April 6, 2020
DOL and IRS Issue Additional FFCRA Leave and Tax Credit Documentation Guidance
By: William D. Edwards and Stephanie E. Harley
About: Employment & Labor
April 6, 2020 – The U.S. Department of Labor (“DOL”) has issued its temporary rule (“Regulation”) implementing the leave provisions of the Families First Coronavirus Response Act (“FFCRA”). The leave provisions of the FFCRA include the Emergency Family and Medical Leave Expansion Act (“EFMLEA”) and the Emergency Paid Sick Leave Act (“EPSLA”). The Regulation expands existing DOL guidance that was issued prior to the April 1, 2020 effective date for the EFMLEA and EPSLA.
The Internal Revenue Service (“IRS”) has also published “COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs” (“FAQ”). Among other things, the FAQ provides guidance to employers regarding the documentation and information that an employer may require from an employee who requests leave under the EFMLEA and EPSLA. The IRS’s guidance is important because it sets forth the documents and information employers need to substantiate their claims for paid leave tax credits, and it permits employers to obtain documentation and information from employees that is not in the DOL’s Regulation.
The DOL Regulation provides more detail than the guidance issued by the DOL shortly after the FFCRA was passed into law. We encourage employers to read the Regulation carefully. Here is a summary of the new Regulation:
- Definitions. The Regulation further defines child care provider, place of care, school, quarantine or isolation order, telework, and son or daughter. A son or daughter must be under 18 years of age, or 18 years of age or older who is incapable of self-care because of a mental or physical disability. A quarantine or isolation order is broadly defined and now includes employees who fall into categories of citizens that may be unable to work because of such orders. Employees of essential businesses, however, would not be covered by this definition because they can still perform work assuming the employer has work for them.
- Qualified reasons for paid sick leave. An employee who is seeking a medical diagnosis for COVID-19 may take paid sick leave if the employee is experiencing any COVID-19 symptoms, but paid sick leave for this reason is limited to time the employee is unable to work because the employee is taking affirmative steps to obtain a medical diagnosis. An employee who is advised by a health care provider to self-quarantine because the employee has, may have, or is particularly vulnerable to COVID-19 is entitled to paid sick leave if following the advice of the health care provider would prevent the employee from being able to work or telework. The Regulation also broadly defines an “individual” for whom an employee takes leave to provide care, but the employee and the individual must have a personal relationship that creates an expectation of care. Finally, care for a son or daughter whose school or place of care has been closed is permitted only if no other suitable person is available to care for the son or daughter during the period of such leave.
- Definition of full-time and part-time employees. Part-time employees are included for purposes of determining whether an employer meets the 500 employee threshold. The DOL defines part-time employees for purposes of the EPSLA as employees who are normally scheduled to work fewer than 40 hours per week and full-time employees who are normally scheduled to work 40 or more hours per week. The DOL’s Regulation also notes that the EFMLEA does not distinguish between full-time and part-time employees for purposes of leave (although the number of hours worked affects the amount of pay the employee is eligible to receive under the EFMLEA).
- Employee eligibility for EFMLEA leave. Employees who are laid off or terminated by an employer on or after March 1, 2020 may qualify for EFMLEA leave if they are later rehired or reemployed by the same employer on or before December 31, 2020, and worked for the employer for at least 30 of the last 60 calendar days prior to layoff.
- Health care providers and emergency responders. Employers can elect to exclude health care providers and emergency responders from EFMLEA and EPSLA leave. Health care provider is broadly defined to include any individual employed by an entity that contracts with health care related institutions, employers, or entities that provide services or assist in maintaining the operation of a health care facility. Emergency responder is also broadly defined, although the DOL previously encouraged employers to be “judicious” when using the definition to exempt emergency responders from the provisions of the FFCRA.
- Employer coverage. Current full-time and part-time employees are counted for purposes of determining whether an employer meets the 500 employee threshold. Employees include temporary employees but not independent contractors or those who have been laid off or furloughed and not subsequently reemployed.
- Small business exemption. The DOL Regulation narrows the small business exemption. If a small business qualifies for the exemption, it can only exclude employees from taking expanded family and medical leave and paid sick leave to care for a son or daughter whose school or place of care has closed. Thus, small businesses still have to grant paid sick leave to eligible employees for any of the other qualifying reasons under the EPSLA.
