Practices, policies and forecasts about what COVID-19 means for businesses, employees and the greater economy has been constant and ever-evolving. In a recent webinar presented by the Small Business Legislative Council (SBLC), “Small Business and COVID-19,” Jessica Summers, Esq., strategic policy director of the SBLC and principal in the Employment Law Group of Paley Rothman in Bethesda, Maryland, provided an overview of the new and existing laws put in place to support businesses during this time. “This is an ever-moving target, and [it’s] difficult for us to continue to navigate, especially for small businesses,” Summers said of the coronavirus pandemic. “We have a lot of unanswered questions.”

These unanswered questions continue to plague businessowners and employees as they prepare to move forward in a manner that is most beneficial, safe, supportive and appropriate for the economy and each other. The Coronavirus Aid, Relief and Economic Security Act (CARES Act), signed into law Wednesday night, will result in a number of changes to existing policy for businesses of 500 or fewer employees, including an expansion of the Families First Coronavirus Response Act (FFCRA Act) leave provision under the Family and Medical Leave Act (FMLA), which requires certain employers to provide employees with paid sick leave or expanded family and medical leave for COVID-19-related reasons. Under this provision, employers who qualify for required paid leave will be 100-percent covered by the dollar-for-dollar refundable tax credit available to their employer, which also includes the cost of the employer’s health premiums during the employee’s leave. Under FFCRA, qualifying reasons for paid sick time, which also pertains to remote workers, include: (1) if the employee is subject to a federal, state or local quarantine or isolation order related to COVID-19; (2) if the employee has been advised by a health care provider to self-quarantine related to COVID-19; (3) if the employee is experiencing symptoms of COVID-19 and seeking medical diagnosis; (4) if the employee is caring for an individual who has been advised by a health care provider to self-quarantine related to COVID-19; (5) if the employee is caring for a while whose school or childcare facility is closed or unavailable due to COVID-19-related reasons; (6) and/or if the employee is experiencing any other significantly similar condition as specified by the Secretary of Health and Human Services, in accordance with the Secretaries of Labor and Treasury.

This leave is applicable to businesses with 500 or fewer employees, with “exemption potential for businesses with fewer than 50 employees,” Summers said. The duration of leave applicable during this time—applicable for reasons one, four and six—allows a full-time employee 80 hours of leave, and a part-time employee the number of hours of leave that are worked over an average two-week period. For reason five, a full-time employee is eligible for up to 12 weeks (three months) of paid leave at 40 hours per week, and a part-time employee is eligible for leave equating the number of hours the employee works, on average, over a 12-week period. For reasons two and three, the FFCRA generally supports that employees are covered for a two-week period, or up to 10 days of paid sick leave of the employee’s regular pay rate; and for reasons four and six, the employee is covered up to two weeks or 10 days of paid sick leave at two-thirds their regular pay rate. This coverage has also been changed under FFCRA, Summer said, from lowering the qualified covered employer timeline as someone who has been employed for a six-month period to someone who has been employed for at least 30 days.

“This was originally 80 hours to match two weeks, but then [the government] modified it to 10 days, so it no longer matches up quite properly with the paid sick leave law,” Summers said. To find out whether this exemption applies to businessowners, she advises businesses to monitor the updates through April 1.

Summer noted that expanded FMLA and paid sick leave law “are not going to apply to employees who are refusing to work because they are afraid, but not mandated,” and that “employees who are out of work but are taking leave for any other reason may eligible for any other leave.” For instance, she said that an employee who is out during this time for routine knee surgery will not be covered by these types of leaves if they are out before April 1. The law, she said, also allows “a separate type of labor to exclude health care providers and emergency responders, so if an employee is in this field then there may be an exemption for this type of leave, simply because there is a high need for them to be at work.”

