HARMON CURRAN NONPROFIT LAW BLOG
FFCRA Updates and Clarifications from the DOL and IRS
In changes to its Frequently Asked Questions (FAQs) issued last week as well as in temporary regulations issued on April 1, 2020, the U.S. Department of Labor (DOL) has continued to update, revise, and clarify its guidance on the expanded leave requirements of the Families First Coronavirus Relief Act (FFCRA). The Internal Revenue Service has also provided additional guidance about how employers can claim the payroll tax credit for providing Expanded Family and Medical Leave and Emergency Paid Sick Leave.
Information about the FFCRA leave requirements and previous DOL guidance was discussed in previous articles, linked here and here. This post provides updated information on several aspects of the government’s implementation of the new law.
Paid Sick Leave
DOL has provided additional guidance on the six different circumstances for which Emergency Paid Sick Leave may be taken by an eligible employee:
- The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19: In a change from its earlier guidance, the DOL regulations now provide that quarantine or isolation orders include a broad range of governmental orders, including those that require all citizens to shelter in place or stay at home or those that advise categories of citizens who might be particularly vulnerable to stay at home, in addition to individualized quarantine or isolation orders. However, the mere existence of such an order is insufficient; the order must prevent an employee from working or teleworking when an employer otherwise has work available for the individual.
- The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19: Employees are eligible for paid sick leave if a health care provider advises them to self-quarantine or stay home because the health care provider believes that the employee has COVID-19, may have COVID-19, or is particularly vulnerable to COVID-19, and the employee is therefore unable to work or telework. Employees who self-diagnose and have not been directed by a health care provider to stay home are not eligible for Emergency Paid Sick Leave.
- The employee is experiencing symptoms of COVID-19 and seeking medical diagnosis from a health care provider: Employees experiencing COVID-19 symptoms, including fever, dry cough, shortness of breath, or other symptoms identified by the U.S. Centers for Disease Control and Prevention are eligible for Emergency Paid Sick Leave for the time period they are unable to work while taking affirmative steps to obtain a medical diagnosis, such as making, waiting for, or attending an appointment for a test for COVID-19.
- The employee is caring for an individual who is subject to an order or directive to quarantine as described in numbers 1 and 2 above: To be eligible for Emergency Paid Sick Leave for this reason, the employee must be unable to work or telework because they are caring for a member of the employee’s immediate family, a person who regularly resides in the employee’s home, or a similar person with whom the employee has a relationship that creates an expectation that the employee would provide such care for the person. Despite the statutory language of care for an “individual,” the employee must have a personal relationship with the person being cared for, and that person must expect or depend on the employee’s care during the quarantine or self-quarantine.
- The employee is caring for their son or daughter whose school or place of care has been closed for a period of time or the child-care provider of such son or daughter is unavailable, for reasons related to COVID-19: Employees may only use Emergency Paid Sick Leave for this reason when caring for their own son or daughter; it is not available for caring for other children. Covered children include biological, adopted, or foster children, stepchildren, legal wards, or children of a person standing in loco parentis, who are under 18 years of age or children 18 years of age or older who are incapable of self-care because of a mental or physical disability. In addition, this leave is available only if there is no other suitable person, such as another parent, guardian, or the regular child-care provider, available to care for the child while the employee is taking leave for this reason. Leave is available even if an employee’s child is receiving instruction online.
- The employee has a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretary of the Treasury and the Secretary of Labor: No additional conditions have yet been identified.
The temporary regulations also provide that full-time employees are eligible for a maximum of 80 hours of paid sick leave in total, even if an employee changes jobs. Prior use of sick leave at one employer reduces the hours of Emergency Paid Sick Leave employees may use at a subsequent employer.
Expanded Family and Medical Leave
Despite the statutory language, DOL has determined that employees taking Expanded Family and Medical Leave to care for their son or daughter whose school or place of care has been closed or whose child-care provider is unavailable, for reasons related to COVID-19, includes care for children over the age of 18 incapable of carrying for themselves. The requirements governing use of Emergency Paid Sick Leave for reason number 5 above also apply to the taking of Expanded Family and Medical Leave.
