UPDATED - We have updated several items as clarifications have been made. We will continue to update as more frequently asked questions are posed.
When Congress passed the Families First Coronavirus Response Act ("CRA"), it left much for the U.S. Department of Labor ("DOL") to explain. The DOL has published a temporary rule offering its interpretations of the CRA, and the Internal Revenue Service (“IRS”) has established a procedure for claiming the tax credits. Here are some of the most frequently asked questions we’ve seen from employers as they plan for the future.
1. When did the CRA become effective?
April 1, 2020.
2. But it’s not going to be enforced for 30 days, right?
About that…The DOL surprised observers by clarifying the 30 days started when the President signed the CRA into law, so the non-enforcement period will end on April 17, not April 30. Of course, that non-enforcement period only applied to the DOL, not private lawsuits. And, just so there is no misunderstanding, the DOL made clear, “After April 17, 2020, this limited stay of enforcement will be lifted, and the Department will fully enforce violations of the Act, as appropriate and consistent with the law.”
3. Can employees take 80 hours of paid sick leave for one reason and then another 80 hours for another reason provided under the Emergency Paid Sick Leave Act?
Not a chance. Employees get to take up to two weeks—or 10 days—(80 hours for a full-time employee, less for part-time) for any combination of qualifying reasons. But, the total number of hours is capped at 80.
4. Can employees take paid sick leave in partial days?
Not normally. Unless teleworking, paid sick leave must be taken in full-day increments. In general, once an employee who is not teleworking begins taking paid sick leave for a reason other than child care, the employee must continue to take paid sick leave each day until the employee either (a) uses the full amount of paid sick leave or (b) no longer has a qualifying reason for taking paid sick leave. If the employee’s reason for taking paid sick leave ends before the 80 hours is exhausted, the employee may take any remaining paid sick leave at a later time, before December 31, 2020.
5. Can employees take this leave intermittently?
Only if the employer and the employee agree, and only if the employee is teleworking, or needs paid sick leave or emergency FMLA for child care. The DOL “encourages employers and employees to collaborate to achieve flexibility and meet mutual needs.”
6. What does “unable to work” mean?
It means the employer has work and a COVID-19 qualifying reason prevents the employee from being able to perform that work, regardless of schedule or by means of telework.
7. Is a state or local “Stay at Home” or “Shelter in Place” Order a reason that supports federal paid sick leave?
Maybe. Every Order is different, but the DOL has said orders that advise some
or all citizens to shelter in place, stay at home, quarantine, or otherwise restrict their mobility may allow an employee to take paid sick leave, but only if the Order is the reason the employee cannot work or telework. Importantly, the DOL said clearly, “[a]n employee subject to one of these orders may not take paid sick leave where the employer does not have work for the employee.” So, if you are closed, or if the employee has been furloughed for lack of work – even if the reason is directly related to “Stay at Home” Order – the employee is not entitled to federal paid sick leave.
8. The CRA says employees may take paid sick leave if they are needed to care for an individual who is required to quarantine or isolate by a governmental entity or health care provider. So, who is an “individual?”
An individual, for this purpose, is an immediate family member, roommate, or similar person with whom the employee has a personal relationship that creates an expectation that the employee would care for the individual.
9. What happens when there is a reduced work schedule?
A reduced work scheduled is not the same as being unable to work. This is because the employee was not prevented from working those hours due to a COVID-19 qualifying reason, but a change in schedule, even if the reduction in hours was somehow related to COVID-19.
10. Is this 12 weeks of Emergency FMLA in addition to the obligations I already had to provide FMLA leave? (In other words, can an employee take 12 weeks of Emergency FMLA on top of any FMLA leave I had already extended to the employee)?
No. An eligible employee gets 12 weeks of total FMLA leave, including Emergency FMLA leave, regardless of the reason. The DOL gave this example:
- Assume you are eligible for preexisting FMLA leave and took two weeks of such leave in January 2020 to undergo and recover from a surgical procedure. You therefore have 10 weeks of FMLA leave remaining. Because expanded family and medical leave is a type of FMLA leave, you would be entitled to take up to 10 weeks of expanded family and medical leave, rather than 12 weeks.
Remember, eligible employees are entitled to paid sick leave under the Emergency Paid Sick Leave Act regardless of any leave taken under the FMLA.
11. I’m in the health care field. I’ve heard I can exclude some employees from the federal leave requirements, but I’m not sure which employees. Help?
If your business is in virtually any field in the health care industry (the DOL has supplied a list), you may exclude anyone you employ, though the DOL is asking employers to be “judicious” in using this exclusion.
