Martha Zackin

FFCRA: Intersection of Emergency Paid Sick Leave, Paid E- FMLA, and FMLA Leave

/in , , , , , , , , , , , /by

By Bello Welsh LLP

As described in detail in our prior Alert, the federal government signed into law the Families First Coronavirus Response Act (FFCRA) to help workers impacted by the current COVID-19 health emergency.  Under the FFCRA, employees of businesses of fewer than 500 employees may be eligible for paid sick leave or paid family leave under certain COVID-19-related circumstances.

There are two types of paid leave available under the FFCRA—emergency paid sick leave and emergency paid family and medical leave (“E-FMLA”).   Click on the links for a summary of the Department of Labor’s guidance and for Q&A.

Emergency Paid Sick Leave Act (“EPSLA”)

EPSLA leave is available to all employees, regardless of tenure. Employees are eligible for this leave if they meet one of the following conditions:

  1. They are subject to a federal, state or local quarantine or isolation order related to COVID-19;
  2. They have been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  3. They are experiencing symptoms of COVID-19 and are seeking a medical diagnosis;
  4. They are caring for an individual[1] who is subject to a quarantine or isolation order or has been advised by a health care provider to self-quarantine;
  5. They are caring for a child because the child’s school or place of care is closed or the child’s care provider is unavailable due to a public health emergency; or
  6. They are experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor. No such specifications have yet been published.

If there is work available for an employee, but that employee cannot work (either in the office or remotely), that employee is entitled to EPSLA.  Importantly, an employee’s entitlement to and use of paid sick leave may not be used to reduce or eliminate any other right or benefit to which the employee is entitled under any law, collective bargaining agreement, or employer policy that existed prior to April 1, 2020 (the effective date of the FFCRA).  In other words, EPSLA cannot count against an employee’s balance or accrual of any other source or type of leave.  Moreover, employers and eligible employees may agree (where Federal or state law permits) to have paid leave supplement EPSLA pay so that the employee receives up to the full amount of his or her normal pay.  EPSLA leave also cannot be used retroactively – the law does not establish any right or entitlement to be paid for any unpaid or partially paid leave taken before April 1, 2020, even if that leave was taken for one of the six qualifying reasons listed above.

Emergency Family and Medical Leave Expansion Act (“E-FMLA”)

This leave is available to all employees who have been employed for at least 30 calendar days (including, in certain instances, rehired employees).  An employee is eligible for up to twelve weeks of E-FMLA leave if he or she is unable to work (either at the employer site or remotely) in order to care for a child[2] because the child’s school or place of care is closed or because their child’s childcare provider is unavailable due to the public health emergency (reason #5, above).

E-FMLA benefits run concurrently with EPSLA leave.  This means that if an employee takes two weeks of EPSLA leave to care for a child (under reason #5), the employee would be eligible to take an additional ten weeks of paid E-FMLA leave.  If, on the other hand, the employee took EPSLA leave for one of the other qualifying reasons, he or she would still be eligible for up to twelve weeks of E-FMLA leave; however, the first two weeks of the E-FMLA leave would be unpaid, unless the employee had accrued paid leave that could be used during that period.  If accrued leave was available, the employer and employee may agree to allow the employee to use accrued paid leave during that two-week period.

Thereafter, for the remaining period of E-FMLA leave, the employee may choose, and the employer may require, that accrued leave be used concurrently with E-FMLA leave.  In that instance, the employee must be paid the full amount to which he or she is entitled under existing paid leave laws or policies for the period of leave taken, up to 100% of regular pay (and the employer may claim the tax credit available under the FFCRA, even if the paid time off comes from the employee’s accrued leave bank).  If accrued leave is exhausted before the end of the E-FMLA benefits period, the employer must pay at least the required E-FMLA amount (which is capped at $200 per day).

Importantly, employees are only entitled to a total of twelve weeks of FMLA leave per the employer’s FMLA year, including E-FMLA, so if an employee has already taken some or all of his or her FMLA leave, their available E-FMLA leave will be reduced by the amount taken.  An employee is still eligible for the two weeks of paid sick leave, however, even if he or she has taken all twelve weeks of FMLA leave.

E-FMLA benefits will end on the earlier of the date on which the public health emergency ends or the employee receives full benefits under these laws.

[1] Of note, while the covered individuals are not limited to family members, the preamble to the DOL regulations states that “paid sick leave may not be taken to care for someone with whom the employee has no personal relationship.  Rather, the individual being cared for must be an immediate family member, roommate, or a similar person with whom the employee has a relationship that creates an expectation that the employee would care for the person if he or she self-quarantined or was quarantined.”

[2] While the E-FMLA statutory text specifies that the child must be under 18 years of age, the EPSLA does not have this limitation, and both laws refer to the definition of “son or daughter” under the FMLA, which includes not only children under 18, but those over 18 who are incapable of self-care because of a mental or physical disability.  The DOL has decided to interpret the E-FMLA and the EPSLA consistently with the FMLA.

Martha Zackin

COVID-19: Department of Labor Issues Regulations Implementing the Families First Coronavirus Response Act’s New Emergency Paid Leave Requirements

/in , , , , , , , /by

By Bello Welsh LLP

The Families First Coronavirus Response Act (FFCRA), enacted on March 18, 2020, creates two new emergency paid leave requirements related to the COVID-19 pandemic: up to two weeks of paid sick leave and up to twelve weeks of expanded FMLA (e-FMLA) leave, ten of which are paid.  Bello Welsh previously posted a summary of the FFCRA, available here.

On April 1, 2020, the United States Department of Labor (DOL) issued temporary regulations to implement the FFCRA’s leave entitlements.  The regulations and supplementary information provided by the DOL (available here)  clarify ambiguities in the FFCRA and provide further guidance to employers.  While we will be providing further analysis of the regulations and their implications in the coming days, certain key provisions of the regulations are summarized below.

Documentation from Employees

Employees are required to provide, and employers must retain, documentation of the need for paid sick leave or e-FMLA.  Regardless of the reason for leave, employees must provide the following:

  • Employee’s name;
  • Date(s) for which leave is requested;
  • Qualifying reason for the leave; and
  • Oral or written statement that the employee is unable to work because of the qualified reason for leave (if the employee provides an oral statement, the employer must document it and retain the documentation).

Additionally:

  • An employee taking paid sick leave because s/he or an individual for whom s/he is caring is subject to a federal, state, or local government quarantine or isolation order must provide the name of the government entity that issued the order;
  • An employee taking paid sick leave because a health care provider advised the employee or an individual for whom s/he is caring to self-quarantine due to concerns related to COVID-19 must provide the name of the health care provider;
  • An employee taking paid sick leave or e-FMLA leave to care for a son or daughter whose school has been closed or whose childcare is unavailable due to COVID-19 must provide: (a) the name of the son or daughter being cared for; (b) the name of the school, place of care, or childcare provider that has closed or become unavailable; and (c) a representation that no other suitable person will be caring for the son or daughter during the period for which the employee takes paid sick leave or e-FMLA leave.

The employer may also require any other documentation necessary to support a request for tax credits under the FFCRA.  Thus, to the extent the IRS issues guidance requiring additional documentation, employers should require employees to provide it.  The IRS’s current guidance on FFCRA tax credits is available here.  Notably, absent the IRS issuing guidance to the contrary, employers may not require doctor’s notes.

Employees or Family Members Particularly Vulnerable to COVID-19

Many employers have asked whether employees in high-risk categories (due to advanced age or underlying medical conditions) are entitled to paid sick time if they do not report to work for fear of contracting COVID-19 and are unable to telework.  Under the regulations, the answer is yes, so long as the employee has been advised by a health care provider to self-quarantine based on a belief that the employee is particularly vulnerable to COVID-19 or a federal, state, or local government authority has advised categories of citizens (e.g., those of certain age ranges or with certain medical conditions) to shelter in place, stay at home, isolate, or quarantine.  Employees must provide the documentation described above (including the name of the relevant governmental authority or health care provider) to substantiate the need for leave.

By contrast, an employee is not eligible for paid sick time because a member of his/her household or other close family/friend is in a high-risk category, unless: (1) the other individual depends on the employee for care; (2) the other individual has been advised by a government authority or health care provider to quarantine, self-quarantine, isolate, stay at home, or shelter in place; and (3) the employee is unable to work or telework due to the need to care for the individual.

Telework

An employee may take paid sick or e-FMLA leave if s/he is unable to work or telework as a result of the qualifying reason for leave.  Telework is considered an option only if: (1) the employer has work for the employee; (2) the employer permits the employee to work from the employee’s location; and (3) there are no extenuating circumstances (including but not limited to serious COVID-19 symptoms) that prevent the employee from performing the work.

