in this CIP update, the Department of Labor application of sick and family leave provisions, IRS announcement on tax credits and EEOC guidance on Coronavirus practices.

The full text of pending legislation including $2-Trillion in Coronavirus related spending which apparently includes direct payments and increased support for unemployment insurance has not been released. This alert does not discuss pending legislation.

Here is what we do know:

The Sick Leave and Family Leave Provisions Start April 1.

In a Frequently Asked Questions page released late yesterday the US DOL has set the effective date of the paid time off requirement of the Families First Coronavirus Response Act as April 1, 2020 – this is a day earlier than had been expected.

Not Retroactive.  Another key point made in the FAQs is that the requirements are NOT retroactive meaning there is no requirement to pay for time off before April 1, 2020. This means that sick leave taken and paid before April 1 will not be reimbursable as it currently stands.  The FFCRA states the leave provisions “shall take effect not later than 15 days after the date of enactment.” As the FFCRA was signed by President Trump on March 18, 2020, it was plausible in the absence of other communication by the DOL that it would be April 2, 2020.

The DOL gave no reason why it chose to move up implementation by one day, but it could be to line up the effective date of the law with the calendar quarter.

Emergency FMLA and Emergency Sick Leave runs concurrently.

The qualifying reason for leave under the Emergency FMLA involves caring for a child when their school or place of care is closed. One of the six qualifying reasons for Emergency Paid Sick Leave similarly addresses this same reason. The DOL clarifies that if taking EFMLA leave, and the first 10 days are covered under Emergency Sick Leave, the total leave is a maximum of 12-Weeks.

Do I have 500 Employees? 

The DOL provides the opinion that an employer is covered if, at the time the leave is to be taken (a “snapshot” approach), the business employs fewer than 500 employees. Moreover, the analysis addresses important issues regarding whether separate entities are counted as one employer for purposes of the new leave laws.

First, the DOL states that if two entities are found to be “joint employers” under the FLSA, all of their common employees must be counted in determining whether leave must be provided under for Emergency Paid Sick Leave and Emergency Family and Medical Leave.

The DOL document also states that if two entities are an “integrated employer” under the Family Medical Leave Act (FMLA), all of the employees of the integrated employer will be counted in determining employer coverage for purposes of Emergency Family and Medical Leave.

The “joint employer” analysis under the FLSA and the “integrated employer” analysis under the FMLA are complicated and involve a critical analysis of specific facts.

The DOL also released a Fact Sheet for Employers and a Fact Sheet for Employees . Expected today, but possibly later this week, they will be releasing a workplace poster required under the law and additional fact sheets and Q&A documents so check back at DOL’s webpage for those. 

Emergency guidance related to small business exemptions related to leave expected.  

The Act provides an exemption for businesses with less than 50 employees from leave requirements related to school and daycare closings where the leave requirements would threaten the viability of the business. The DOL plans to issue guidance with “simple and clear criteria” on the qualifications related to this exemption.

Tax Credits.

The IRS has announced employers they will be issuing guidance this week to address the cash flow challenge for business. This guidance will allow employers to retain an amount of payroll taxes equal to the amount of paid leave INCLUDING HEALTH INSURANCE COSTS they paid rather than deposit them with the IRS in anticipation of the tax credits. The announcement outlines the following:
Complete Coverage:
·        Employers receive 100% reimbursement for paid leave pursuant to the Act.
·        Health insurance costs are also included in the credit.
·        Employers face no payroll tax liability.
·        Self-employed individuals receive an equivalent credit.

Fast Funds

·        Reimbursement will be quick and easy to obtain.
·        An immediate dollar-for-dollar tax offset against payroll taxes will be provided
·        Where a refund is owed, the IRS will send the refund as quickly as possible.

Small Business Protection.  Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or child care is unavailable in cases where the viability of the business is threatened.

Compliance Requirements subject to 30-day non-enforcement period for good faith compliance efforts.
To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.

ADA Compliance under COVID Pandemic.

 The federal Equal Employment Opportunity Commission (the “EEOC”) has issued revised guidelines  that define Americans with Disabilities Act (“ADA”) compliance standards for employers operating under current COVID-19 pandemic conditions.

In general, the ADA broadly restricts business decisions that consider employee health or medical conditions. 

Through the guidelines, the EEOC has temporarily suspended certain ADA restrictions in an effort to permit “Essential Businesses” businesses that are exempted from various shelter-in-place and business restrictions order now in effect in several regions to adopt practical strategies to maintain safe business operations.

These guidelines deal with employee inquiries regarding COVID-19 symptoms, workplace infection control strategies, reasonable accommodation requests by employees unrelated to COVID, and hiring practices.

Please note:
This notice provides an overview of a specific developing situation. It is not intended to be, and should not be construed as, legal advice. Please also be advised that any and all information, comments, analysis, and/or recommendations set forth above relative to the possible impact of COVID-19 on potential insurance coverage or other policy implications are intended solely for informational purposes and should not be relied upon as legal advice.

Comments above do not take into account any pending or future legislation introduced with the intent to override, alter or amend current policy language.