March 27, 2020 | Covid-19 | Posted by Bob Greene, Senior HR Industry Analyst at Ascentis
DOL Issues Further Guidance, Q&As on Compliance with Families First Coronavirus Response Act
On March 24, the Department of Labor issued initial guidance to employers on compliance with the new Families First Coronavirus Response Act (“FFCRA,” sometimes referred to as “Corona-2”), signed into law on March 18, 2020. Because the guidance emanated from DOL, it concerned mostly the details surrounding the two kinds of new Emergency Paid Leave authorized by FFCRA, not the employer tax credits aspect of the law. It should be noted that we are also awaiting guidance from the IRS/Treasury – perhaps a Q&A – around employer tax credits, reconciliation, etc., and although that had been promised “this week,” as of this publishing no such guidance has been issued and it is now expected next week.
The DOL guidance starts by resolving one key issue that has been concerning employers around the country: What is the effective date of the law? We knew it had to be between the date of signature (3/18) and 15 days from that date (4/2). According to this new DOL guidance, the effective date will be April 1 (no fooling!) This, of course, puts it solidly outside of the first quarter, so we expect that next week’s further guidance from Treasury will postpone detailed instructions on tax credit reconciliation until late April or even later, since the first time employers and their tax preparers would encounter it would be in July for second quarter 941 filings.
The leave provisions of FFCRA are NOT retroactive, therefore any paid leave an employer provides to employees prior to April 1 is “on them,” cannot be offset against the employee’s statutory entitlement beginning April 1, and is not available to the employer for tax credit inclusion. The effectivity end date of the FFCRA leave provisions is December 31, 2020.
Additional Questions Resolved by This DOL Guidance
(For purposes of the remainder of this blog, “EPSL” means Emergency Paid Sick Leave, and “PHEL” means Paid Health Emergency Leave (Emergency FML).
What employees are to be counted in determining whether an employer meets the “under 500 employee” threshold for coverage by the law?
For purposes of determining whether an employer meets the 500-employee threshold, they are to INCLUDE: full-time employees, part-time employees, employees on leave, and temporary workers. INCLUDE employees in all 50 states, D.C., and any US territory or possession. EXCLUDE contractors the employer has determined fail to meet the FLSA test for an employment relationship. The release also includes guidance for “integrated employers” as that term is defined under the FMLA; see the DOL release (Q&A #2) for more on this issue.
How does an employer with fewer than 50 employees elect the small business exemption?
For now, simply document the need with appropriate reasoning (i.e., why providing the required leave would “jeopardize the viability of [your] business as a going concern”, and retain that documentation. Additional guidance on this point will be issued in the future by DOL. Do not send any documentation to the DOL at this time related to this issue.
Part-time employees are entitled to leave based on average hours worked. How is that to be calculated?
The law states that part-timers are entitled to leave based on his/her average number of work hours in a two-week period. The guidance offers several methods for doing this, and appears to favor these approaches in this order:
- determine hours based on the number of hours the part-timer was normally scheduled to work, OR
- if the part-timer’s schedule is variable, use a six-month average to calculate average daily hours, OR
- if the employee hasn’t been employed for six months, use the number of scheduled hours agreed upon between employer and employee upon hiring, OR
- if no such agreement was made, use the average hours per day the employee was scheduled to work over the entire term of their employment.
Once the average hours calculation is made pursuant to one of the above methods, that average applies to BOTH the employee’s (up to) two-week entitlement to EPSL and his or her (up to) ten-week entitlement to PHEL.
When calculating paid leave due to employees under the FFCRA, must employers include overtime hours?
For PHEL, YES! The Emergency FML Expansion Act requires that employees be paid on leave for their normally scheduled work hours, even if that exceeds 40 hours in a week. For EPSL, the 80-hour, two-week limit applies, so the example in the guidance is that if an employee is paid for 50 hours for the first week of their EPSL, that employee is only entitled to 30 hours for the second week. For both PHEL and EPSL, any overtime hours included in the paid leave DO NOT have to include any overtime premium pay. The guidance also reminds us of the statutory limits applicable to each day’s pay for EPSL for “own illness,” of $511 per day, and for all other EPSL reasons and all PHEL reasons, of $200 per day.
In questions 23-29, the guidance addresses various aspects of business closings, termination of employment and furlough, and the impact of these actions on employee FFCRA rights. What are the key takeaways?
- If an employer closes a worksite prior to April 1, the employees at that worksite are not eligible for any paid leave under FFCRA, but may be eligible for expanded unemployment benefits expected to be included in the CARES Act (“Corona-3.”)
- If an employer closes a worksite on or after April 1 but before an employee takes leave, that employee’s rights to leave under FFCRA are terminated as well.
- If an employer closes a worksite on or after April 1, while an employee is on EPSL or PHEL, the employer is only obligated to pay the applicable leave up to and including the day the worksite closes.
- If an employer lays off, furloughs or reduces the hours of an employee, none of these actions is a triggering event for EPSL or PHEL.
- Employees may not qualify for both unemployment and paid leave under FFCRA for the same day(s.) An employee is either employed – in which case their rights to EPSL and PHEL are intact and available to them, or unemployed – in which case they are only (potentially) entitled to unemployment benefits.
Employers must use the FLSA regular rate of pay as defined in DOL Fact Sheet #56A. The guidance reminds us that this rate includes non-discretionary commissions, tips, and piece rates, and instructs employers to use a backward-looking six months of pay history (if available) to make this calculation.
Must employers continue health insurance benefits for employees on EPSL and/or PHEL?
Yes, and the guidance reminds us that employers are entitled to tax credits for the employer share of that health insurance during the period of qualified leave.
In questions 31-34, the guidance visits issues around coordination of benefits between preexisting employer PTO policies and the new forms of paid leave under FFCRA. What are the key takeaways?
- Employees may NOT be paid for employer-provided PTO and EPSL or PHEL for the same day.
- Employers may NOT reduce any PTO balances by the amount of any EPSL or PHEL paid to the employee under the FFCRA, and they may NOT decrement available hours for EPSL/PHEL and company-provided PTO concurrently. (NOTE: this appears to be final resolution of two prior pieces of commentary about the law that was contradictory.)
- Employers may NOT mandate, but employees may elect, to use PTO for the unpaid waiting period (first 10 days) of PHEL.
- If an employer wants to pay their employee above and beyond the statutory daily limits for EPSL for “own illness,” of $511 per day, or for all other EPSL reasons and all PHEL reasons, of $200 per day (e.g., the employer chooses to pay an employee $300 for a day of PHEL), the employer may do so, but is reminded that the statutory limit amounts ($511/$200) represent the maximum tax credit an employer may take under the law.
Bob Greene currently serves as Senior HR Industry Analyst at Ascentis. Bob’s 40 years in the human capital management industry have been spent in practitioner, consultant and vendor/partner roles. As practitioner, he managed payroll for a 5,000-person bank in New Jersey. As consultant, he spent 8 years advising customers in HRMS, and payroll and benefits system design as well as acquisition strategies. Bob also built a strategic HCM advisory practice for Xcelicor (later acquired by Deloitte Consulting.)