There are two big benefits that small businesses may experience as a result of the approved FFCRA provisions to FMLA. First, Summer said, the FMLA usually only applies to businesses with 50 or more employees, “so many companies in the small-business sector may not have encountered this before.” Although FFCRA would be expanded for a “very limited purpose” for a “limited period of time,” the provision would cover all employers with 500 or fewer employees. “If you have fewer than 50 employees and you were not previously covered by the FMLA, this provision now covers you,” she said. “This doesn’t mean the entire FMLA covers you, but this particular provision.” Further, this provision would be eligible for full-time employees over 30 days, as opposed to the typical time period, which is six months of full-time employment. Further, the FMLA covers if an “employee was sick, had a baby, had a military spouse that needed to be cared for or was injured,” and this new provision extends the FMLA for an employee who needs to be out of work due to school or childcare closures. Further, Summer says, the FMLA is typically unpaid, but the emergency FMLA that applies if an employee must be out of work if school or childcare is closed, must be paid.

There is also a special exemption, she said, for employers with 25 or fewer employees. These employers “are permitted to not necessarily reinstate employees after the end of this leave to the extent that this job no longer exists.” For instance, if a small-business owner has permitted an employee to take this leave and related circumstances have significantly changed, or if an operational change has occurred, the requirement will be waived for these employers.

But for the future of small businesses, Summer said, the Department of Labor is “scrambling to put together rules and guidance on how this law is going to go into effect.” The standard that FEMA provides, she said, is that exemption can be granted by the Department of Labor if continuing to pay this leave would “jeopardize the liability of the business;” a fact that remains a growing concern. “Right now, it is very difficult for an employer [in terms of] whether or not you’re going to be able to apply for an exemption and whether there is any leeway, [and] what that is going to look like.”

Along with these updates, what is being done to help businesses stay afloat—and continue to pay their employees during this leave? The answer, Summers said, is tax credit for businesses of 500 or fewer employees—but not for those with more than 500 employees. “The larger businesses got exempt from this portion of the bill. Don’t ask me how or why that was negotiated, because no one quite knows,” said Summers. She said that the Internal Revenue Service has issued statements that employers can retain the number of payroll taxes that can be paid out for leave and can withhold the payroll taxes when they’re filing the form, which includes income tax and medical tax, which are shared by both employers and employees. “There are some leeway to recover the amounts that should be paid, but we’re looking for additional support to help small businesses pay.”

To prepare for a tax credit, Summers offers several suggestions. First, she explained that currently, executive orders are still permitting employees to qualify for paid leave, if even they are not able to work and if they are still technologically employed. “Staffing has been reduced, demand has been reduced for an employee that is normally full time to normally part time,” allowing these employees to receive partial unemployment for reduced pay.” We are also seeing efforts made to streamline and expedite the claims process and to withhold lifting and waiting periods that normally apply, she said.

Summers advised businesses to remain up to date on the differences between furlough and layoff, and how to handle insurance claims during furloughs. “Layoff may trigger lead payment obligations,” she said. Employers should continue to communicate information to employees at the outset of what they are doing. She also added that retention, although the “less tangible factor” here, should be considered in terms of the message “it sends to employees who are being terminated versus being furloughed.” She also noted that employers who are laying off more than 500 employees or more than 50 employees from a single location within a 30-day period need to submit a notice, as per the Warren Act, and for those “operating larger businesses who may be looking at larger layoffs, this may be something to keep in mind.”

Further, businesses can opt to “require employees to stack other paid leave or allow other employees to use other paid leave first,” and “may allow an employee to supplement using paid leave.” And finally, businesses can also consider reducing salaries for exempt workers, with the point being to “keep trying to keep the business afloat.” Once an employee is qualified as exempt, the employer is required to pay them a certain salary or they risk losing the exemption. Summers described this as an “across-the-board reduction” that is not based on the employee’s performance, but rather, on the business situation. Whichever the most reasonable and financially sound decision may be for businesses, she added that employers must communicate to employees on “what is going on,” take the time “to be wary of moves that could appear to be discriminatory, such as imposing salary reductions in one department, but not others."

This summary is for information purposes only and is not intended to constitute legal, tax, accounting or other professional advice. Consult your attorney for further information.

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