WITH GREAT THANKS TO THE LAW FIRM OF PUTNEY, TWOMBLY, HALL AND HIRSON, LLP
TREASURY, IRS AND LABOR ANNOUNCE PLAN TO IMPLEMENT CORONAVIRUS-RELATED PAID LEAVE
FOR WORKERS AND TAX CREDITS FOR SMALL AND MIDSIZE BUSINESSES
In our previous alert on Responding to the Coronavirus – Paid Sick Leave, we advised that on March 18, 2020, President Donald Trump signed into law the Families First Coronavirus Response Act (“FFCRA”), requiring employers to provide paid sick leave and paid family leave for eligible employees affected by COVID-19. These provisions were to take effect 15 days after the date of enactment, on April 2, 2020. The Act also allows for employers to a payroll tax credit for required paid sick leave and family leave, which enables employers to keep workers on their payrolls.
On March 20, 2020, the U.S. Treasury Department, Internal Revenue Services (“IRS”), and the U.S. Department of Labor announced a plan to implement the Act so that eligible employers can begin to immediately take advantage of two new refundable payroll tax credits to reimburse them, dollar-for dollar, for the cost of providing Coronavirus-related leave to their employees. Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and family leave under the Act. Eligible employers will be able to claim these credits based on qualifying leave provided between the effective date and December 31, 2020.
Equivalent credits are also available to self-employed individuals based on similar circumstances.
COMPLETE REIMBURSEMENT FOR EMPLOYERS PAID SICK LEAVE CREDIT
The Act provides that employees who are unable to work during the COVID-19 outbreak because of an order to quarantine or isolate, self-quarantine, or to seek medical diagnosis, may receive up to 80 hours of paid sick leave at 100% of the employee’s pay, up to $511 per day and $5,110 in the aggregate, for a total of ten (10) days.
Employees who are unable to work during the COVID-19 outbreak because they must care for another individual who is quarantined or isolated, or to care for a child whose school or child care facility as closed, or who is experiencing similar conditions as specified by the U.S. Department of Health and Human Services, may receive up to 80 hours of paid sick leave at 2/3 of the employee’s pay, up to $200 per day and $2,000 in the aggregate, for a total of ten (10) days.
Employers are allowed a tax credit for each calendar quarter in an amount equal to 100 percent of the qualified sick leave wages paid. Employers are also entitled to an additional tax credit based on costs to maintain health insurance coverage for the eligible employee during the leave period.
In addition to the sick leave, employees who are unable to work because they must care for a child whose school has been closed or child care provider is unavailable due to COVID-19 may receive up to an additional ten weeks of expanded paid family leave at 2/3 the employee’s pay, up to $200 per day or $10,000 in the aggregate. Up to ten (10) weeks of qualifying leave can be counted towards the paid family leave credit. Employers are allowed a tax credit for each calendar quarter in an amount equal to 100 percent of the qualified family leave wages paid. Employers are entitled to an additional tax credit based on costs to maintain health insurance coverage for the eligible employee during the leave period.
PROMPT FUNDING FOR THE COST OF PROVIDING LEAVE
Typically, employers are required to withhold from their employees’ paychecks federal income taxes and the employees’ share of Social Security and Medicare Taxes. The employers are then required to deposit the payroll taxes with the IRS and file quarterly payroll tax returns. Under guidance that will be released next week, eligible employers who pay qualified sick leave or family leave under the Act may retain an amount of the payroll taxes equal to the amount of qualifying sick leave and family leave paid, rather than deposit them with the IRS. The payroll taxes that may be retained include:
- federal income taxes
- employee’s share of Social Security and Medicare taxes
- employer’s share of Social Security and Medicare taxes
Moreover, if there are insufficient payroll taxes to cover the cost of qualified sick leave and family leave paid, employers may file a request for an accelerated payment from the IRS. The IRS expects to process such requests in two weeks or less. The details of this expedited process will be available later in the week.
The IRS provides examples of funding scenarios including the following:
Example 1: If an eligible employer pays $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, the employer could use up to $5,000 of the $8,000 payroll taxes to make qualified leave payments. The employer would be required to deposit the remaining $3,000 on its next regular deposit date.