The DOL encourages employers to implement highly flexible telework arrangements that allow employees to perform work, potentially at unconventional times, while tending to family and other responsibilities, such as teaching children whose schools are closed for COVID-19 related reasons.

Other Provisions

The regulations and supplementary information contain detailed guidance on the items discussed above and a number of other issues, including the scope of the qualifying reasons for which employees may take paid leave; the amount of leave and pay available for sick time and e-FMLA; employee eligibility criteria; employer coverage; intermittent leave; the interaction between paid sick leave, e-FMLA, and typical FMLA; employer and employee notice requirements; job protection for employees; and recordkeeping, including documentation required for purposes of obtaining the tax credit.  Individuals responsible for implementing FFCRA leaves should consult the regulations and/or legal counsel to ensure compliance.

 

Martha Zackin

New COVID-19 Tax Credit Guidance available from the IRS

/in , , , , , , /by

By Bello Welsh LLP

The IRS has issued a set of Frequently Asked Questions relevant to the tax credits available for payments made by employers to employees taking leave under the Families First Coronavirus Response Act (FFCRA), enacted on March 18, 2020.  Among other things, this guidance states that if an eligible employer that is required to pay qualified leave wages does not have sufficient federal employment taxes set aside for deposit to cover those payments, it can get an advance of the credits by filing a new Form 7200 (instructions available here).

The IRS has also issued a set of Frequently Asked Questions relevant to the separate refundable tax credits available under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, for employers incurring payroll costs and experiencing economic hardship related to COVID-19 (referred to as the Employee Retention Credit).  Of particular interest may be the questions that relate to how employers can claim the tax credits or get advances on the credits.

More information on the FFCRA, the CARES Act, and other COVID-19 related issues is available on the News & Alerts portion of our website, including a summary of key provisions of the FFCRA,  an overview of the CARES ACT (including numerous programs made available to employers), detailed discussion of the Paycheck Protection Program and unemployment related provisions of the CARES Act, and additional analysis of new and existing employer obligations for dealing with the effects of the COVID-19 pandemic.

And as always, you can reach out to any of the attorneys at Bello Welsh LLP for further guidance.

Martha Zackin

Coronavirus Aid, Relief, and Economic Security Act (CARES Act): What Employers Need to Know

/in , , , , , , , , /by

By Bello Welsh LLP

The Coronavirus Aid, Relief and Economic Security (CARES) Act, signed March 27, 2020, estimated at $2 trillion, includes billions of dollars in assistance to individuals and businesses of all sizes.  The following describes highlights of the historic legislation relevant to most U.S. employers:

  • Emergency EIDL Grants: The CARES Act adds fast access to grants of up to $10,000, in the form of a cash advance on an application for an Economic Injury Disaster Loan (EIDLs) through the Small Business Administration (a program that existed prior to the CARES Act).  Small businesses (those with 500 or fewer employees, sole proprietors, and independent contractors) are eligible to apply, and will receive funds within three days.  Importantly, so long as the application is made during the period January 31, 2020 to December 31, 2020, the advanced amount does not need to be repaid even if the applicant is not approved for the underlying EIDL.  EIDL applications are available here.
  • Paycheck Protection Program: As discussed in detail in our summary, employers of 500 or fewer employees may take out forgivable loans of up to $10 million (or a cap tied to prior average payroll costs) to cover payroll, rent and certain other costs through June 30, 2020. Such loans are eligible for forgiveness (in part or in whole), in an amount equal to the sum of costs incurred and payments made during the 8-week period beginning on the date of the origination of the loan. The amount of loan forgiveness is reduced if the employer reduces headcount or wages by certain amounts unless the reductions are restored by June 30, 2020.  PPP applications are available here.
    • This program creates an incentive for businesses to maintain or restore employment impacted by COVID-19 pandemic mitigation measures or related business downturn.
  • Expanded Unemployment Benefits: As discussed in our alert, laid off employees are eligible for an additional $600 per week on top of existing unemployment benefits, for up to four months, and unemployment benefits are extended to others not traditionally eligible, such as the self-employed, independent contractors, and those with limited work history.  States that repeal the common one-week “waiting period” (such as Massachusetts) will receive federal funding for this first week of benefits.  Additional weeks of unemployment benefits, up to a maximum of 39 weeks of benefits, will also be made available (through December 31, 2020) if state benefits run out.
    • Paradoxically, the flat dollar amount boost to unemployment may result in some lower wage earners receiving more through unemployment than through the employer, and the fact that workers will receive these additional benefits may well create an incentive for employers to shed employees from payrolls.
    • Additionally, while involuntary separations usually result in increased rates for employers, states are considering mitigating the impact of such potential rate hikes given the widespread pandemic-related job actions, and Massachusetts has already announced that at minimum, rates will not increase before January 2021.
  • Business Tax Relief Provisions (Subtitle C): While individuals will receive checks of up to $1,200, businesses will also benefit from certain forms of tax relief (listed by the Senate Finance Committee) intended to increase cash flow to help sustain business operations and payroll, including, for example:
    • Refundable payroll tax creditof 50% of quarterly wages on up to $10,000 in “qualified wages” paid per employee from March 12, 2020 to the end of the calendar year (including qualified health plan expenses properly allocable to such wages for the employee).  This is in addition to any credits against payroll taxes which are taken to fund paid sick leave and emergency FMLA leave paid to employees under the new Families First Coronavirus Response Act (FFCRA), detailed in our separate alert.  The credit is available to firms in existence in 2020 which were fully or partially suspended due to government-ordered virus-related shutdowns or other restrictive measures, and to businesses experiencing a decrease in gross receipts of 50% or more when compared to the same quarter in 2019.  For businesses with an average of over 100 full time employees in 2019, the credit is available for employees retained but not currently working due to the crisis; for smaller firms the credit applies to all employee wages.
      • The maximum amount of the credit is $5,000, and it is “refundable” in that any amount that exceeds the employer’s employment taxes for the quarter will be paid to the employer as if it were a tax overpayment.
      • Of note, to determine employer size the IRS will use the “single employer” definition under the Internal Revenue Code.
    • Delay of estimated tax payments for corporations until October 15, 2020.
    • Delay of payment of employer payroll taxes (e.g. employer share of Social Security tax), with deferred payments payable over the following two years (first half by December 31, 2021, second half by December 31, 2022).
    • Modifications for net operating losses (NOLs) to allow businesses to carry losses from 2018, 2019, or 2020 back five years, and to temporarily remove the taxable income limitation to allow an NOL to fully offset income (including through amendment of prior year returns). These modifications are also available to pass-through businesses and sole proprietors.
    • Acceleration of the ability to recover AMT credits.
    • Temporary increase in the limit on the amount of interest expense businesses are allowed to deduct on their tax returns, from 30% to 50% of the taxable income for 2019 and 2020.

Additional emergency funds will also be made available to U.S.-based businesses in the airline industry (including passenger and cargo air carriers; Part 145 regulated businesses that perform inspection, repair, replace, or overhaul services; and ticket agents); to businesses critical to maintaining national security; and for the Federal Reserve System to make loans, loan guarantees, and other investments to provide liquidity to the financial system.  Businesses that accept these amounts will be subject to certain additional conditions, including a 1-year prohibition on stock buy-backs and dividend payouts, and temporary limitations on layoffs.

While many of the measures making the headlines are geared toward bolstering small businesses (those with 500 or fewer employees) or specific industries (airlines, healthcare, etc.), this appropriation includes a provision that targets U.S.-based mid-size businesses (between 500 and 10,000 employees).  Specifically, part of the appropriation described above requires the federal government to “endeavor to seek the implementation of a program or facility” to provide financing to banks and other lenders that make direct loans to such mid-sized businesses with interest rates capped at 2% per annum.  These loans would be subject to similar restrictions, such as requiring that funds be used to retain or restore employment at 90%, that jobs not be outsourced or offshored, and that the business not engage in stock buy-backs or dividend payouts.

Unlike the airline, national security and federal reserve lending funds, however, this potential funding would also require recipients not to abrogate existing collective bargaining agreements during the term of the loan plus 2 years, and to remain neutral in union organizing efforts during the term of the loan.  These provisions may not withstand legal scrutiny in the long run, however, as they may run afoul of the National Labor Relations Act and First Amendment rights of businesses.  In addition, given that the CARES Act only provides that the government must “endeavor to seek the implementation” of a program with these parameters, it remains to be seen when and if mid-sized businesses will be able to obtain these funds.

We will continue to monitor legal developments related to COVID-19 and provide updates as new laws and regulations applicable to employers are enacted.

