DOL Issues Q&A Guidance to Assist Employers in Complying with the FFCRA; Also, the CARES Act: What Employers Need to Know

By Martin Kappenman and William E. Parker - Peters, Revnew, Kappenman & Anderson, P.A.

March 27, 2020

It’s a new world, and everything is changing very quickly.  Earlier this week, we let you know about a poster that qualified employers must post informing their employees of their rights under the Families First Coronavirus Response Act (“FFCRA”).  Here are several more updates you’ll need to know about as this crisis and the response continue to unfold.

DOL Issues Guidance

On Friday, March 27, the Department of Labor (“DOL”) issued a set of questions and answers meant to assist employers and employees in complying with the leave requirements under the FFCRA.  The document can be accessed here.

It’s worth your time to review the entire document, but a key question and answer is number 18.  Responding to the question, “What does it mean to be unable to work, including telework for COVID-19 related reasons?” the DOL responded: “You are unable to work if your employer has work for you and one of the COVID-19 qualifying reasons set forth in the FFCRA prevents you from being able to perform that work, either under normal circumstances at your normal worksite or by means of telework. If you and your employer agree that you will work your normal number of hours, but outside of your normally scheduled hours (for instance early in the morning or late at night), then you are able to work and leave is not necessary unless a COVID-19 qualifying reason prevents you from working that schedule.”

A key takeaway from this answer for employers is that for an employee to be “unable to work” for purposes of the FFCRA’s leave provisions, the employee’s employer has to have work available for that employee to perform.  It thus appears that employers don’t have to provide leave to employees who the employer would not otherwise be able to employ anyway, due to a lack of work during this crisis.  However, the CARES Act’s expansion, discussed below, of the definition of “eligible employee” to include employees who had been recently laid off or furloughed may complicate matters. An employee’s entitlement to leave under these different rules and provisions will require careful analysis.   

Congress Passes the CARES Act

Late on Wednesday night, March 25, the U.S. Senate unanimously passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), a lengthy bill providing $2 trillion in emergency relief in what Congress is calling “phase three” of its response to the COVID-19 pandemic.  The Act was passed by the House of Representatives on Friday, March 28. The highest-profile provisions of the nearly 900-page CARES Act focus more on individual citizens than on employers, but there are portions that employers need to be aware of, discussed below.

Paid Leave for Laid-Off or Furloughed Workers

Notably, the CARES Act expands the definition of “eligible employee” for purposes of eligibility for emergency paid leave under the only week old FFCRA.  Under the CARES Act an “eligible employee” is amended to include one who was laid off or furloughed on or after March 1, 2020.    This is a complicated new twist, and it remains to be seen how it might play out in practice.

Unemployment Compensation

The CARES Act also supplements state unemployment insurance programs by providing a flat $600 per week to unemployment recipients on top of what they would ordinarily receive from their state program.  The Minnesota legislature earlier this week enacted a bill that included unemployment expansions of its own to deal with the crisis. Under the bill, which codifies some of the changes Governor Walz had already made by executive order, the one-week waiting period for benefits is waived, and recipients who turn down jobs that would have exposed them, other workers or the general public to risk from COVID-19 will not be considered to have turned down “suitable employment” and thus lose their benefits. The bill also suspends inclusion of unemployment payments made between March 1 and December 31, 2020 from being used to compute the new unemployment insurance tax rate of an employer, ensuring that employers do not face a huge future tax penalty for potentially having to have a number of unemployed workers due to the crisis. And under certain circumstances, an employee who takes a leave of absence due to COVID-19 may be considered to have been placed on an involuntary leave of absence and thus be eligible to receive unemployment benefits.

Loans for Payroll and Other Expenses Under the Small Business Act

The CARES Act also immediately, greatly expands the availability of loans under the Small Business Act, giving the Small Business Administration authority to grant a new category of 100% federally-backed loan.  Businesses with fewer than 500 employees (unless a larger size threshold is later established by the Small Business Administration for a given industry) can receive a loan in an amount tied to the business’s monthly payroll costs (but capped at $10 million) and can be used to cover operating expenses, including especially maintaining employees and paying payroll or health benefits costs, along with costs of staying in business like rent or mortgage payments.  If the loan is used for certain purposes like these, it can be forgiven in its entirety, effectively turning the “loan” into a straight cash payout.  If used for other allowed purposes, the loans can be repaid in 12 months.  The Act also waives certain requirements that may ordinarily prevent more businesses from obtaining SBA loans, such as certain fees, and a requirement that the small business applicant be unable to obtain credit elsewhere.

Another type of loan available under the CARES Act—for “midsize” businesses, between 500 and 10,000 employees—requires the employer to agree to remain neutral as to any union-organizing activity during the term of the loan, so that’s something to watch out for if you’re looking at taking advantage of one of these programs.

Employee Retention Credit Against Payroll Taxes

The CARES Act additionally provides an employee retention credit to encourage businesses to refrain from dismissing employees during the crisis.  Employers can take a 50% refundable credit against payroll tax for wages paid to employees between March 12, 2020 and December 31, 2020 on the first $10,000 in wages per employee, including the value of health benefits.  For employers of fewer than 100 employees who operated a trade or business during 2020 and were either required to fully or partially suspend operations due to an order issued by a governmental agency pertaining to COVID-19 or who experienced a year-over-year reduction of 50% or more in gross receipts, this credit applies to all wages paid to all employees (up to the $10,000 maximum).  For employers of more than 100 employees, the credit applies only to those employees who are actively not working due to COVID-19-related causes.

Deferral of Payroll Tax Payments

Employers’ payroll tax payments for the remainder of 2020 are also delayed by the CARES Act.  With respect to all such payments which would have had to be deposited between the effective date of the CARE Act and December 31, 2020, half of those payments will now be due by December 31, 2021, and the other half by December 31, 2022.
 
This is, of course, an extremely fluid situation, and we will continue to inform you of changes as they occur. If you have questions regarding the CARES Act, other governmental responses to the COVID-19 pandemic, or strategies for employers responding to the pandemic, please contact Martin Kappenman (952-921-4603 or mkappenman@prkalaw.com), William Parker (952-921-4602 or wparker@prkalaw.com), or any other attorney at Peters, Revnew, Kappenman & Anderson, P.A.