Example 2: If an eligible employer pays $10,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, the employer could use the entire $8,000 of payroll taxes in order to make qualifying leave payments, and file a request for an accelerated credit for the remaining $2,000.
SMALL BUSINESS PROTECTION
The Act provides protection to certain small businesses with fewer than 50 employees. The Secretary of Labor may exclude such employers from the paid leave requirements, if the requirements would jeopardize the viability of the business as a going concern. The Department of Labor will provide emergency guidance and rule-making to clearly articulate this standard.
NON-ENFORCEMENT PERIOD FOR GOOD FAITH COMPLIANCE
Finally, the Department of Labor announced that it will be issuing a temporary non-enforcement policy to allow time for employers to come into compliance with the Act. Under the policy, the Department of Labor will not bring an enforcement action against any employer for violations of the Act during the 30-day period, so long as the employer acted reasonably and in good faith to comply, but will instead focus on compliance assistance.
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WITH GREAT THANKS TO THE LAW FIRM OF DUANE MORRIS
NEW YORK’S NEW JOB PROTECTED PAID LEAVE LAW – WHEN DOES IT APPLY AND HOW DOES IT TIE TOGETHER WITH THE FEDERAL FAMILIES FIRST CORONAVIRUS RESPONSE ACT TO TREASURY, IRS AND LABOR ANNOUNCE PLAN TO IMPLEMENT CORONAVIRUS-RELATED PAID LEAVE.
March 23, 2020
While the Quarantine Order definition above is vague on its face, based on legislative history and New York State Department of Health guidance, it appears it is intended to be construed narrowly.
NEW YORK COVID-19 SICK LEAVE AND BENEFITS
On March 18, 2020, Governor Andrew Cuomo signed into law Senate Bill 8091 (the Act), which guarantees certain leave, benefits and job protections to employees affected by COVID-19, effective immediately. The Act’s key provisions are summarized below.
SICK LEAVE
Employees who are subject to a “mandatory or precautionary order of quarantine or isolation issued by the state of New York, the department of health, local board of health, or any government entity duly authorized to issue such order due to COVID-19” (Quarantine Order) are entitled to certain amounts of job-protected sick leave, largely dependent on their employer’s size, as of January 1, 2020. There is no minimum period of employment required for employee eligibility.
- Employers with 100 or more employees must provide each employee subject to quarantine with at least 14 days of paid sick leave and unpaid leave until the termination of the Quarantine Order.
- Employers with between 11 and 99 employees must provide each employee subject to quarantine with at least five days of paid sick leave and unpaid leave until the termination of the Quarantine Order. Once paid leave has run out, employees are eligible for family leave and disability benefits.
- Employers with 10 or fewer employees must provide five days of paid sick leave to each employee subject to quarantine until the termination of the Quarantine Order, provided the employer earned more than $1 million in the previous tax year. Once paid leave has run out, employees are eligible for family leave and disability benefits. Employers with 10 or fewer employees that have a net income of less than $1 million in the previous tax year must provide each employee subject to a Quarantine Order with unpaid sick leave. During this period, employees are eligible for family leave and disability benefits.
The legislative history of the Act indicates that it is up to the local departments of health to determine what requires an order of isolation or quarantine. The NYSDOH’s previous interim COVID-19 guidance for local health departments may provide the most reliable definition for the time being. The NYSDOH requires local health departments to issue mandatory, precautionary quarantine orders if an individual has had close contact with a person who has tested positive or if an individual has traveled to certain countries. The Act’s March 18, 2020, Assembly legislative history indicates that the sick leave is intended to be available for employees who are active and who have an actual order of quarantine from the NYSDOH or other entities authorized from the Commissioner of Labor who can craft a declaration of quarantine. By contrast, the executive order that Governor Cuomo has issued directing the workforce of all nonessential businesses to stay home was issued through Article 29-A of the Executive Law and relates to powers of the governor during a public emergency; this statute is not limited to pandemics, and the governor does not refer to his order as one of quarantine or isolation.