- Intermittent leave. The EFMLEA does not explicitly provide for the use of intermittent leave. The Regulation now makes clear that EFMLEA and EPSLA leave may be taken intermittently and in any increment but only under certain circumstances that are defined in the Regulation and only if the employer and employee agree. The DOL encourages employees and employers to work together to develop flexible arrangements.
- Leave to care for a child due to school or place of care closure or child care unavailability – the intersection of traditional FMLA, the EFMLEA, and the EPSLA. An eligible employee can choose to substitute earned or accrued paid leave provided by the employer during the first two weeks of unpaid EFMLEA leave if the employee has already exhausted the employee’s EPSLA leave entitlement. Paid leave provided by the employer runs concurrently with the two weeks of unpaid EFMLEA leave. If an eligible employee has already taken the full 12 workweeks of traditional FMLA leave during the 12-month period, the eligible employee may not take EFMLEA l An eligible employee’s entitlement to take up to two weeks of EPSLA leave is not impacted by the employee’s use of traditional FMLA leave.
- Employer notice requirements. Employers are required to post or distribute a notice explaining the FFCRA’s paid leave provisions and providing information regarding filing complaints. Employers can satisfy this requirement by posting in a conspicuous place, emailing, or mailing the Employee Rights Poster on the DOL’s website. Employers are not required to translate the notice or the Employee Rights Poster into languages other than English. New or updated Employee Rights Posters will be issued via the DOL Wage and Hour Division’s website. Employers should check this website on a regular basis for updates regarding compliance with the FFCRA, including notice posting/distribution requirements and Employee Rights Posters translated into other languages.
- Employee notice of need for leave requirements. An employer may not require an employee to provide notice in advance, and may only require notice after the first workday (or portion thereof) for which an employee takes EPSLA or EFMLEA leave. After the first workday, it will be reasonable for an employer to require notice as soon as practicable under the facts and circumstances of the particular case. When an employee requests EFMLEA or EPSLA leave to care for a son or daughter whose school or place of care is closed or whose child care provider is unavailable due to COVID-19 related reasons, and the need for such leave is foreseeable, the employee must provide notice as soon as practicable. Employers can require employees to follow reasonable notice procedures. Generally, it will be reasonable for an employer to require the employee to comply with the employer’s usual and customary notice and procedural requirements for requesting leave, absent unusual circumstances. It will also be reasonable for an employer to require oral notice and sufficient information for an employer to determine whether the requested leave is covered by the EPSLA or the EFMLEA. Notice may be given by an employee’s spokesperson (e.g., spouse, adult family member, or other responsible party). If an employee fails to give proper notice, the employer should give the employee notice of the failure and an opportunity to provide the required documentation prior to denying the request for leave.
- Documentation of need for leave. Employees are required to provide employers with documentation containing specific information set forth in the Regulation prior to taking paid sick leave under the EFMLEA or EPSLA. For example, the employee is required to submit an oral or written statement that the employee is unable to work because of the qualified reason for leave. Under the EPSLA, employees also must submit additional documentation specific to the different qualifying reasons for leave. Significantly, the Regulation states that the employer may also request an employee to provide such additional material as needed for the employer to support a request for tax credits pursuant to the FFCRA. The employer is not required to provide leave if materials sufficient to support the applicable tax credit have not been provided. In this instance, the Regulation’s notice and documentation rules are less than clear. While the Regulation mandates that an employer cannot require an employee to provide notice in advance of taking leave, the Regulation also states an employer can require that the employee submit required documentation before a leave commences. Thus, it is not apparent how an employee could submit documentation prior to taking leave without providing notice of the need for leave. Further clarification from the DOL is needed regarding the timing of an employee’s notice.
- Employer recordkeeping requirements. Employers are required to retain all documentation provided for four years. The Regulation provides guidance about how to document leave request denials and documentation required to claim tax credits from the IRS.