Martha Zackin

Forgivable Small Business Loans Available Pursuant to the Keeping American Workers Paid and Employed Act (under the CARES Act)

/in , , , , , , , /by

By Bello Welsh LLP

In response to the COVID-19 emergency, the federal government has passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which, among numerous other provisions, makes available forgivable loans for small businesses impacted by COVID-19.[1] Such loans may be used toward payroll costs, as well as covered mortgage, rent, and utility payments, and the program includes incentives for employers to retain or rehire employees.  The following is a summary of these provisions, found in the Keeping American Workers Paid and Employed Act (“KAWPEA,” Title I of the CARES Act).

ELIGIBILITY FOR PAYCHECK PROTECTION PROGRAM

The “Paycheck Protection Program” (PPP) makes available forgivable (partially or in whole), low-interest loans to small businesses, defined as an entity that employs no more than 500 employees during the covered period,[2] including individuals employed on a full-time, part-time, or other basis. The maximum loan amount available is 2.5 times the employer’s average total monthly “payroll costs” (as defined) during the one-year period before the date on which the loan is made,[3] up to a maximum of $10 million.[4]

“Payroll costs” include payments of compensation to employees, including salary, wages, commissions, or similar amounts; cash tips or the equivalent; vacation, parental, family, medical, or sick leave; allowance for dismissal or separation; payment required for the provision of group health insurance benefits or retirement benefits; and payment of state or local tax assessed on the compensation of employees.  Payments of compensation to a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation are also considered “payroll costs” for purposes of determining the loan amount.[5]  Compensation paid to any individual worker that exceeds $100,000 per year (prorated for the covered period) is excluded from payroll costs, as are certain federal employment taxes, the compensation of an employee whose principal residence is outside of the United States, and qualified sick leave or family leave wages for which a credit is allowed under the Families First Coronavirus Response Act.

USE OF PAYCHECK PROTECTION LOAN PROCEEDS

Proceeds of a loan covered by the PPP may be used for the following:

  • Payroll costs;
  • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
  • Employee salaries, commissions, or similar compensations;
  • Payments of interest on any mortgage obligation (but not prepayment of or payment of principle on a mortgage obligation);
  • Rent;
  • Utilities; and
  • Interest on any other debt obligations that were incurred before the covered period.

While not referenced in the Act, the Small Business Administration’s recently-issued guidance states that at least 75% of the forgiven amount must have been used for payroll.

 APPLICATION AND ADMINISTRATION

Paycheck Protection Loans are fully guaranteed by the federal government, and no personal guarantee and no collateral will be required. While the Act provides that such loans will bear interest at a rate of no more than 4%, the recently-issued guidance states that the interest rate will be .5%. There is no prepayment penalty for any payment made on a covered loan. The loans will be available through Small Business Act (SBA) approved lenders, and the authority to make such loans will be extended to additional lenders as well. Lenders can be found by visiting the SBA’s webpage. During the covered period, lenders will be required to provide complete payment deferment relief for a period of not less than 6 months (including payment of principal, interest, and fees), and not more than 1 year.

While the deadline to apply is June 30, 2020, it is highly likely that the demand will be significant, so employers are advised to apply as soon as possible after determining that a need for the funds exists. The Small Business Administration has announced that small businesses and sole proprietorships may apply beginning April 3, 2020, while independent contractors and self-employed individuals may apply beginning April 10, 2020. A copy of the application is available here.

The applicant for a Payroll Protection Loan must make the following certifications, in good faith:

  • That the uncertainty of current economic conditions makes necessary the loan request to support the recipient’s ongoing operations;
  • That the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments;
  • That the eligible recipient does not have an application pending for a loan for the same purpose and duplicative of amounts applied for or received under a covered loan; and
  • That during the period February 15, 2020-December 31, 2020, the recipient has not received (and will not receive) amounts under the law for the same purpose and duplicative of amounts applied for or received under a covered loan.

Loan forgiveness

 Paycheck Protection Loans are eligible for forgiveness (partial or in whole), in an amount equal to the sum of costs incurred and payments made during the 8-week period beginning on the date of the origination of the loan, including:

  • Payroll costs (excluding compensation paid to any individual worker that exceeds $100,000 per year, prorated for the covered period);
  • Any payment of interest on any covered mortgage obligation (including any indebtedness or debt instrument incurred in the ordinary course of business that is a liability of the borrower, is a mortgage on real or personal property, and was incurred before February 15, 2020);
  • Any payment on any covered rent obligation under a leasing agreement in force before February 15, 2020; and
  • Any covered utility payment for distribution of electricity, gas, water, transportation, telephone, or internet access, for which service began before February 15, 2020.

The borrower must submit an application to the lender to seek loan forgiveness, including documentation verifying the number of full-time equivalent employees on payroll and pay rates, canceled checks, payment receipts, transcripts of accounts, or other documents verifying payments on covered mortgage obligations, covered lease obligations, and covered utility payments, and a certification from an authorized representative of the borrower that such documentation is true and correct and that the amount for which forgiveness is requested was used to retain employees, make interest payments on covered mortgage, rent, or utility obligations, and any other documentation deemed necessary.

The lender will issue a decision on the borrower’s application for loan forgiveness no later than 60 days after receiving the application. Forgiven amounts will be excluded from the borrower’s gross income.

Loans with a remaining balance after the application of loan forgiveness amount will continue to be guaranteed by the federal government. While the Act provides that such loans will have a maximum maturity of 10 years from the date on which the borrower applies for loan forgiveness, the recently-issued guidance states that the loan has a maturity of 2 years. The amount of loan forgiveness cannot exceed the principal amount of the financing made available under the covered loan.

 REDUCTION OF LOAN FORGIVENESS AMOUNT [REVISED]

 The KAWPEA creates incentives for employers to maintain and restore employment and pay levels by providing that the amount of loan forgiveness may be reduced according to a proportional formula, if the employer (1) reduces the average number of full-time employees (FTEs) and/or (2) reduces the total salary or wages of employees who earned $100,000 or less in 2019 by more than 25%.

  • In the case of a reduction of average FTEs, the loan forgiveness will be reduced by the ratio of the average FTEs during the covered period to the average FTEs during a benchmark period. That is, the average monthly FTEs[6] during the covered 8-week period is divided by the average monthly FTEs during the employer’s chosen benchmark period (either 2/15/19 to 6/30/19, or 1/1/20 to 2/29/20, at the employer’s election).  The total amount of the loan eligible for forgiveness is then multiplied by the resulting fraction, which is the ultimate amount of the forgiveness.
  • In the case of a reduction of salary or wages of employees who earned $100,000 or less in 2019 (“relevant employees”), the reduction in the loan forgiveness is equal to the reduction in the wages of these employees that exceeds 25%. That is, the total amount of reductions in the total salary/wages of all relevant employees during the covered 8-week period that are in excess of 25% of the total salary/wages of these employees during the immediately preceding full quarter is subtracted from the amount of loan forgiveness. [7]

However, the amount of loan forgiveness will not be reduced by any reductions that occurred in the period February 15, 2020 through 30 days after the enactment of the CARES Act (April 26, 2020) if, by June 30, 2020, the employer has eliminated those reductions. Further, borrowers with tipped employees may receive forgiveness for additional wages paid to those employees.  As the above reflects, the calculation to determine how the loan forgiveness will be applied to a given employer is complicated and fact-specific, and at this point is made more complicated by ambiguities in the law.  Therefore, we have not provided hypothetical examples here, but we expect there to be further guidance (from the SBA and possibly other agencies) on how to make these calculations.  In the meantime, we can work with clients to provide preliminary advice on how a specific situation may be analyzed.

The Small Business Administration has a webpage dedicated to assisting small businesses navigate available loans, including the PPP.  A link this page may be found here.  The SBA also provides other forms of assistance, including disaster loans and COVID-19 related forgivable advances on such loans.  For more information, visit the SBA site at http://www.sba.gov.

It is our understanding that some banks have already reached out to businesses that may be eligible for PPP loans.  If your bank has not, we suggest that you contact your relationship manager.

We will continue to monitor legal developments related to COVID-19 and provide updates as new laws and regulations applicable to employers are enacted.

[1] Provisions of the CARES Act that significantly expand eligibility for unemployment benefits and increase available unemployment compensation are discussed in Bello Welsh’s prior client alert, available here. Our analysis of additional provisions of the CARES Act, including those relating to business taxes and additional funding sources, is available here.

[2] Importantly for employers in the restaurant and hospitality industries, the PPP also provides that such entities with more than 500 employees are eligible for such loans as long as no more than 500 employees are employed in one physical location.

[3] An alternate calculation is available for seasonal and recently established employers.

[4] The covered period runs from February 15, 2020 through June 30, 2020. During this period, individuals who operate under a sole proprietorship or as an independent contractor, and eligible self-employed individuals, are also eligible to receive a covered loan, a departure from the SBA’s usual loan eligibility requirements.

[5] The statute is ambiguous as to whether a business that uses both employees and independent contractors could include such payments to its independent contractors in determining the loan amount, or whether such payments are only available to an independent contractor seeking a loan on their own behalf.

