President Donald Trump on March 18, 2020, signed the Families First Coronavirus Response Act (the “FFCRA” or “Families First Act”) to provide economic relief to those impacted by COVID-19. This law includes key employment provisions that significantly impact private employers across the nation, including non-profits. Since our last OnPoint discussing these key employment provisions (found here), the Department of Labor (“DOL”) issued a temporary rule governing the administration of the FFCRA’s paid leave requirements. Additionally, the DOL and Internal Revenue Service (“IRS”) have released guidance further interpreting the FFCRA provisions. This guidance is frequently updated, and employers should consult it often to ensure ongoing compliance with the FFCRA.
- The DOL’s Temporary Rule for Paid Leave under the FFCRA can be found here.
- The DOL’s summary of the FFCRA’s requirements for employers can be found here.
- The DOL’s FAQs can be found here.
- The IRS’s FAQs can be found here.
This alert addresses some of the most common concerns and questions that non-profit organizations confront in understanding how to comply with the employment provisions of the FFCRA. In particular, we focus on the requirements of the Emergency Paid Sick Leave Act (“EPSLA”) and the Emergency Family and Medical Leave Expansion Act (“E-FMLEA”), as well as the availability of related tax credits to non-profit organizations and other employers. However, there are many developments that will affect non-profit organizations. For instance, an earlier Dechert OnPoint (found here) discussed the additional financial support available to non-profit organizations under the U.S. CARES Act. In addition, non-profit organizations should be aware that last week the IRS issued Notice 2020-23 extending the deadlines for filing Forms 990-PF, 990-T and 990-W. Notably, Notice 2020-23 does not extend the deadline for filing Form 990.
The FFCRA requires “covered employers” to provide employees with expanded sick leave and expanded family and medical leave under the EPSLA and E-FMLEA, respectively. In exchange for this paid leave, employers are eligible for capped tax credits. For purposes of the FFCRA, a “covered employer” includes any private employer, including a non-profit organization, with fewer than 500 employees. The calculation of the number of employees is based on the joint employer test under the Fair Labor Standards Act (“FLSA”) and the integrated employer test under the Family and Medical Leave Act (“FMLA”). The employee threshold is measured as of the date an employee seeks to take a qualified leave, between April 1, 2020 and December 31, 2020.
Notably, employers with under 50 employees can request a small business exemption from complying with certain of the FFCRA’s requirements if doing so would jeopardize the viability of their business (see Questions and Answers below for a further discussion of this exemption).
Emergency Paid Sick Leave Act
Under the EPSLA, employees are immediately eligible to receive up to 80 hours of emergency paid sick leave (“EPSL”) in a two-week period, regardless of how long they have been employed by the employer, if they are unable to work or telework due to a qualifying COVID-19 reason. The amount of paid leave an employee may receive will be determined by the reason for which they are requesting the leave:
- If the employee is unable to work or telework because the employee is (1) subject to a government issued quarantine or isolation order related to COVID-19; (2) advised by a healthcare provider to self-quarantine due to concerns related to COVID-19; or (3) experiencing symptoms of COVID-19 and is seeking a diagnosis, the employee is entitled to their regular rate of pay, federal minimum wage, or state or local minimum wage, whichever is greater, but not to exceed a maximum of $511 per day, or $5,110 in the aggregate.
- If the employee is unable to work or telework because the employee is (1) caring for an individual who is subject to a quarantine or isolation order mandated by the government or a healthcare provider due to COVID-19; (2) caring for a child whose school or place of care is closed or unavailable due to COVID-19; or (3) experiencing any other substantially-similar condition that may arise, as defined by the Secretary of Health and Human Services (“HHS”), the employee is entitled to two-thirds of their regular rate of pay, federal minimum wage, or state or local minimum wage, whichever is greater, but not to exceed a maximum of $200 per day, or $2,000 in the aggregate.
In calculating paid sick leave, full-time employees are entitled to be paid for up to 80 hours of work and part-time employees are entitled to be paid up to the average number of hours they typically work in a two-week period.