Additionally, as drafted and interpreted by the governor’s Emergency COVID-19 Paid Sick Leave FAQ, the Act’s leave provided by private employers to employees must be in addition to and without loss of an employee’s accrued sick leave (this is despite the fact the legislative history indicates private employers who provide sick leave to employees may require employees to utilize that time before the provisions of the Act inure). The Act gives the Commissioner of Labor power to adopt regulations, including emergency regulations, and to issue guidance to implement the law, which may clarify employer obligations under the Act. Hopefully, such guidance will be issued shortly to provide definitive clarification over these important issues.
DISABILITY BENEFITS AND PAID FAMILY LEAVE
The Act authorizes employees who are subject to an unpaid period of quarantine to utilize disability benefits and New York State Paid Family Leave (NYPFL), to the extent they qualify, for any portion of the Quarantine Order for which they do not receive paid leave.
The Act also expands the definitions of disability and family leave to encompass a greater number of employees. Under the Act, “disability” is defined as the “inability of an employee to perform the regular duties of his or her employment or the duties of any other employment which his or her employer may offer him or her” as a result of a quarantine. The Act waives the seven-day waiting period for disability benefits, making them payable on the first day of disability. “Family leave” is defined as “leave taken by an employee from work when an employee is subject to a [quarantine] or to provide care for a minor dependent child of the employee who is subject to a [quarantine].”
Based on the above definitions, it appears that employees subject to a quarantine would be eligible for both disability and family leave benefits concurrently, unless they had not been employed long enough for eligibility for disability or paid family leave, i.e., 30 consecutive days and 26 consecutive weeks of employment for full-time employees, respectively. While the seven-day waiting period to commence receipt of disability benefits has been waived, the qualifying periods for employee eligibility for disability and paid family leave benefits appear to still be in place.
The Act also waives the one-week unemployment insurance benefits waiting period in instances where an employer closes because of COVID-19 or because of a mandatory government order and the employer terminates its employees. Eligible employees may collect up to $840.70 in NYPFL each week. The maximum weekly disability benefits an employee can collect is the difference between the $840.70 NYPFL maximum and the employee’s total average weekly wage, up to a maximum of $2,043.92 per week. NYPFL and disability benefits can be collected concurrently upon the first full day of an unpaid period of quarantine.
By way of example:
- If an employee earned $2,000 per week, and the employee was eligible for the maximum $840.70 in NYPFL, the employee would collect a total of $2,000 between disability benefits and NYPFL: $2,000 minus $840.70 (NYPFL maximum) equals $1,159.30 in disability benefits, plus an additional $840.70 in NYPFL, for an overall total of $2,000.
- If an employee earned $4,000 per week, and the employee was eligible for the maximum $840.70 in NYPFL, the employee would collect a total of $2,884.62 between disability benefits and NYPFL: $4,000 minus $840.70 (NYPFL maximum) equals $3,159.30 in disability benefits. However, as disability benefits are capped at $2,043.92, the employee would collect that maximum, plus an additional $840.70 in NYPFL for an overall total of $2,884.62.
EXCEPTIONS
The Act provides two exceptions relating to the ability to work and certain travel.
- First, the Act would not apply in cases where the employee is deemed asymptomatic or has not yet been diagnosed with any medical condition and is physically able to work while under quarantine, whether through remote access or other similar means.
- Second, an employee shall not receive paid sick leave or any paid benefits provided by the Act if the employee is subject to a Quarantine Order because the employee has returned to the United States after traveling to a country for which the CDC has a level 2 or 3 health notice for personal reasons, and if the employee was provided notice of the travel health notice and the limitations of this exception prior to such travel. In this instance, the employee can use accrued leave, or if no accrued leave is available, the employee may take unpaid sick leave for the duration of the Quarantine Order.
JOB PROTECTION
When an employee returns to work following a quarantine, employers must restore the employee to his or her position of employment held prior to any leave taken, with the same pay and other terms and conditions of employment. The Act also prohibits employers from discharging, threatening, penalizing or otherwise discriminating or retaliating against employees for taking protected leave. The Act does not prohibit employers from terminating employees due to the need for layoffs as a result in changed demand or need for employment services.