12. How do I qualify for the small business exemption?
The DOL has offered more guidance to help employers with fewer than 50 employees determine if they are exempt. The exemption only applies to the obligation to provide (a) paid sick leave due to school or place of care closures or child care provider unavailability and (b) expanded family and medical leave. If the reason leave is sought is for one of the other reasons not related to child care or school closures, small employers would still need to provide federal paid sick leave. To be exempt to the extent possible, an officer of the company must determine that one of these three conditions apply:
- Paying the federal paid leave would result in the business’s expenses and financial obligations exceeding available business revenues and cause the business to cease operating at a minimal capacity;
- The absence of the employee would create a substantial risk to the financial health or operational capabilities of the small business because of the employee’s specialized skills, business knowledge, or responsibilities; or
- There are not sufficient workers who are able, willing, available, and qualified to perform the labor or services provided by the employee requesting federal leave, and these labor or services are needed for the small business to operate at a minimal capacity.
Other than condition A, it appears the employer should make the decision as each request for leave is made. The DOL has repeated in its temporary rule that employers are not to send the documentation to them. Employers should still retain records to support their decision if challenged.
13. When may an employee take child care leave (either Federal Paid Leave or Emergency FMLA)?
First, employees may take child care leave only for their minor sons or daughters, which includes employees’ biological, adopted, or foster children, stepchildren, legal wards or children for whom the employee is standing in loco parentis (described by the DOL as any child for whom the employee has day-to-day responsibilities to care for or financially support). It also can include a child who is 18 or older and incapable of self-care due to a mental or physical disability. This is the same definition of son or daughter used under a traditional FMLA analysis.
Second, it can only be taken where the employee is unable to work (or telework) because the employee is needed to care for the son or daughter where the child’s school or place of care has been closed, or is unavailable, due to COVID-19. Importantly, the IRS, which must approve the tax credit, has added that leave is available only if “no other person will be providing care for the child during the period for which the employee is receiving family medical leave.” The IRS also has said where the child is over age 14 “special circumstances” must exist requiring the employee to provide care if the care is needed during daylight hours.
14. What do I need to support an employee’s request for Federal Paid Leave or Emergency FMLA?
A written request for leave from the employee in which the employee provides:
- His or her name;
- The date or dates for which leave is requested;
- A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
- A statement that the employee is unable to work, including by means of telework, for such reason.
15. Will I need any other information to support a request for Federal Paid Leave or Emergency FMLA?
Yes. Where the leave request is based on a quarantine order or self-quarantine advice, the statement from the employee should include the name of the governmental entity ordering the quarantine or the name of the healthcare professional advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name, and relation to the employee. Where the leave request is based on a school closing or child care provider unavailability, the statement from the employee should include:
- The name and age of the child (or children) to be cared for,
- The name of the school that has closed or place of care that is unavailable,
- A representation that no other person will be providing care for the child during the period for which the employee is receiving family medical leave, and
- If the child is older than 14 and care is to be provided during daylight hours, a statement that special circumstances exist requiring the employee to provide care.
16. How long do I need to retain the records?
Four years from the date the tax is paid or due.
17. How much will I receive as a tax credit?
The IRS has said an employer may claim a fully refundable tax credit equal to 100 percent of the qualified family leave wages (and allocable qualified health plan expenses and the employer’s share of Medicare tax on the qualified family leave wages) it pays. You will need to create documents to support the calculation for the amount of the credit sought.
18. How do I claim my tax credit?
Employers will report their total qualified leave wages and the related credits for each quarter on their federal employment tax returns, usually Form 941, Employer’s Quarterly Federal Tax Return. In anticipation of receiving the credits, employers can fund qualified leave wages by accessing federal employment taxes, including withheld taxes, that are required to be deposited with the IRS or by requesting an advance from the IRS.
19. What if I need the credit now?
There is a procedure for obtaining an advance of the refundable credits. First, reduce your remaining federal employment tax deposits for wages paid in the same quarter to zero. After that, Internal Revenue has published the Form 7200, Advance Payment of Employer Credits Due to COVID-19 that will allow employers to claim an advance credit for the remaining qualified leave wages (and any allocable qualified health plan expenses and the eligible employer’s share of Medicare tax on the qualified leave wages) it has paid for the quarter for which it did not have sufficient federal employment tax deposits.
The IRS provides this example: An eligible employer paid $10,000 in qualified leave wages (and allocable qualified health plan expenses and the eligible employer’s share of Medicare tax on the qualified leave wages) and is otherwise required to deposit $8,000 in federal employment taxes, including taxes withheld from all of its employees, on wage payments made during the same quarter. The eligible employer can keep the entire $8,000 of taxes that the eligible employer was otherwise required to deposit without penalties as a portion of the credits it is otherwise entitled to claim on the Form 941. The eligible employer may file a request for an advance credit for the remaining $2,000 by completing Form 7200.
These are just a cursory list of the most common questions and answers