Interaction with FLSA
The temporary regulations include a specific provision that taking Emergency Paid Sick Leave or Expanded Family and Medical Leave does not in any way change an employee’s status as an exempt employee under the Fair Labor Standards Act. For example, taking intermittent leave will not change that the exempt employee is being paid on a salary basis.
DOL has provided additional clarification about the right of employees to be restored to their previous job or to an equivalent one after taking Expanded Family and Medical Leave and Emergency Paid Sick Leave. The temporary regulations provide that the new law does not protect an employee from layoffs or similar actions that the employer would have taken regardless of the employee’s use of leave, although the employer has the burden of demonstrating that the employee would have been laid off even if they had not taken leave.
Based on the pre-existing provisions of the federal FMLA, employers may potentially also deny job restoration to certain highly compensated key employees taking Expanded Family and Medical Leave. To do so, employers would have to provide written notice of this potential to affected employees at the time they request leave and substantiate that the restoration of the employee to employment will cause “substantial and grievous economic injury” to the operations of the employer (as opposed to that the absence of the employee will cause substantial and grievous injury).
Very small employers with fewer than 25 employees are not required to restore employees taking Expanded Family and Medical Leave if the job held by the employee is eliminated as a result of changes in economic or operating conditions due to the COVID-19 emergency and the employer has no equivalent position available and notifies the employee of available equivalent openings for a one year period.
Pre-existing Employer Leave Programs
If employers put in place paid leave programs prior to the effective date of FFCRA that they now wish to eliminate going forward, the DOL regulations make clear that employers may do so. Employers just need to pay employees for leave already taken and make sure changes are consistent with other applicable legal obligations that apply to changes to employer policies.
Documentation from the Employee
DOL has revised its guidance about the documentation requirements for employees using Expanded Family and Medical Leave and Emergency Paid Sick Leave. In addition to its own documentation requirements, DOL states that employers may also request that employees provide additional materials where needed for the employer to obtain the tax credits available under FFCRA as required by the IRS. Employers are not required to provide leave if materials sufficient to support the applicable tax credit have not been provided.
Unfortunately, there are some inconsistencies about required documentation among the DOL FAQs, the DOL temporary regulations with its explanatory Federal Register Notice, and the IRS guidance. Based on all of the various requirements, employees taking leave must provide the following information:
(1) the employee’s name;
(2) the date(s) for which leave is requested;
(3) the COVID-19 qualifying reason for leave, and according to the IRS, written support for the reason; and
(4) a statement representing that the employee is unable to work or telework because of the COVID-19 qualifying reason.
An employee must provide additional documentation depending on the COVID-19 qualifying reason for leave:
- An employee requesting paid sick leave because of a government order must provide the name of the government entity that issued the quarantine or isolation order.
- An employee requesting paid sick leave at the direction of a health care provider must provide the name of the health care provider who provided the advice to self-quarantine for COVID-19 related reasons.
- An employee requesting paid sick leave to care for an individual must provide the name and relationship to the employee of the individual and, as applicable, either the name of the government entity that issued the quarantine or isolation order or the name of the health care provider who advised the individual to self-quarantine.
- An employee requesting paid sick leave or expanded family and medical leave to care for their child who is out of school or child-care must provide: (1) the name and age of the child being cared for; (2) the name of the school, place of care, or child-care provider that closed or became unavailable due to COVID-19 reasons; and (3) a statement representing that no other suitable person is available to care for the child during the period of requested leave. According to the IRS, if the child is older than 14, the employee must also provide a statement that special circumstances exist requiring the employee to provide care.
While some of the DOL guidance states that employees can provide this information or part of the information orally, which the employer must then document, the IRS requires a written request from the employee to support the tax credit.
If an employee is eligible for other forms of federal FMLA leave apart from the new FFCRA leave requirements (e.g., for an employee’s own serious health condition related to COVID-19, or to care for certain family members with a serious health condition related to COVID-19), the normal FMLA certification requirements still apply.