[6] The average monthly number of FTEs is determined by calculating the average number of FTEs for each pay period falling within a month.

[7]  Note that the statute is ambiguous regarding which calculation should be performed first in the case of a reduction in both FTEs and salary/wages.  Given that the order of the calculation will impact the result, it is expected that agency guidance will resolve this issue.

 

 

Martha Zackin

COVID-19: Expanded Unemployment Insurance Eligibility and Benefits Available Pursuant to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

/in , , , , /by

In response to the COVID-19 emergency, the federal government has passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which includes provisions that significantly expand eligibility for unemployment benefits and increase available unemployment compensation. These changes are in addition to the recent changes made to the unemployment insurance program in Massachusetts, as explained in Bello Welsh’s prior client alert, available here. The following is a summary of these provisions, found in the Relief for Workers Affected by Coronavirus Act (“RWACA,” Title II, Subtitle A of the CARES Act).

Relief for Individuals Not Otherwise Eligible for Unemployment Compensation

The RWACA makes “Pandemic Unemployment  Assistance” (PUA) available to covered individuals who are not otherwise eligible for regular unemployment compensation under state or federal law, including self-employed individuals, independent contractors, those with limited work history, and those who have exhausted all rights to regular unemployment compensation under state or federal law.  (This is separate from the “Pandemic Unemployment Compensation” provisions discussed in the next section.)

Such individuals must certify that they are otherwise able and available to work (within the meaning of state law), but are unemployed, partially unemployed, or unable or unavailable to work for a wide range of reasons related to COVID-19:

  • The individual was diagnosed with COVID-19 or is experiencing symptoms and seeking a medical diagnosis;
  • A member of the individual’s household was diagnosed with COVID-19;
  • The individual is providing care for a family member or household member diagnosed with COVID-19;
  • A child or other person for which the individual has primary caregiving responsibility is unable to attend school or a childcare facility which is closed for the COVID-19 emergency;
  • The individual is unable to reach the place of employment because of quarantine or because the individual has been advised by a healthcare provider to self-quarantine;
  • The individual was scheduled to commence employment and does not have a job or is unable to reach the job as a result of the COVID-19 emergency;
  • The individual has become the breadwinner or major support for the household because the head of household has died as a direct result of COVID-19;
  • The individual had to quit their job as a direct result of COVID-19;
  • The individual’s place of employment is closed as a direct result of COVID-19; or
  • The individual meets any additional criteria established by the Secretary of Labor.

Individuals with the ability to telework with pay, and individuals receiving paid leave benefits (including paid sick leave), however, are not eligible for PUA.

This expanded eligibility is available for up to 39 weeks of unemployment, partial unemployment, or inability to work caused by COVID-19, beginning on or after January 27, 2020 and ending on or before December 31, 2020, as long as the covered individual’s unemployment, partial unemployment, or inability to work caused by COVID-19 continues.

The weekly benefit amount for covered individuals is the weekly benefit amount authorized under the unemployment compensation law of the state where the covered individual was employed (except that the amount may not be less than the minimum weekly benefit amount described in 20 C.F.R. § 625.6[1]), in addition to $600 per week as provided for by the Federal Pandemic Unemployment Compensation provisions (discussed below).

Expanded Unemployment Compensation for Currently Eligible Individuals

The RWACA also makes available “Pandemic Unemployment Compensation” (PUC), which significantly expands unemployment compensation available to individuals eligible for regular unemployment compensation under state law.  PUC is also available to individuals eligible for Pandemic Unemployment Assistance (PUA, discussed above).

  • Eligible individuals will receive an additional $600 per week, beyond the amount they are eligible to receive under state unemployment law, for up to 4 months. Pursuant to this provision, the maximum weekly benefit in Massachusetts will be $1,423.
  • Eligible individuals who remain unemployed may receive an additional 13 weeks of unemployment benefits after state unemployment benefits are exhausted. Pursuant to this provision, the maximum length of benefits in Massachusetts will be 39 weeks.

Note that, as drafted, the PUC provision means that some employees could receive a weekly unemployment benefit that is greater than 100% of the individual’s weekly wage when employed. The Act also includes a “nonreduction rule,” pursuant to which a participating state may not modify state law such that the number of weeks (maximum benefit entitlement) or weekly benefit amount would be reduced below the amounts in effect as of January 1, 2020.

WAITING PERIOD FOR UNEMPLOYMENT INSURANCE BENEFITS

The RWACA includes a reimbursement incentive for states to waive the waiting period generally applicable to an individual’s first week of unemployment. As explained in Bello Welsh’s prior client alert, Massachusetts has already implemented a waiver of the one-week waiting period for individuals who applied for unemployment on or after March 10, 2020 due to circumstances relating to COVID-19.

Work Search Requirements

Under the RWACA, individuals must continue actively seeking work to remain eligible for the benefits described above; however, the law directs states to provide flexibility in meeting work search requirements, in case of individuals unable to search for work because of COVID-19.  Massachusetts has already implemented such flexibility, as described in our prior client alert.[2]

We will continue to monitor legal developments related to COVID-19 and provide updates as new laws and regulations applicable to employers are enacted.

[1] This regulation contains detailed rules for calculating unemployment benefits amounts with reference to state law provisions, discussion of which is outside the scope of this document.

[2] The RWACA also contains provisions concerning temporary financing of, grants for, and assistance in implementing short-time compensation programs.  As Massachusetts already has a WorkShare program, these provisions may not have practical effect for Massachusetts employers.

Martha Zackin

COVID-19 Challenges: A Q&A for Employers [UPDATED]

/in , , , , , , , , , /by

By Bello Welsh LLP

Organizations are facing unprecedented challenges as the result of COVID-19.  The virus’s impact on the workplace is significant and implicates a host of issues under employment law.  Additionally, on March 18, 2020, the federal government passed a new law, the Families First Coronavirus Response Act (FFCRA), that imposes new obligations on employers.

Bello Welsh has previously published the following resources: Key Considerations for Employers Amid the COVID-19 Pandemic and Families First Coronavirus Response Act Signed into Law (FFCRA Summary), which provides a summary of the relevant provisions of the FFCRA.  This Q&A document is intended to supplement those resources and answer additional questions that may arise.  This document has been updated to reflect changes to the FFCRA enacted by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) as well some portions of the interpretive guidance issued by the Department of Labor, including its Families First Coronavirus Response Act: Questions and Answers (DOL Q&A), which itself continues to be updated frequently.  We note that the guidance published as of March 29, 2020 may not have incorporated amendments implemented through the CARES Act.

 Question 1:  We may be forced to furlough, temporarily lay off, or permanently terminate employees as the result of economic conditions caused by COVID-19. Are we required to give advance notice or severance pay for terminations, or to pay employees on furlough or temporary layoff?

Answer 1:  Generally, no, with a few caveats.  First, if the action is a layoff or plant closing covered by the federal WARN Act or similar state or local law, advance notice (and in New Jersey severance) may be required. (See Question 9 below.)  Second, if your workforce is unionized, the applicable collective bargaining agreements may impose contractual obligations. (See Question 11 below.) Third, employment agreements with executives and other employees may contain notice or severance requirements, particularly in connection with permanent terminations.

[New:]  While severance and ongoing wage or benefit payment may not be required, many states require payment of final pay, including accrued unused vacation, at or shortly after the time of an employer-initiated termination.  A “temporary layoff” or even a “furlough” may be considered a termination requiring such payout.  (See Question 20 below.)  Accordingly, employers are advised to carefully weigh the risks of deciding not to pay final pay at the time of a furlough or temporary layoff, and to consider alternatives to mitigate risk.

Question 2:  The FFCRA gives employees new sick pay and paid leave entitlements. Who pays for these, employers or the government?

Answer 2 [Updated]:  Employers must “front” the money by paying employees directly, but the amounts will be subsidized by the government in the form of a tax credit or reimbursement, specifically a credit against quarterly payroll tax payments (including withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees).  If the payroll tax payments are not large enough to cover the credit, employers will be issued a refund.  See our alert, FFCRA Summary, the DOL Q&A (nos. 15, 32-34), and this news release relating to expected joint IRS/Treasury/DOL Regulations  for details.

Question 3:  The FFCRA expands the reasons why employees can take leave under the Family and Medical Leave Act (FMLA). Do we need to worry about this if our organization is too small to be covered by the FMLA or if the employee doesn’t meet typical FMLA eligibility requirements?

Answer 3:  Yes.  The FFCRA has greatly expanded the scope of employers and employees covered by the new leave requirement.  Note, however, that large employers with 500 or more employees are not covered by the public health emergency leave or sick pay requirements of the FFCRA.  See our alert, FFCRA Summary, and the DOL Q&A (nos. 2-3), for details.