Emergency Family and Medical Leave Expansion Act
Under the E-FMLEA, employees employed for at least 30 calendar days may be eligible to receive up to twelve weeks of paid leave in order to care for a child under 18 years of age when the child’s school or place of care is closed or unavailable due to COVID-19. Although the first ten days of leave may be unpaid, an employee may choose to supplement this with company-provided paid time off or the EPSL. After the ten day period, the employee will be eligible to receive at least two-thirds of their regular rate of pay based on the average number of hours they are normally scheduled to work. Employees who are part-time or have an irregular schedule are entitled to paid leave based on the average number of hours the employee worked during the six months prior to taking leave. If the employee has not worked for the employer for six months, the employee’s pay will be based on the average number of hours the employee worked during each week prior to taking leave.
Generally, employees taking leave under the E-FMLEA have job-protected leave. However, the FFCRA provides an exception for employers with fewer than 25 employees: such employers are not required to guarantee the employee’s position if that position no longer exists due to operational changes resulting from the COVID-19 public health emergency.
Reimbursable Payroll Tax Credit
Employers providing mandated paid leave under the FFCRA are entitled to refundable tax credits. These tax credits are offset against the employer’s portion of the payroll taxes.
Tax Credits Available Under the Emergency Paid Sick Leave Act
The maximum credit an employer can receive under the EPSLA is $511 per day per employee, or a total of $5,110 over the entire sick leave period, if the employee is unable to work or telework because of the employee’s own complications related to COVID-19 (i.e. the employee is subject to a self-quarantine/isolation order or is experiencing symptoms of COVID-19). However, if the employee is unable to work or telework because the employee is taking care of another individual or is experiencing substantially similar conditions related to COVID-19, the maximum credit an employer can receive under the EPSLA is $200 per day or a total of $2,000 over the entire sick leave period.
Tax Credits Available Under the Emergency Family and Medical Leave Expansion Act
The maximum credit an employer can receive for payments made under the E-FMLEA is $200 per day per employee, or a total of $10,000 over the E-FMLEA period.
Applying for Tax Credits
In order to apply for FFCRA tax credits based on payments made pursuant to the EPSLA and E-FMLEA, employers should request certain documentation and information from their employees to substantiate the paid leave wages. Under the FFCRA, employers may deny employees paid leave until the employee provides the necessary documentation and/or information to support their request.
Documents and information employers should request to substantiate employees’ request for leave under the EPSLA:
- Name of the government entity that issued a state, federal, or local quarantine or isolation order;
- Name and address of the health care professional who advised the employee to self-quarantine due to concerns related to COVID-19;
- For requests for leave to care for an individual who is subject to quarantine or who has been advised to quarantine due to COVID-19: the name of the individual; relationship of the individual to the employee; the name of the government entity ordering quarantine or the name and address of the health care provider advising quarantine;
- For requests for leave to care for a child under the age of 18 years old because the child’s school, daycare or child care provider is closed or unavailable: the name(s) and age(s) of child(ren); name(s) and address(es) of school(s) or care provider(s) that is/are closed or unavailable; certification that no other person will be providing care for the child(ren) during the period for which the employee is receiving leave; if the child is over 14 years old, certification that special circumstances exist which require the employee to provide care for the child during daylight hours.
Documents and information employers should request to substantiate employees’ request for leave under the E-FMLEA:
- Name(s) and age(s) of child(ren);
- Name(s) and address(es) of school(s) or care provider(s) that is/are closed or unavailable;
- Certification that no other person will be providing care for the child(ren) during the period for which the employee is receiving paid leave;
- If the child is over 14 years old, certification that special circumstances exist which require the employee to provide care for the child during daylight hours.
According to the DOL, in certain instances, employers can accept the employee’s oral confirmation of the above mentioned information. However, it is important that the employer reduce such information to writing. Regardless of how the documentation and information is received, employers who wish to apply for FFCRA tax credits should create a formal report documenting the employee’s request for leave.
Employers should report the total qualified leave wages and related credits for each quarter on their Quarterly Federal Tax Return (Form 941) and complete the Advance Payment of Employer Credits Due to COVID-19 (Form 7200). It is further recommended that the employer create appropriate pay codes in their payroll system so that they can effectively track the available tax credits.