Additional Documentation for Tax Credit
To obtain the tax credit, in addition to obtaining documentation from employees taking leave, employers must create and maintain the following records:
- Documentation to show how the employer determined the amount of qualified sick and family leave wages paid to employees who are eligible for the credit, including records of work, telework and qualified sick leave and qualified family leave.
- Documentation to show how the employer determined the amount of qualified health plan expenses that the employer allocated to wages.
- Copies of any completed Forms 7200, Advance of Employer Credits Due To COVID-19, that the employer submitted to the IRS.
- Copies of the completed Forms 941, Employer’s Quarterly Federal Tax Return, that the employer submitted to the IRS (or, for employers that use third party payers to meet their employment tax obligations, records of information provided to the third party payer regarding the employer’s entitlement to the credit claimed on Form 941).
Documentation of Small Employer Exemption
DOL also requires employers to document a determination by an authorized officer that the organization is a small employer and satisfies the criteria that establish that the employer can deny an employee’s request for leave to care for a child whose school or place of care has been closed or whose child-care provider is unavailable, due to COVID-19 precautions because complying would jeopardize the viability of the employer’s business as a going concern.
Record Retention Time Period
All required documentation must be kept for at least four years and must be available in case of review by the IRS or DOL.
Tax Treatment and Credit
The IRS has issued a number of FAQs about how employers should treat wages paid to an employee for Expanded Family and Medical Leave and Emergency Paid Sick Leave and how employers can take advantage of the available tax credit. Highlights include:
- Leave wages are subject to withholding of federal income tax and the employee’s share of social security and Medicare taxes, and employers must pay the employer’s share of Medicare tax on the wages. The employer is not required to pay the employer portion of social security tax on leave wages.
- Qualified leave wages are also considered wages for purposes of other benefits, such as contributions to 401(k) plans and salary reduction agreements.
- Employers receive the tax credit in the full amount of Expanded Family and Medical Leave and Emergency Paid Sick Leave wages paid, up to the applicable statutory caps, plus the allocable cost of maintaining health insurance coverage for the employee and the employer’s share of Medicare tax on the wages.
- In calculating the allocable cost of maintaining health insurance coverage for an employee, employers can count both the portion of the cost paid by the employer and the portion of the cost paid by the employee with pre-tax salary reduction, but not with after-tax contributions. Health expenses may include contributions to an HRA or to a health FSA.
- Employers that are common law employers of employees taking leave but use third party agents for payment of wages are entitled to take advantage of the tax credit.
- Employers will report their total qualified leave wages (plus allocable cost of maintaining health insurance coverage and employer’s share of Medicare tax) for each quarter on their federal employment tax return, usually Form 941.
- To benefit more quickly from the available tax credits, employers can reduce their current tax deposits up to the amounts of the qualified leave wages paid (plus allocable cost of maintaining health insurance coverage and employer’s share of Medicare tax). The tax payments that can be used for this purpose include federal income tax withheld from employees, the employees’ share of social security and Medicare taxes, and the employer’s share of social security and Medicare taxes for all employees. How to account for this advance will be specified in the Form 941 instructions.
- Where reducing deposits of federal employment taxes does not cover the amount of the credits, employers may submit Form 7200, Advance Payment of Employer Credits Due to COVID-19 to the IRS to request an advance payment of the credits. The IRS expects to begin processing these requests during April 2020
Employers should move quickly to work with their payroll providers and implement the process for receiving the FFCRA tax credits for qualifying leave provided to their employees. Also note that employers may be able to obtain certain credits under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) in addition to the credits available for providing FFCRA required leave, but cannot double dip in obtaining credits for the same wage payments.
Please contact us if you have questions on how to implement the new leave requirements.
This publication is designed to provide accurate and authoritative information about the subject matter covered. It is not distributed with the intent to render legal, accounting, or other professional advice. The services of a competent professional should be sought if legal advice or other expert assistance is required.