Question 4:  Do we have to affirmatively notify employees of the new public health emergency leave and sick pay requirements of the FFCRA?

Answer 4 [Updated]:  Yes. The FFCRA requires employers to post notice of the new leave requirements in a conspicuous location in the workplace where notices are customarily posted.  The DOL has now published model posters[1] (in English and Spanish) for this purpose.[2]  (Although the original text of the FFCRA only required notice to be posted for the new sick leave, and not the new public health emergency leave under the FMLA (E-FMLA), the DOL poster includes information on both.)  Since many offices are closed and many employees are working from home, employers may email the notice to employees and post it on the organization’s intranet, if one exists, in addition to physical posting, or may directly mail the notice to employees. See the DOL Posting Q&A for additional details on the posting requirement.

Question 5:  We already provide paid sick time to employees under company policy and state and local laws. Do we have to provide additional sick time under the FFCRA?

Answer 5:  Yes.  The new emergency paid sick time obligation is in addition to any paid sick time or other paid time off provided under employer policy, collective bargaining agreement, or other federal, state, or local law.

Question 6:  Are employees who are on temporary layoff or furlough eligible to receive public health emergency leave pay (E-FMLA) or sick pay, assuming they otherwise meet the eligibility requirements?

Answer 6 [Updated]:  No, the new paid leave/sick time is not required for employees who were put on temporary layoff or furlough before requesting any emergency leave or sick time.   The new leave and pay entitlements are intended to protect those employees who are unable to work when an employer needs them, not employees on layoff.  See the DOL Q&A (nos. 26-28), for details.

Question 7:  We were considering a reduction-in-force to deal with economic conditions, and now we are especially concerned with the cash flow issues the new paid public health emergency leave and paid sick leave may cause for our organization. Would it violate the law for us to have a reduction-in-force earlier to avoid potential paid leave/sick time obligations under the FFCRA?

Answer 7:  It is not clear whether the non-retaliation and related provisions in the FMLA and FFCRA would be construed to prohibit a layoff motivated by a variety of economic reasons, one of which may be the specter of potential cash flow problems caused by new FFCRA obligations.  As such, it is risky to rely on the avoidance of FFCRA obligations as a reason for having or accelerating layoffs.  Organizations also should not select specific individuals for layoff based on the likelihood that they will utilize the new paid public health emergency leave or paid sick time as doing so could violate anti-discrimination laws in addition to the FFCRA and FMLA.

 Question 8:  If we conduct a reduction-in-force for economic reasons, are we allowed to include those employees who are on public health emergency leave under the FMLA/FFCRA, or are they guaranteed reinstatement to their jobs?

Answer 8 [Updated]:  The answer is not clear.  Under existing FMLA regulations, if an employer can show that “an employee would not otherwise have been employed at the time reinstatement is requested” as the result of a reduction-in-force, then there is no reinstatement obligation.  See 29 C.F.R. §825.216(a).  However, the FFCRA contains an explicit exemption from reinstatement for small employers (with fewer than 25 employees) if the job no longer exists due to changed economic or other operating conditions that are caused by a public health emergency and impact employment, and certain other conditions are met.  While this explicit exception for small employers could be read to mean that no such exception is available for larger employers, which would contradict existing FMLA regulations, the DOL’s guidance attempts to reconcile this apparent contradiction by stating that the conditions available for employers under 25 are in addition to existing FMLA standards.  See the DOL Q&A (no. 43), for details.   Regardless, it is advisable to consult with legal counsel if this situation arises.

As under the existing FMLA, it is clear that an individual may not be selected for termination, in whole or part, because the individual used or requested public health emergency leave or paid sick time under the FFCRA.  Also, it should be noted that employees may not be subject to discrimination or retaliation if they filed any type of complaint or proceeding relating to the new laws, or have testified or intend to testify in any such proceeding.   That does not mean that such individuals cannot be terminated, but it instructs that employment actions taken with respect to such individuals should be based on business purposes which in turn should be clearly documented.

[New:] Note that the DOL has now made clear that if a workplace is closed, either for economic reasons or because of business shut-downs ordered by state or local governments, the employer only needs to pay for the amount of sick/E-FMLA time taken by eligible employees before the closure.  See the DOL Q&A (no. 25; see also nos. 23-24, 27), for details.  In addition, the DOL has provided guidance on how to calculate the amount of sick/E-FMLA pay that is available to employees when the employer implements schedule reductions.  See the DOL Q&A (no. 28), for details.

Question 9:  How do I know if the federal WARN Act or similar state laws apply to our anticipated layoff or reduction-in-force?

Answer 9:  The WARN Act is a very complicated statute, and legal counsel should be consulted if there is a possibility the law may be implicated.  The WARN Act applies to employers with 100 or more employees (excluding some part-time and recently-hired employees) or who have 100 or more employees (including all part-time and recently-hired employees) who work at least 4,000 hours per week, exclusive of overtime.[3]   In general, if your organization is anticipating a temporary layoff, reduction-in-force, reduction in hours, or closing of a particular facility or operation that impacts the employment of 50 or more individuals, a more detailed WARN Act analysis is advised.

Massachusetts does not have a state analogue to the federal WARN Act.  However, various other states, including but not limited to California, Illinois, New Jersey, and New York, have statutes similar to the federal WARN Act, and many apply to smaller employers and personnel actions impacting smaller numbers of employees.

Question 10:  Does the WARN Act allow any flexibility in situations like this, where economic conditions are changing rapidly and unpredictably?

Answer 10:  Yes.  The federal WARN Act contemplates situations where the need for layoff was unforeseeable and it is hard to predict how long layoffs or reductions in hours may last.  Even in such situations, however, WARN imposes very specific obligations on employers, and there are significant consequences for non-compliance.   If it is possible that the WARN Act may apply to your employment action, legal counsel can help guide you through the WARN Act’s requirements and assist you in taking advantage of any flexibility available under the law.  Note that state law requirements may differ from those in the federal WARN Act.

Question 11:  Part of my organization’s workforce is unionized. Do we have special obligations with respect to any anticipated layoffs, closures, or reductions in hours?

Answer 11:  Yes.  You must review your collective bargaining agreement for specific provisions regarding seniority, layoff, recall, notice provisions and possibly other matters.  Unions are sending out letters to employers reflecting that they expect employers to follow these provisions regardless of the crisis.  There may also be an obligation to bargain about the impacts of layoffs.  Experienced labor counsel can assist with reviewing relevant collective bargaining agreements and obligations before taking action.

Question 12:  We are worried that some of our employees, specifically older individuals and those who have shared they have certain underlying health conditions, may be especially vulnerable to COVID-19, and we would like to help prevent them from being exposed. Can we offer these employees the opportunity to work from home without allowing other employees in similar positions to do so?

Answer 12:  The best practice in this circumstance is to invite employees with particular concern about COVID-19 due to risk factors to raise the issue and to deal with concerns raised by employees on a case-by-case basis.  However, if you wish to affirmatively reach out to employees in high-risk categories, be sure not to compromise the privacy of an employee’s medical information or make assumptions about an employee’s medical status beyond what the employee has disclosed to you.  There is always the possibility, though, that the employees you affirmatively reach out to and/or those who may be in high-risk categories that you do not allow to work from home might contend that your actions were based on improper consideration of protected characteristics, such as age, disability or pregnancy.

For those employees who are required to work on-site, employers should take the steps recommended by federal, state, and local public health authorities to reduce transmission of COVID-19.

Question 13:  Our organization generally does not allow certain employees to work from home, even as an accommodation of a disability, because we have determined that being in the office/worksite is an essential function of certain jobs. If we allow employees to work from home as the result of the public health emergency, are we compromising our ability to argue later that being at work is essential?

Answer 13:         Do not let the impact on future disability accommodations drive your decisions about allowing work from home during the public health crisis.  However, if you are concerned about future impact, be clear in all communications to employees that working from home is being allowed due to the extraordinary public health emergency even though many important aspects of people’s jobs cannot be performed remotely.

Question 14:  Can we check the temperatures of all employees before allowing them to come in to work? 

Answer 14:  Yes.  Now that COVID-19 has been declared a pandemic, guidance from the Equal Employment Opportunity Commission (EEOC) allows temperature checks for all employees.  However, there are numerous practical considerations that should be resolved before undertaking this measure, including whether there is an employee who is trained to do the checks, has reliable equipment and can be safe in doing so; whether employee privacy can be protected in the case of a positive result; and whether a contingency plan exists to deal with excluded employees.  It is also possible that state laws may diverge from the EEOC guidance, though that seems unlikely under the circumstances.

Question 15:  Can I and should I tell other employees if we learn that someone with COVID-19 symptoms or a positive test was present at work, and should I exclude those other employees from the workplace for 14 days? 