In order to substantiate the claim for tax credits, and protect themselves against an audit, employers should retain all records and documentation related to the employee’s request for qualified paid leave for a minimum of four years.
Frequently Asked Questions and Answers
Q. What is the effective date of the FFCRA, including the EPSLA and E-FMLEA provisions?
A. The FFCRA’s paid leave provisions went into effect on April 1, 2020, and apply to leaves taken between Apri1 1, 2020 and December 31, 2020.
Q. What information do employers need to communicate to their employees about the FFCRA?
A. Covered employers must post a notice of the FFCRA requirements in a conspicuous location on their premises or website. An employer can also satisfy this requirement by emailing or directly mailing a notice to the employees. The notice can be found here.
Q. If an employer laid off their employees, but re-hires them before December 31, 2020, are the employees covered under the FFCRA?
A. Employees would be immediately eligible for EPSL, since there is no minimum period of employment required for coverage.
Re-hired employees would be eligible for expanded family and medical leave if the employee was laid off or otherwise terminated on or after March 1, 2020 and had worked for the employer for at least 30 of the prior 60 calendar days prior to the layoff.
Q. If an employee was placed on furlough (voluntary or involuntary short-term program of unpaid leave) on or after April 1, 2020, what effect does this have on the employee’s coverage under the FFCRA?
A. The employee would not be entitled to EPSL or expanded family and medical leave. However, the employee may be eligible for unemployment insurance benefits.
Q. If an employer reduces an employee’s work hours, can the employee use EPSL or expanded family and medical leave for the hours that the employee is no longer scheduled to work?
A. No. An employee may not use EPSL or expanded family and medical leave for the hours they are no longer scheduled to work because the employee is not prevented from working those hours due to a COVID-19 qualifying reason.
Q. If an employer closed the worksite before April 1, 2020, can the employee still get EPSL or expanded family and medical leave?
A. No, if the employer closed the worksite and stopped paying its employees, employees are not eligible for EPSL or expanded family and medical leave. This is true whether the employer closed the worksite due to a lack of business or because it was required to close pursuant to Federal, State, or local directive.
Q. If an employer closed the worksite on or after April 1, 2020, but before the employee sought to take leave, is the employee eligible for paid leave under the EPSLA or E-FMLEA?
A. No, if the employer closes after the FFCRA’s effective date, the employee is not eligible for leave under the EPSLA or E-FMLEA, but may be eligible for unemployment insurance benefits. This is true whether the employer closed due to a lack of work, for safety reasons, or pursuant to a Federal, State, or local directive.
Q. If an employer closes the worksite while the employee is on EPSL or expanded family and medical leave, what happens?
A. The employer must pay the employee for any EPSL or expanded family and medical leave that was used before the employer closed. As of the date the employer closes the worksite, the employee is no longer entitled to EPSL or expanded family and medical leave.
Q. What is the employee’s “regular rate of pay” for purposes of the FFCRA?
A. The regular rate of pay used to calculate paid leave under the FFCRA is the average of the employee’s regular rate over a period of up to six months prior to the date on which the employee takes leave. If the employee has not worked for the current employer for six months, it is the average of the employee’s regular rate of pay for each week the employee worked for the current employer.
Q. When calculating employees’ pay, must overtime hours be included?
A. The E-FMLEA requires employers to pay employees for hours the employee would have been normally scheduled to work, even if that is more than 40 hours in a workweek.
However, under the EPLSA, employers are only required to pay up to 80 hours of leave over a two-week period. Therefore, overtime hours will be taken into account, but the employer need not pay over 80 hours to the employee.
Q. If an employer pays their employees more than they are entitled to receive under the EPSLA or E-FMLEA, can the employer claim a tax credit for the entire amount paid?
A. Employers may pay employees in excess of the FFCRA requirements, but cannot claim, and will not receive, tax credits for that which is paid in excess of the statutory limits.
Q. Can an employee who is teleworking take intermittent paid leave?
A. If the employer allows it, and the employee is unable to telework their normal schedule of hours due to one of the qualifying reasons set forth in the EPSLA or E-FMLEA, the employee may take intermittent paid leave. The employee may take intermittent leave in any increment, provided that the employee and employer agree.