RELATIONSHIP WITH FEDERAL LAW
The Act only provides sick leave and/or benefits in excess of those provided by any federal COVID-19 sick leave and/or benefits. On March 18, 2020, President Donald Trump signed into law the Families First Coronavirus Response Act (FFCRA), as reported in this Duane Morris Alert. While the FFCRA has been enacted, its effective date is not later than April 2, 2020. So at least as of April 2, employers will have to compare both state and federal laws to determine whether state law provides any benefits in excess of those provided by the FFCRA. It is unclear if an employer can apply the FFCRA effective immediately so that it runs concurrently with benefits required under the Act.
The FFCRA provides two separate employment benefits―emergency sick leave and expanded Family and Medical Leave Act use. Employees are eligible to use emergency sick leave under the FFCRA for a broader range of reasons than permitted under the Act, as shown in a side-by-side comparison in the following chart. If employees are eligible to use sick leave, the chart further compares the amount of such leave to which those employees are entitled under the Act and the FFCRA.
| SICK LEAVE | ||
| QUALIFYING REASONS FOR SICK LEAVE | ||
| The Act (New York) | FFCRA (Federal) | |
| Permitted Reasons for Taking Sick Leave | Employees are potentially eligible for sick leave when they are “subject to a mandatory or precautionary quarantine or isolation order issued by the state of New York, the Department of Health, the local board of health, or any governmental entity duly authorized to make such an order due to COVID-19.” | Employees are potentially eligible for sick leave when they are unable to work (or telework) because they (1) are subject to a federal, state or local quarantine or isolation order related to COVID-19; (2) have been advised by a healthcare provider to self-quarantine due to COVID-19 concerns; (3) are experiencing COVID-19 symptoms and seek a medical diagnosis; (4) are caring for an individual subject to an order described in item 1 or have been advised as a person in item 2; (5) are caring for their child if the child’s school or child care has been closed, or the child care provider is unavailable due to COVID-19 precautions; or (6) are experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and Secretary of Labor. |
| AMOUNT OF SICK LEAVE PROVIDED BASED ON SIZE OF EMPLOYER | ||
| Private Employers | The Act (New York) | FFCRA (Federal) |
| 500 or more employees | 14 days of paid sick leave and unpaid leave until the termination of the quarantine (part-time proportionate to time worked) | No provisions |
| 100-499 employees | 14 days of paid sick leave and unpaid leave until the termination of the quarantine (part-time proportionate to time worked) | 80 hours of paid sick leave (10 work days) and part-time employees are entitled to a number of hours equal to the number of hours that such employee works, on average, over a 2-week period |
| 51-99 employees | 5 days of paid sick leave and unpaid leave until the termination of the quarantine (part-time proportionate to time worked) | 80 hours of paid sick leave (10 work days) and part-time employees are entitled to a number of hours equal to the number of hours that such employee works, on average, over a 2-week period |
| 11-50 employees | 5 days of paid sick leave and unpaid leave until the termination of the quarantine (part-time proportionate to time worked) | 80 hours of paid sick leave (10 work days) and part-time employees are entitled to a number of hours equal to the number of hours that such employee works, on average, over a 2-week period, unless exempted as a small business with fewer than 50 employees when the imposition of such requirements would jeopardize the viability of the business |
| 10 employees or less and a net income of greater than $1 million in the previous tax year | 5 days of paid sick leave and unpaid leave until the termination of the quarantine (part-timers paid time proportionate to time worked) | 80 hours of paid sick leave (10 work days) and part-time employees are entitled to a number of hours equal to the number of hours that such employee works, on average, over a 2-week period, unless exempted as a small business with fewer than 50 employees when the imposition of such requirements would jeopardize the viability of the business |
| 10 employees or less and a net income of less than $1 million in the previous tax year | Unpaid sick leave | 80 hours of paid sick leave (10 work days) and part-time employees are entitled to a number of hours equal to the number of hours that such employee works, on average, over a 2-week period, unless exempted as a small business with fewer than 50 employees when the imposition of such requirements would jeopardize the viability of the business |
| RATE OF PAY FOR BENEFITS PAID | ||
| The Act (New York) | FFCRA (Federal) | |
| Employee subject to a federal, state or local quarantine or isolation order related to COVID-19 | Employees eligible for paid sick leave are entitled to full pay | Paid sick leave calculated at employee’s regulate rate capped at $511 per day and $5,110 in the aggregate |
| Employee has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19, or employee is experiencing symptoms of COVID-19 and seeks a medical diagnosis | Act not applicable | Paid sick leave calculated at employee’s regulate rate capped at $511 per day and $5,110 in the aggregate |
| Employee is caring for an individual who is subject to an order or has been advised by a healthcare provider to self-quarantine; employee is caring for his or her child if school or child care close or unavailable; or employee is experiencing any other substantially similar condition | Act not applicable | Paid sick leave calculated at two-thirds the employee’s regular rate capped at $200 per day and $2,000 in the aggregate |
The following chart compares the FFCRA’s FMLA provisions with the Act’s NYPFL provisions.