Answer 15:         Many employers are choosing to notify “Tier 1” (direct) contacts of an employee who has tested positive for COVID-19 or was in close contact with someone who tested positive, and we believe that approach is permissible and potentially could be viewed as required under the Occupational Health and Safety Act (OSHA) in some circumstances.  Given the current lack of availability of testing, making such notifications where the employee has symptoms but has not had a test may also be prudent.  However, going further to second-level contacts (those in contact with Tier 1 employees) may not make sense absent additional information indicating risk of exposure.  In making the notifications, employers should be careful to protect the privacy of the affected employee to the extent practical and must avoid seeking disability-related information from employees being notified.  Temporary exclusion of employees who have tested positive or who have symptoms consistent with COVID-19 infection is both permissible and prudent.  Employers should always follow the guidance of federal, state, and local public health authorities with respect to notifications.

Question 16:  Can I require all employees returning from travel or other leave to fill out a questionnaire confirming that they are not a risk to the workforce? 

Answer 16:   Maybe, depending on the questions asked.  Generalized questions that do not elicit disability-related or other confidential information are permissible.  These could include asking the employee to confirm such things as that s/he is free of fever or other known COVID-19 symptoms, has not been in contact with a positive or presumed positive individual, and is not under an order or recommendation of quarantine.

Question 17:  If an employee develops COVID-19, am I required to record the illness or report it to the Occupational Safety and Health Administration (OSHA)? 

Answer 17:  Maybe.  Generally, an illness is recordable if the illness is contracted as a result of the employee performing their work-related duties, and if it requires medical treatment beyond first aid or days away from work.  Although common colds and the flu are excluded from the obligation to record work-related illness, COVID-19 is not excluded.  Accordingly, a confirmed case of COVID-19 is a recordable illness if a worker is infected as a result of performing their work-related duties, provided it requires medical treatment or days away from work (which is likely, unless the employee is asymptomatic and already working remotely).  Moreover, if an employee who contracts COVID-19 at work later requires in-patient hospitalization, you must report the in-patient hospitalization to OSHA.

Of course, it may be difficult or impossible to know whether an employee’s infection actually resulted from their performance of work-related duties.  That said, best practice would be to assume that if an employee develops COVID-19 after having had known contact with another employee who has a confirmed case of COVID-19, the incident should be recorded or reported, as applicable.

Question 18:  Our organization is covered by the FFCRA. We have reduced a number of employees to part-time in response to the current situation, with some working only one day per week.  Will those employees still be eligible for the paid public health emergency FMLA leave and paid sick time under the FFCRA, and if so, how much?

Answer 18 [Updated]:  Yes, based on their scheduled hours.  There is no minimum hours threshold to receive paid public health emergency FMLA leave or paid sick time under the FFCRA.  The amount of paid sick time granted to part-time employees (defined as those working less than 40 hours per week) is not the full 80 hours, but rather the average number of hours the employee works over a two-week period.  For public health emergency FMLA leave, pay is pro-rated based on the number of hours the employee would otherwise be regularly scheduled to work.  If an employer has implemented a schedule reduction, and an affected employee is unable to work the new schedule due to sick time or E-FMLA qualifying reasons, they must be given leave based on the new schedule – the paid time off may not be used for the hours the employee is no longer scheduled to work.  See the DOL Q&A (no. 28), for details.

If an employee does not have a regular schedule, the amount of E-FMLA leave pay is calculated based on the average number of daily hours over the six months preceding leave (or, for newer employees, the reasonable expectation of the employee at the time of hiring of the average number of hours that the employee would be normally scheduled to work).

Note that employees must have been employed for at least 30 days to be eligible for the E-FMLA.  The CARES Act has amended the FFCRA to allow for coverage of employees who were terminated on or after March 1, 2020 and are reinstated if they worked 30 out of the 60 calendar days before the layoff. CARES Act § 3605.

Question 19:  We have employees currently on furlough. If an employee is called in to work for a few days during the furlough period, does the employee become eligible to receive E-FMLA leave and paid sick time under the FFCRA?

Answer 19 [Updated]:  Yes.  However, the amount of pay would be pro-rated as described in Question 18.

Question 20:  We are temporarily laying off employees. We don’t know how long the layoff will last, but we expect the employees will come back to work in the future.  Do we need to pay out employees’ accrued, unused vacation at the start of the layoff?

Answer 20 [Updated]:  State laws regarding the payout of accrued vacation vary, so be sure to check the law in all states where you are conducting temporary layoffs.

In Massachusetts, accrued vacation is considered a wage, and state law requires that “any employee discharged from . . . employment shall be paid in full on the day of his discharge.”  M.G.L. c. 149, § 148.  While this language could support the position that accrued vacation need not be paid in connection with a temporary layoff, as opposed to a permanent termination, the Massachusetts Attorney General’s Office very recently released COVID-19-related guidance to the contrary.  This guidance states that “when an employee is temporarily laid off, they have a right to be paid all of their earned wages, including all accrued vacation pay, on that same day.”  The Attorney General’s Office has indicated it will not take enforcement action for untimely payment of vacation pay if an employee being temporarily laid off voluntarily agrees to save accrued vacation for later use.  However, the Attorney General’s Office notes that it does not have control of private litigation, and employees who agree to defer vacation payment now would technically still have the legal right to sue later.

Based on the Attorney General’s Office guidance, the conservative approach is to either pay employees accrued, unused vacation upon layoff (including temporary layoff) or allow the individual to voluntarily defer the payout, especially since Massachusetts wage laws provide automatic triple damages and attorneys’ fees for violations.

Question 21:  Can employees use paid sick time under the FFCRA if we cannot provide them any work hours due to a government-ordered closure of non-essential businesses or a “stay-at-home” order?

Answer 21:  The answer is not clear.  Paid sick time under the FFCRA may be used if “[t]he employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.”  The term “isolation order” could be read broadly to refer to stay-at-home orders and government-ordered business closures, or narrowly to refer to an isolation order specific to a particular individual, for example related to that individual’s actual or potential exposure to the virus.  We will monitor for guidance on this point.

Question 22:  Can our organization continue to provide medical and dental insurance to employees who are on furlough or temporary layoff?

Answer 22:   Yes, as long as you follow the requirements of your insurance plans or the provisions of COBRA, as explained below.  As a first step, you should check your insurance plans, as most contain a requirement that employees work a minimum number of weekly hours to be eligible for coverage.  Insurance plans may also limit coverage for individuals who have been laid off, even temporarily.  If your furloughed or laid off employees do not meet the technical eligibility requirements of the plans, you can request an exception from your insurer to maintain active coverage.  We understand that insurers are being flexible in granting exceptions to eligibility requirements due to the unusual circumstances caused by the pandemic.

If your insurer does not allow you to maintain regular coverage for furloughed or laid off employees, then the COBRA law provides an alternative method to continue such coverage.  COBRA notices should be issued to each affected individual, who will need to elect COBRA to continue coverage.  Employees are typically permitted to elect COBRA for up to 18 months, far longer than expected layoffs.  While individuals generally pay the full premium for COBRA coverage, employers may choose to pay some or all of the premium instead.  If you do so, be sure to clearly communicate to employees any time limits or other restrictions on the premium payments the organization is willing to provide.

Note that small employers not covered by COBRA may be subject to state laws concerning continuation of health coverage, such as the Massachusetts mini-COBRA law.

Question 22:  [New] Can employees take either sick leave or E-FMLA intermittently?

Answer 23:   In some situations, yes.  Specifically, current DOL guidance distinguishes between (1) sick time taken for reasons other than to care for a child whose school or childcare has closed or is unavailable for COVID-19 reasons and (2) either sick time or E-FMLA taken to care for a child whose school or childcare has closed or is unavailable for COVID-19 reasons.  The former must be taken in full-day increments and continuously while the need exists, unless the employee is teleworking, in which case the time may be taken intermittently if agreed to by the employer, in any agreed increment.  The latter may be taken intermittently if agreed to by the employer regardless of whether the employee is working at his or her regular place of employment or teleworking, again in any increment agreed by the parties.  Finally, any sick time or E-FMLA that is not exhausted may be taken at a future time before December 31, 2020 (but additional paid leave is not available if an employee exhausts their leave and later experiences a new situation which otherwise would have been eligible for leave).  See the DOL Q&A (nos. 21-22), for details.

[1] These links are for the private employer posters; federal employer posters are also available at the DOL’s COVID-19 site.

[2] We note that it appears the posters are still being updated, so employers may wish to check the linked page for the most updated version immediately before posting.

[3] The WARN Act does not identify a single point in time at which employer size is to be measured in all circumstances.  If your organization is near the threshold size or has exceeded it in the recent past, it is advisable to do a deeper dive on whether the law may apply.

