DOL Clarification: FFCRA Goes Into Effect April 1, 2020
The DOL clarifies the effective date of FFCRA: The FFCRA goes into effect on April 1, 2020 and will continue until December 31, 2020.
Does the FFCRA apply to my private-sector company?
The FFCRA applies to private-sector employers with 499 or fewer employees.
At what point do I count the number of employees?
At the time your employee’s leave is to be taken.
What employees do I count?
- Full-time and part-time employees within the United States
- Employees on leave
- Temporary employees who are jointly employed by the employer and another company (regardless of whether the jointly-employed employees are maintained on only one employer’s payroll); and
- Day laborers supplied by a temporary agency (regardless of whether the employer is the temporary agency or the client firm if there is a continuing employment relationship).
Workers who are independent contractors under the Fair Labor Standards Act (FLSA), rather than employees, are not considered employees for purposes of the 500-employee threshold.
What if I own a small business (fewer than 50 employees), I heard the company would be exempt?
FFCRA provides that businesses with fewer than 50 employees may be able to obtain an exemption when offering these leave benefits would “jeopardize the viability of the business as a going concern.” The DOL’s current guidance only provides that employers who will claim this exemption should document why this standard applies to them. The DOL indicates that detailed regulations will be forthcoming. Current thinking amongst thought leaders is that this will be a high hurdle, we will keep you posted.
What about ownership interests in another corporation – do those employees count toward the 500 threshold?
Where a corporation has an ownership interest in another corporation, the two corporations are separate employers unless they are joint employers under the FLSA with respect to certain employees.
What about affiliated companies or subsidiaries?
In general, two or more entities are separate employers unless they meet the integrated employer test under the Family and Medical Leave Act of 1993 (FMLA). If two entities are an integrated employer under the FMLA, then employees of all entities making up the integrated employer will be counted in determining employer coverage for purposes of expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act.
What is an integrated employer?
If a corporation has an ownership interest in one or more other corporations, the two or more corporations may be considered one ‘integrated employer’ for purposes of counting employees to determine coverage under the FMLA. 29 C.F.R. §825.104(c)(1)-(2). The entire relationship between and/or among two or more corporations must be considered based on the following four factors:
- Common management—generally looks to whether there are common directors and boards between the two companies
- Interrelation between operations—looks to whether the two entities have common offices, common record keeping, and shared bank accounts and equipment
- Centralized control of labor relations—looks to whether one of the companies controls the personnel of the other including, for example, making hiring and firing decisions
- Degree of common ownership/financial control
All four factors do not need be present for an ‘integrated employer’ finding, and each situations must be reviewed in its totality.
Using Integrated Employer Test to Reach 500 Employees
If you use the integrated employer test to reach the 500 employee threshold and have not done so previously, you may be opening your company up to arguments that you have always been and continue to be an integrated employer for purposes of FMLA liability.
Paying FFCRA Leave When You Have 500 or More Employees
If you have 500 or more employees and decide to pay FFCRA leave, there is a risk that you will not be eligible for the associated tax credits with the FFCRA. The FFCRA provides that tax credits will be provided when qualifying leave wages which are required to be paid are paid to employees. We continue to monitor IRS guidance to determine whether employers who are not covered and decide to pay will receive credits.
If You Are a Covered Employer – You Are Required To Post Posters
Employers are required to post the DOL’s poster on FFCRA. It is suggested that employers wait until March 31, 2020, to access and print the poster as it may be amended or corrected. An updated version should be available at this link: https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf. An FAQ on the details of posting this notice is here: https://www.dol.gov/agencies/whd/pandemic/ffcra-poster-questions.
How do the Tax Credits Work?
When employers pay their employees, they are required to withhold from their employees' paychecks federal income taxes and the employees' share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.
Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.
The payroll taxes that are available for retention include 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 there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.
The IRS provides these two examples:
Example 1: If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
Example 2: If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.
REMINDER ON THE PAID LEAVE PROVISIONS OF FFCRA
COVID-related FMLA Leave
Covered Employers (those with fewer than 500 employees) will have to allow 12 weeks of FMLA leave for use by employees who have been employed for 30 days if the employee has a “qualifying need related to a public health emergency.”
“Qualifying need related to a public health emergency” means an employee is unable to work (or telework) due to a need for leave to:
- Care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.
Calculation of Pay for COVID-19 related FMLA: The first 10 days may be unpaid, although employees may elect to use other paid benefits to cover this period. The remaining time must be paid at 2/3 the employee’s regular rate up to a maximum of $200 per day and $10,000 in the aggregate.
Federal Paid Sick Leave
Covered employers (those private employers with fewer than 500 employees and public agencies with 1 or more employees) are required to provide employees with up to 80 hours of paid sick leave (or the equivalent of two weeks of hours for part-time employees) to the extent that the employee is unable to work (or telework) due to a need for leave because:
- 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 seeking a medical diagnosis.
- The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).
- The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID–19 precautions.
- 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.
Except that an employer of an employee who is a health care provider or an emergency responder may elect to exclude such employee from the application of this subsection.
Calculations of Sick Pay
Sick Pay is calculated based on an employee’s regular rate of pay.
- Leave under Sections (1), (2), and (3) above: Paid at regular rate. Max sick time pay is $511 per day and $5,110 in the aggregate.
- Leave under Sections (4), (5) and (6) above: Paid at 2/3 regular rate. Max sick time pay is $200 per day and $2,000 in the aggregate.
For more information on the Families First Coronavirus Response Act (FFCRA) and other communications relating to the Coronavirus, please contact one of our labor and employment law attorneys. You may also visit our COVID-19 Resource Center.
Disclaimer: This information is intended for general information purposes only and is not intended, nor should it be construed or relied on, as legal advice. Please consult your attorney if specific legal information is desired.