| NYPFL and FMLA | ||
| QUALIFYING REASONS FOR LEAVE | ||
| The Act (New York) | FFCRA (Federal) | |
| Permitted reasons for taking leave | Employees are potentially eligible for NYPFL when subject to a Quarantine Order or if they need to provide care for a minor dependent child who is subject to a Quarantine Order | Employees are potentially eligible for FMLA leave when they are unable to work (or telework) due to a need for leave to care for a child under 18 if their school or place of care has been closed, or the child care provider is unavailable, due to a public health emergency |
| ELIGIBILITY | ||
| The Act (New York) | FFCRA (Federal) | |
| Application | Applies to employees subject to an unpaid period of Quarantine Order | Applies to employers with fewer than 500 employees. The Secretary of Labor may exempt small businesses with fewer than 50 employees when the leave would jeopardize the business’s viability |
| AMOUNT OF BENEFITS | ||
| The Act (New York) | FFCRA (Federal) | |
| Calculation | NYPFL benefits are paid at 60% of an employee’s average weekly wage, up to the stated maximum. Employees can also tap into state disability benefits concurrently with paid family leave | After the first 10 days of leave, the employer must provide paid leave for the remaining FMLA period at an amount that is not less than two-thirds of an employee’s regular rate of pay and the number of hours the employee would otherwise normally be scheduled to work |
| Maximum | NYPFL benefits are capped at $840.70 per week. Disability benefits are capped at $2,043.92 per week, as calculated in the text examples above | Benefits are capped at $200 per day and $10,000 in the aggregate |
WITH GREAT THANKS TO THE LAW FIRM OF DUANE MORRIS
NEW YORK STATE ON PAUSE EXECUTIVE ORDER
On March 20, 2020, Governor Cuomo issued the New York State on PAUSE Executive Order effective March 22, 2020, at 8:00 p.m. until further notice. The order requires, among other things:
- All businesses in the state utilize, to the maximum extent possible, any telecommuting or work from home procedures they can safely utilize.
- Employers must reduce in-person workforces at all New York work locations by 100 percent no later than March 22 at 8:00 p.m. (this has updated two prior executive orders issued shortly before that first required in-person workforce reduction of 50 percent, then 75 percent).
These restrictions do not apply to essential businesses or entities providing essential services or functions. Essential businesses are:
- Essential healthcare operations
- Essential infrastructure
- Essential manufacturing
- Essential retail
- Essential services
- Financial institutions
- Providers of basic necessities to economically disadvantaged populations
- Construction
- Defense
- Essential services necessary to maintain the safety, sanitation and essential operations of residences or other essential businesses
- Vendors that provide essential services or products, including logistics and technology support, child care and services
RELATIONSHIP WITH THE ACT
While the Act’s vague language left room for the interpretation that this executive order would trigger the Act’s benefits and protections for employees, as discussed above, upon careful analysis of the statute and legislative history, it does not appear to as the Act’s coverage is only triggered by an employee’s receipt of “a mandatory or precautionary order of quarantine or isolation issued by the state of New York, the department of health, local board of health, or any governmental entity duly authorized to issue such order due to COVID-19.”