Q. Can an employee who is working at their usual worksite (as opposed to teleworking) take intermittent paid leave?
A. It depends on the reason the employee is taking paid leave and whether the employer agrees. Generally, unless the employee is teleworking, EPSL for qualifying reasons related to COVID-19 must be taken in full-day increments. Therefore, EPSL cannot be taken intermittently if the leave is being taken because the employee is: (1) subject to a government quarantine or isolation order related to COVID-19; (2) subject to healthcare provider’s advisement to self-quarantine; (3) experiencing symptoms of COVID-19 and seeking medical diagnosis; (4) caring for an individual who is subject to a quarantine or isolation order due to concerns related to COVID-19; (5) experiencing substantially similar conditions as specified by the HHS.
However, if the employer and employee agree, the employee may take paid leave intermittently under the EPSLA or E-FMLEA if the employee is taking such leave to care for a child whose school or place of care is closed or unavailable because of COVID-19 related reasons.
Q. Can an employer require an employee to take company-provided paid leave concurrently with expanded family and medical leave under the E-FMLEA?
A. Yes, after the first two workweeks, an employer may require an employee to take concurrently for the same hours expanded family and medical leave and existing leave that would otherwise be available to the employee in that circumstance. This would include personal leave or paid time off, but not medical or sick leave if the employee or a covered family member is not ill.
Employers must pay employees the full amount the employee is entitled to under the existing paid leave policy for the period of leave taken. The employer must also pay the employee at least two-thirds of the employee’s pay for subsequent periods of expanded family and medical leave taken, up to $200 and $10,000 in the aggregate, for the E-FMLEA.
Q. Can an employer use the paid sick leave under EPSLA to satisfy paid leave entitlements that the employee may have under the employer’s paid leave policy?
A. No, unless the employee agrees. Paid sick leave under the EPSLA is provided in addition to the employee’s other leave entitlements. An employer may not require an employee to use accrued paid vacation, personal, medical, or sick leave before the paid sick leave under the EPSLA. An employer also cannot require an employee to use existing leave concurrently with paid sick leave under the EPSLA.
However, if the employee and employer agree, the employee may use pre-existing leave entitlements to supplement the amount he or she receives from paid sick leave, up to the employee’s normal earnings. Employers would not be entitled to claim a tax credit for paid sick leave that is not required to be paid pursuant to EPSLA or is in excess of the caps set forth by the EPSLA.
Q. If an employee is currently on FMLA, can they continue their leave under E-FMLEA?
A. If an employee is currently on traditional FMLA leave, they would be able to transition their paid leave to the provisions under the E-FMLEA and would be able to receive compensation if they are taking leave for an eligible reason. However, the total maximum amount of leave available is 12 weeks per 12-month period, as that period is defined by the employer’s FMLA policy.
Q. Can an employee collect unemployment insurance benefits for time in which the employee receives EPSL and/or expanded family and medical leave?
A. If an employer provides EPSL or expanded family and medical leave, employees are generally not eligible for unemployment insurance. However, each State has its own rules for unemployment insurance benefits, and the DOL recently extended partial unemployment benefits to workers whose hours or pay have been reduced. Employees should contact their State workforce agency or State unemployment insurance office for specific questions
Q. When does the small business exemption apply to exclude small businesses from the provisions of the EPSLA and E-FMLEA?
A. An employer, including a non-profit organization, with fewer than 50 employees is exempt from providing leave under the EPSLA and E-FMLEA due to school or place of care closures or childcare provider unavailability due to COVID-19 related reasons when doing so would jeopardize the viability of the small business. A small business may claim this exemption if an authorized officer of the business has determined that:
- The provision of EPSLA or E-FMLEA would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
- The absence of the employee(s) requesting EPSL or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
- There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee(s) requesting EPSL or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.
Q. If an employer has less than 50 employees, and wishes to take advantage of the small business exemption, what is the process for applying for a small business exemption?
A. To elect the small business exemption and deny an employee’s request for leave based on a school or place of care closure or childcare provider unavailability due to COVID-19, the employer must document that its authorized officer made a determination for exemption pursuant to the criteria listed above. The employer should not send this documentation to the DOL. Rather, the employer should retain the documentation for four years.