Martha Zackin

COVID-19: Families First Coronavirus Response Act Signed Into Law [UPDATED]

/in , , , , , , , , , /by

On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (the “Act”), which aims to address the impact of the COVID-19 pandemic by, among other things, providing a limited period of paid sick leave for employees affected by COVID-19 and expanding the Family and Medical Leave Act (“FMLA”) for a public health emergency.  The paid sick leave and Emergency FMLA expansion (“E-FMLA”) provisions of this new law apply to employers with fewer than 500 employees.  For employers with more than 500 employees, the new law does not impact or change existing legal obligations under the FMLA or other federal employment laws, which remain as is.

Employers will be required to “front” the money for the leave required by the Act by paying employees directly, but the amounts will be subsidized by the federal government in the form of a tax credit or reimbursement.  The Act will become effective on April 1, 2020, and will remain in effect until December 31, 2020.  This alert summarizes the key provisions of the Act for employers.  A summary in chart form, prepared by the House Ways and Means Committee, can be found here.  This document has been updated to reflect changes to the FFCRA enacted by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) as well some portions of the interpretive guidance issued by the Department of Labor, including its Families First Coronavirus Response Act: Questions and Answers (DOL Q&A), which itself continues to be updated frequently.  We note that the guidance published as of March 29, 2020 may not have incorporated amendments implemented through the CARES Act.

PAID SICK LEAVE [updated]

The Act requires private employers with fewer than 500 employees to provide paid sick time to any employee, regardless of tenure, who is unable to work for any of the following reasons:

  • The employee is subject to a federal, state or local quarantine or isolation order related to COVID-19;
  • The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • The employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
  • The employee is caring for an individual who is subject to a quarantine or isolation order or has been advised by a health care provider to self-quarantine (note that this is not limited to just family members);
  • The employee is caring for a child because the child’s school or place of care is closed or the child’s care provider is unavailable due to a public health emergency; or
  • The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

However, employers of healthcare providers or emergency responders may elect not to provide paid sick leave to those employees.  In addition, the Secretary of Labor has the authority to exempt businesses with fewer than 50 employees from providing leave for reason 5 if the required leave would jeopardize the viability of the business.  Small business may claim this exemption “if an authorized officer of the business has determined that:” (1) providing the paid leave “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;” (2) the absence of the employee(s) requesting paid 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 (3) “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 or employees requesting paid … leave, and these labor or services are needed for the small business to operate at a minimal capacity.”  The DOL will provide information on how this will be implemented; for now, employers seeking to use this exemption are advised to record the reasons why they qualify.  See the DOL Q&A (nos. 4, 58-59), for details.

Duration of Leave [updated]

Full-time employees may take up to 80 hours of paid sick time, while part-time employees (defined by the DOL guidance as those normally scheduled to work fewer than 40 hours per week) are entitled to the average number of hours worked over a two-week period.  Part-time employees who work variable hours must be paid based on the number of hours they worked over the preceding six-month period or, if an employee has been employed less than six months prior to taking leave, based on the employee’s reasonable expectation at the time of hire.  This paid sick time may not be carried over from year to year, the employer is not required to provide further sick leave under the Act once the employee returns to work if all the available leave has been used, and unused time need not be paid out at termination.  An employer also cannot require an employee to find a replacement before taking paid sick time.  The paid sick time to which employees are entitled under the Act is in addition to all other sick time or PTO provided to employees under the employer’s policy or other applicable laws (such as the Massachusetts paid sick time law).  Paid sick time for reasons 1-4 and 6 may only be taken intermittently if the employee teleworks and the employer agrees; paid sick time for reason 5 may be taken intermittently regardless of whether the employee works on site or teleworks, but again employer agreement is required.  In addition, the paid sick time is available only for time the employee is otherwise scheduled to work.  See our alert, COVID-19 Challenges: A Q&A For Employers (nos. 18 and 23) and the DOL Q&A (nos. 28, 20-22, 49), for details.

Rate of Pay

Employees who take leave for self-care (reasons 1-3 above) must be compensated at the higher of (1) the employee’s regular rate of pay, (2) the federal minimum wage, or (3) the local minimum wage.  Employees who take leave to care for others or for a substantially similar condition (reasons 4-6 above) must be compensated at two-thirds of their regular rate of pay.

However, the paid sick leave amounts are capped at $511 per day for 10 days ($5,110 total) for employees who take leave for self-care, and at $200 per day for 10 days ($2,000 total) for employees who take leave to care for others or for a substantially similar condition.

Employer Tax Credits [updated]

The Act provides for certain tax credits to ease the financial burden on employers.  Employers are entitled to a refundable tax credit equal to 100% of the paid sick leave wages paid to employees in each calendar quarter in accordance with the Act (up to the caps described above).  The amount of the credit is increased by the amount of nontaxable group health plan expenses paid by the employer that are properly allocable to the qualified sick leave for which the credit is allowed.  The tax credit is allowed against payroll tax payments (including withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees).  If the payments are not large enough to cover the credit, employers will be issued a refund.

Notice [updated]

Employers must post model posters[1] (in English and Spanish) concerning the paid sick leave provisions of the Act.[2]

Non-Compliance/Anti-Retaliation [updated]

Employers are prohibited from discriminating against an employee who takes paid sick leave under the Act or has filed any complaint, instituted or caused to be instituted any proceeding under the Act, or has testified or is about to testify in any such proceeding.  Employers that terminate an employee for such discriminatory reasons, or who fail to provide paid sick time under the Act, will be considered in violation of the Fair Labor Standards Act and will be subject to its penalties, including payment of back pay, liquidated damages and attorneys’ fees.

EMERGENCY FMLA EXPANSION [updated]

The Act also substantially expands FMLA leave (“Emergency FMLA” or “E-FMLA”).  The Act provides for up to 12 weeks of Emergency FMLA leave to any eligible employee who is unable to work (or telework) in order to care for a child who is under 18 because the child’s school or place of care is closed or the child’s childcare provider is unavailable due to the public health emergency.  Leave may be taken intermittently regardless of whether the employee works on site or teleworks, but only with employer agreement.  All employers with fewer than 500 employees are required to provide E-FMLA leave.  However, the Secretary of Labor has the authority to exempt employers of healthcare providers and emergency responders, and to exempt businesses with fewer than 50 employees if the required leave would jeopardize the viability of the business.  The criteria for exemption for small businesses are the same as described for sick leave taken for reason 5.  See the DOL Q&A (nos. 4, 58-59), for details.

Eligible Employees [updated]

Any employee is eligible for E-FMLA leave if the employee has worked for the employer for at least 30 days prior to taking leave; employees who were terminated after March 1, 2020 and rehired qualify if they worked 30 of the last 60 calendar days prior to the layoff.

Rate of Pay [updated]

The first 10 days of E-FMLA leave may be unpaid.  During the unpaid period, an employee may elect (and an employer may require an employee) to substitute any accrued vacation, personal, or medical or sick leave for unpaid leave.  Employees could also elect to use paid sick time under the Act to cover the first 10 days.  After the 10-day period, the employer must pay full-time employees at two-thirds the employee’s regular rate for the number of hours the employee would otherwise be normally scheduled.  Employees who work variable schedules must be paid based on the number of hours they worked over the preceding six-month period or, if an employee has been employed less than six months prior to taking leave, based on the employee’s reasonable expectation at the time of hire.  The Act limits paid FMLA leave to $200 per day and $10,000 total per employee (equivalent to 10 weeks of E-FMLA payments).

Employer Tax Credits [updated]

As with paid sick leave, employers may claim a refundable tax credit equal to 100% of the payments made to employees for E-FMLA leave in each calendar quarter, up to the caps described above.  Similarly, the amount of the credit is increased by the amount of nontaxable group health plan expenses paid by the employer that are properly allocable to the qualified E-FMLA leave for which the credit is allowed.  These tax credits are allowed against payroll tax payments (including withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees), and employers will receive a refund if the payments are not large enough to cover the credit.  However, employers are not allowed to take the credit with respect to any wages for which the general business credit for FMLA leave is allowed.

Job Restoration [updated]

Employers are subject to the standard FMLA obligation to return any employee who has taken leave to the same or equivalent position upon return to work.  The only changes under Act are: (1) employers with fewer than 25 employees are excluded from the requirement to return the employee to the same or an equivalent position if the position no longer exists when an employee seeks to return from Emergency FMLA leave because of an economic downturn or other conditions caused by a public health emergency, and (2) an excluded employer must attempt to contact the employee if an equivalent position becomes available in the next year.  While this explicit exception for small employers could be read to mean that no such exception is available for employers with more than 25 employees, this would contradict existing FMLA regulations (which appear to be incorporated into the Act) providing that there is no reinstatement obligation if an employer can show that “an employee would not otherwise been employed at the time reinstatement is requested” as the result of a reduction-in-force.  29 C.F.R. § 825.216(a).  The current DOL guidance may be seeking to reconcile this apparent contradiction by stating that this new provision is in addition to the existing FMLA standards.  See the DOL Q&A (nos. 43), for details.

