For our inaugural COVID-19 Town Hall on March 24, 2020, our very own Chief ERISA Geek David LeFevre gave practical guidance on coronavirus-related employee benefits topics including furlough and leave management and the Families First Coronavirus Response Act, freshly signed the week prior.
ERISAfire COVID-19 Town Hall Recording - Week 1
March 24, 2020
Families First Coronavirus Response Act (FFCRA)
Can an employer require employees to use their accrued PTO or paid vacation concurrently with FFCRA-mandated closed school/daycare leave?
Yes, with some exceptions. An employer can require that FFCRA-mandated Emergency Family Medical Leave (EFMLA leave, which we call "closed school/daycare leave") run concurrently, much like employers can do with ordinary FMLA leave. (If you've read something to the contrary, know that on April 10, DOL published corrections to its April 6 regulations clearing up some drafting inconsistencies that provided for a different result.)
However, for the first two weeks of the 12-week leave period, if the employee is taking FFCRA-mandated sick/quarantine leave, an employer cannot require the employee to exhaust PTO, vacation or sick time. Effectively, it means that the first two weeks of closed school/daycare leave will be paid sick/quarantine leave, then PTO can be debited, then non-PTO closed school/daycare leave is provided.
Another caveat: if the PTO or other employer-provided leave cannot be used to care for a child (e.g., sick time), it cannot be debited for closed school/daycare leave.
Can an employer require employees to use their accrued PTO, paid vacation or paid sick time first before providing FFCRA-mandated paid sick/quarantine leave?
No. The FFCRA requires that employees be free to choose from the leave types at their disposal. Requiring employees to exhaust existing leave before providing FFCRA-mandated paid sick/quarantine leave is prohibited.
Which businesses must comply with the paid sick/quarantine leave and paid school/daycare closure leave mandates in the FFCRA?
Both paid leave mandates apply to companies with fewer than 500 employees. Employers with fewer than 50 employees may qualify for an exemption if an authorized officer of the business documents and certifies that one of the following applies:
The provision of paid sick leave or expanded family and medical leave would result in the small business’ expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.
How is the 500-employee threshold determined, and at what point in time?
Pursuant to temporary regulations issued by the Department of Labor (DOL), the 500-employee threshold is measured each an every time an employee requests leave. (Ouch.)
Controlled group rules under Internal Revenue Code Section 414 do not apply. Instead, DOL has created a kind of hybrid of the joint employer test from the Fair Labor Standards Act (FLSA) and the integrated employer test from the Family Medical Leave Act (FMLA). Oversimplifying quite a bit, this essentially means that parent, subsidiary or other affiliated companies in a controlled group will be combined as a single employer for purposes of the 500-employee threshold only if they can show there are combined management and human resources functions.
Based on our analysis of the temporary regulations, an employer with affiliated, parent and/or subsidiary companies should start first with the FMLA integrated employer test, which is a pretty broad test under which common ownership is a factor. Add up all the employees of the companies that meet the integrated employer test, then move to the FLSA joint employer test and add them to the first sum. Now you've got your employee count.
Confused yet? We understand. It's not easy, but we're here to help. Just ping us on the in-app messenger (the little blue guy in the lower right corner).
If an employer's employees are furloughed—either by temporary layoff or reduction in hours to zero—do the FFCRA paid leave mandates apply?
No, but there is one caveat.
The FFCRA does provide for a refundable payroll tax credit to cover the cost of its paid leave mandates, but the paid leave must be provided first and then later reimbursed through payroll taxes, which could present real cash flow concerns for employers. Furloughs, reductions in force (RIFs) and layoffs may be the only option for some employers.
DOL threw employers a bone here. In its FAQ guidance DOL expressly stated that employees do not have any FFCRA paid leave entitlement after employment is terminated (even temporarily) or hours are reduced to zero.
Be careful, though, because both the statute and the temporary regulations contain non-interference provisions that prohibit employers from interfering with an employee's exercise of FFCRA rights. If an employer terminated employment or reduced hours to zero for the purpose of avoiding the FFCRA paid leave mandates, it's possible the employer could be held liable.
Under what circumstances can employees request paid closed school/daycare leave?
EFMLA leave (closed school/daycare leave) is available if: an employee's child’s school or daycare is closed, or the employee's regular child care provider is unavailable, due to reasons related to COVID-19. This leave is available to parents whose children are 17 or younger (that is, under 18). Employers can require their employees to provide documentation to support the leave and should keep records of that to qualify for the tax credit.
Other Compliance and Risk Management Issues
Has the DOL extended the filing deadline for Forms 5500?
Yes, but not for calendar year Forms 5500, which are still due July 31, 2020.
The CARES Act did expand ERISA Section 518 "Authority to postpone certain deadlines by reason of Presidentially declared disaster" to include "a public health emergency declared by the Secretary of Health and Human Services," and the Department of Labor has delivered.
Both retirement and welfare plan Forms 5500 due between April 30 and June 30 have had their deadlines extended to July 15. Employers don't need to apply for this extension; it's automatic. Employers with calendar year ERISA plans, however, are out of luck: those are still due July 31.