- Other provisions in the Regulation. Other provisions in the Regulation include, but are not limited to:
- Calculating the amount of paid sick leave and expanded family and medical leave, including caps;
- Calculating the amount of pay and hours for paid sick leave and expanded family and medical leave – individual and aggregate pay, tax credit, and tax credit advance caps for EFMLEA and EPSLA leave under the FFCRA apply for each employee;
- Health coverage for employees who are on leave;
- Multiemployer plans;
- Return to work procedures;
- Prohibited acts and enforcement under the EPSLA and the EFMLEA; and
- Complaint filing procedures and investigations.
Although the Regulation provides much needed guidance for employers, there are still many unanswered questions, including:
- Regarding qualifying reasons for EPSLA leave, how does an employee demonstrate that the employee has a substantially similar condition as specified by the Secretary of Health and Human Services? The Regulation does not define “substantially similar condition,” but the DOL states that the substantially similar condition may be defined at any point in time between now and December 31, 2020. Thus, employers who deny this type of leave request do so at their own peril, but a good faith and reasonable denial based on an alleged “similar condition,” without more, will likely help employers defend against a complaint or lawsuit.
- Will the DOL amend this Regulation or issue additional interpretive guidance? Congress is already criticizing the DOL’s new Regulation and calling for revisions to narrow the definition of health care provider and increase employee access to paid leave. The DOL and the IRS will likely refine their guidance in the coming weeks as employers field more and more leave requests and are forced to make difficult business decisions based on the new economic reality caused by COVID-19.
IRS Guidance Regarding Documentation from Employees to Claim Tax Credits
The IRS’s FAQ provides guidance to employers regarding documentation and information that employers are required to obtain from employees for purposes of substantiating tax credit eligibility for qualified leave wages. The information includes, but is not limited to, a statement of the COVID-19 related reason the employee is requesting leave, written support for such reason, and a statement that the employee is unable to work or telework for such reason. The IRS also requires the following:
- In the case of a leave request based on a quarantine order or self-quarantine advice, the statement from the employee should include the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee.
- In the case of a leave request based on a school closing or child care provider unavailability, the statement from the employee should include the name and age of the child (or children) to be cared for, the name of the school that has closed or place of care that is unavailable, and a representation that no other person will be providing care for the child during the period for which the employee is receiving family medical leave and, with respect to the employee’s inability to work or telework because of a need to provide care for a child older than 14 years old during daylight hours, a statement that special circumstances exist requiring the employee to provide care.
The FAQ also sets forth the records employers should create and maintain to substantiate eligibility for tax credits, including, but not limited to, documentation to show how the employer determined the amount of qualified sick and family leave wages paid to employees that are eligible for the credit, including records of work, telework, and qualified sick leave and family leave.
We recommend that employers incorporate the IRS required documentation and information into their EFMLEA and EPSLA leave request forms and any written notices to employees about employee obligations to notify employers of their need for leave and to submit supporting documentation prior to taking leave.
Although the DOL Regulation and IRS FAQ will help employers navigate their obligations under the EFMLEA and EPSLA, there are still a number of questions that remain unanswered and issues that remain unresolved. Until the DOL or IRS weigh in again, employers should make reasonable and good faith efforts to comply with the EFMLEA and EPSLA based on currently available guidance and seek legal counsel when necessary.
The DOL Wage and Hour Division continues to update the FFCRA Q&A on its “COVID-19 and the American Workplace” website. Although the DOL has issued the implementing Regulation, employers should continue to consult the website and review the FFCRA Q&A for supplemental guidance and information.
Ulmer’s Employment & Labor Practice Group is available 24/7 to provide strategic advice and counseling to employers navigating the COVID-19 crisis. Please reach out to our attorneys if you have any questions. To view more of Ulmer’s useful client alerts, webinars, and resources regarding COVID-19, please click here.
The information provided in this client alert speaks only to the information and guidance we have available as of the date of publication and is subject to change. We will continue to follow further issued guidance and regulations and endeavor to post those updates via our website. Please continue to follow these updates at ulmer.com. This legal update was created by Ulmer & Berne LLP, and is not intended as a substitute for professional legal advice. Receipt of this client alert, by itself, does not create an attorney client relationship. For any questions, or for further information, please contact William D. Edwards at firstname.lastname@example.org or Stephanie E. Harley at email@example.com.