Notice [updated]

While the Act does not explicitly require employers to provide notice of the E-FMLA provisions, these are covered in DOL’s model posters (in English and Spanish), which are required to be posted for compliance with the paid sick leave provisions of the Act.

NEXT STEPS FOR EMPLOYERS

Employers with fewer than 500 employees should take steps immediately to prepare to comply with the provisions of the Act.  Employers will also be required to provide notice to their employees in the form approved by the Secretary of Labor.  In addition to the federal Act, several states have proposed legislation to enact or expand their own paid sick leave or family and medical leave laws to address COVID-19 issues.  These state laws may impose additional requirements beyond the requirements of the federal Act.  Though Massachusetts has not yet enacted legislation to expand paid sick leave or family and medical leave, the legislature has taken several measures to address the needs of employees and businesses in the Commonwealth, including loosening restrictions on unemployment claims and working with banks and other stakeholders to ease financial pressures on businesses.  We will continue to monitor legal developments related to COVID-19 and provide updates as new laws applicable to employers are enacted.

[1] These links are for the private employer posters; federal employer posters are also available at the DOL’s COVID-19 site.

[2] We note that it appears the posters are still being updated, so employers may wish to check the linked page for the most updated version immediately before posting.

Martha Zackin

COVID-19: Changes to Massachusetts Unemployment Insurance Program

/in , , , , , /by

By Bello Welsh LLP

In response to the COVID-19 emergency, there have been several key changes made to the eligibility and work search requirements for unemployment insurance. The following summarizes the changes applicable to impacted claimants in Massachusetts, and highlights additional changes that could be implemented as a result of the federal legislation that was just passed by the United States Senate and is currently under consideration by the House of Representatives, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

WAITING PERIOD AND AMOUNT OF BENEFITS

Waiver of Waiting Period

Governor Baker recently signed an act temporarily authorizing waiver of the one-week waiting period for unemployment benefits for any person who has become separated from work as a result of any circumstance relating to the outbreak of COVID-19, or the effects of the governor’s March 10, 2020 declaration of a state of emergency. Accordingly, individuals who applied for unemployment on or after March 10, 2020 will receive benefits for the first week of unemployment.

Length and Amount of Benefits

Under existing Massachusetts law, eligible individuals can receive up to 26 weeks of unemployment benefits in a benefit year. The current weekly benefit amount is approximately 50% of the individual’s average weekly wage, up to a maximum of $823 per week. An individual may also receive $25 per dependent child.

The CARES Act would significantly expand the length and amount of unemployment benefits, by providing for an additional $600 per week, and an additional 13 weeks of benefits. (As this legislation remains subject to change, we will update this information as further details become available.)   This means that claimants will receive whatever unemployment benefit they would receive under state law, plus $600.  This could create the anomalous result that a claimant receives more in unemployment benefits than they would have been paid in the ordinary course; the bill is, of course, subject to change, whether before it passes or in a subsequent corrections bill.

Individuals who work part time hours may still be paid unemployment benefits if the gross wages are less than the individual’s weekly benefit amount. Such individuals must report any earnings to the Department of Unemployment Assistance (DUA) each week, and any earnings greater than 1/3 of the weekly benefit amount will be deducted from the weekly benefit payment.

CLAIMANTS IMPACTED BY COVID-19

The DUA has also filed emergency regulations, which make it easier for those impacted by COVID-19 to claim unemployment benefits. All requirements of attending seminars at the MassHire career centers have been suspended, and appeal hearings will be held by telephone only. Further, the DUA may excuse missed deadlines during the processing of a claim, if the reason for failing to meet the deadline is due to COVID-19.

Eligibility

Most individuals who are out of work due to being impacted by COVID-19 should be eligible for unemployment insurance benefits. Individuals who are temporarily unemployed due to COVID-19 – whether laid off, furloughed, or if their workplace is fully or partially shut down – and expect to return to work will be considered to be in “Standby Status,” and are eligible for unemployment benefits. According to the DUA’s updated guidance for filing a new unemployment claim, being impacted by COVID-19 for purposes of unemployment eligibility may also include, but is not limited to, the following:

  • Employee or someone in his/her household is quarantined (whether due to an order by a civil authority or medical professional, or a self-imposed quarantine based on a reasonable fear of illness or exposure)
  • Employee leaves employment due to reasonable risk of exposure or infection or to care for a family member and does not intend to or is not allowed to return to work
  • Employee, or someone the employee is caring for, is “high risk” (older adults and/or persons with serious chronic medical conditions)
  • Lack of childcare

Individuals impacted by COVID-19 will be presumed eligible for four weeks of standby status. Individuals do not need to provide medical documentation, and employers need not even respond that the individual is on standby. However, employers may request that standby status be extended to up to eight weeks, and the DUA can further extend such standby status if necessary.

Work Search Requirements

Individuals impacted by COVID-19 will not be subject to the usual work search requirements; rather, such individuals will satisfy this requirement by taking reasonable measures to maintain contact with their employer and being available to perform any work that their employer may have for them, that they are able to do. Note, however, that work will not be considered suitable if it endangers the health of the employee or others in the employee’s household, and an employee need not accept such work.

CLAIMANTS NOT IMPACTED BY COVID-19

Individuals applying for unemployment benefits for reasons unrelated to COVID-19 are still required to conduct a weekly work search, which may include reviewing job postings online or working on a resume. However, such individuals only need to accept suitable work; accordingly, if the individual is quarantined, self-quarantining, caring for a family member who is sick, or caring for a child who is at home, the individual does not need to accept work offered until these conditions resolve.

Independent Contractors and Self-Employed Individuals

Self-employed individuals and individuals whose compensation is reported on an IRS Form 1099-MISC (“independent contractors”) are not currently eligible for unemployment benefits under Massachusetts law. However, the CARES Act would provide Pandemic Unemployment Assistance for certain self-employed individuals and independent contractors who are unemployed, partially unemployed, or unable to work due to COVID-19. We will update this information as details become available.

OTHER CONSIDERATIONS for Employers DUE TO COVID-19

Distribution of Unemployment Handbook Upon Separation

The DUA has issued a new COVID-19 Unemployment Handbook, which provides detailed instructions on filing for benefits online.  Employers that communicate with employees via email may distribute this information electronically to employees upon temporary layoff or termination.  In addition, all employers are required to provide a pamphlet regarding unemployment insurance  to employees at the time of a temporary or permanent separation (which may also be done electronically).

Grace Period for Quarterly Reports and Contributions

Employers that are impacted by COVID-19 may request up to a 60-day grace period for filing quarterly wage reports and paying contributions. The DUA is currently looking at the effect of COVID-19 on employer rate charging, and rates will not change until January 2021.

WorkShare Program – An Alternative to Layoffs

To avoid layoffs, employers may apply to the Executive Office of Labor and Workforce Development and the DUA’s WorkShare program. This program allows an employer to reduce the number of hours worked by a specific group of employees by 10%-60%, while maintaining health insurance and other benefits. The decreased wages are partially offset by unemployment benefits. Employers must submit quarterly contribution and wage detail reports and pay unemployment taxes in a timely manner, and benefits paid to employees under an approved WorkShare plan are charged the same way as regular unemployment benefits. Interested employers should visit the WorkShare website for additional information about eligibility and creation of a WorkShare plan. However, employers should carefully evaluate whether the WorkShare program will meet the employer’s needs, as the program is not particularly flexible, and once a WorkShare plan is approved, workers must work the reduced hours stated in the plan each week.

Note that certain employees may be entitled to other forms of paid leave for reasons related to COVID-19, pursuant to the Families First Coronavirus Response Act signed March 18, 2020 and effective April 1, 2020. For more information about eligibility for paid sick time and emergency FMLA leave, please see Bello Welsh’s detailed alert on this topic.

We will continue to monitor legal developments related to COVID-19 and provide updates as new laws applicable to employers are enacted.

Martha Zackin

COVID-19: Department of Labor Issues Guidance on Families First Coronavirus Response Act

/in , , , , , , , , , , /by

By Bello Welsh LLP

The Department of Labor’s Wage and Hour Division has issued materials providing guidance (the “DOL Guidance”) on the Families First Coronavirus Response Act (“FFCRA”).  These materials, which include Q&A documents and fact sheets for employers and employees, can be found here.  The same page also includes links to the notices that employers must post. For a detailed summary of the paid sick leave and Emergency FMLA provisions of the FFCRA, please refer to our earlier alert, available here.  Read more →