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PPP And Employee Retention Credit

Loan Forgiveness and Tax Credits

Both the Paycheck Protection Program (PPP) and the Employee Retention Credit provide financial relief to businesses that retain employees. Employers should compare the benefits of both programs to confirm which program provides the most economic support for the business and the employees.

Paycheck Protection Program

The main driver of the small business stimulus in the CARES Act was the Paycheck Protection Program (PPP). Many small businesses have already applied for and received funding from the PPP. This FAQ will address what the funds can be used for and how to apply for loan forgiveness.

Frequently Asked Questions

  • Paycheck Protection Program

    1. What are permitted uses for PPP Loans?

      • Payroll costs (as described below);
      • Interest on mortgage obligations, incurred before February 15, 2020;
      • Rent, under lease agreements in force before February 15, 2020; and
      • Utilities, for which service began before February 15, 2020

       

    2. When does loan forgiveness periods begin?

      Subject to some exceptions, forgiveness is generally available for costs incurred with respect to thees items during the borrower’s “Covered Period,” which is the eight-week period that beings on the date the PPP loan was disbursed.

       

    3. How will the amount of loan forgiveness be determined? Can a PPP loan be fully forgiven?

      Yes, the amount of the loan can be fully forgiven as long as certain conditions are met. The specific amount will generally depend in part on what portion of the loan is used on eligible payroll costs and whether the employer has maintained staffing and pay levels during the covered period.

      A loan may be fully forgiven if all the following three conditions are met:

      • The loan proceeds are spent, or qualifying costs are incurred, within 8 weeks of receipt of the loan proceeds.
      • At least 75 percent of the forgiveness amount was used for eligible payroll costs, and no more than 25 percent was used for the other Loan Uses described above.
        Example: If a small business seeks 100% forgiveness on a loan for $50,000, at least $37,500 must be for payroll costs during the 8-week period following disbursement of the loan. No more than $12,500 may be for the other Loan Uses described above.
      • Staffing and pay levels must be maintained during the 8-week period immediately following disbursement of the loan (see below).

       

    4. What is the period within which I must spend my loan proceeds to obtain full loan forgiveness?

      To obtain full forgiveness, loan proceeds must be spent during the 8-week period immediately following disbursement of the loan (the Covered Period). If you pay your employees on a biweekly or more frequent schedule, you may choose to begin the period on the first day of the first pay period following disbursement of the loan (“Alternative Payroll Covered Period”) for qualifying payroll costs only.

       

    5. What Payroll Costs can be deducted for loan forgiveness?

      The SBA’s guidance allows a PPP borrower to deduct payroll costs “paid” or “incurred” during the borrower’s eight-week Covered Period (or an Alternate Payroll Covered Period).

       

    6. When are payroll costs considered paid?

      Payroll costs are considered paid on the day that paychecks are distributed or that the borrower originates an ACH credit transaction. Payroll costs are considered incurred on the day that the employee earned pay. This distinction allows employers some flexibility in timing their use of PPP funds.

      EG: Payroll costs incurred but not paid during the borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if the borrower pays them by its next regular payroll date.  Otherwise, the SBA’s guidance requires that payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period) to qualify.

       

    7. What is an Alternate Payroll Covered Period?

      The SBA provides for an Alternative Payroll Covered Period that caters to borrowers with a biweekly (or more frequent) payroll schedule, allowing them to elect to calculate eligible payroll costs using the eight-week period that begins on the first day of their first pay period following the disbursement of PPP proceeds.  Borrowers who opt for the Alternative Payroll Covered Period are still required to use the standard Covered Period for other costs.  

       

    8. What is considered Cash Compensation for loan forgiveness?

      Under the SBA’s guidance, the total amount of cash compensation that is eligible for forgiveness for each individual employee cannot exceed an annual salary of $100,000, as prorated for the Covered Period; that is, it cannot exceed $15,385.  For these purposes, “cash compensation” includes the sum of gross salary, gross wages, gross tips, gross commissions, paid leave (vacation, family, medical or sick leave, not including leave covered by the Families First Coronavirus Response Act), and allowances for dismissal or separation paid or incurred during the Covered Period or the Alternative Payroll Covered Period.

       

    9. What is considered Non-Cash Compensation for loan forgiveness?

      Non-cash compensation includes the following and is NOT subject to the prorated limit discussed above:

      • The total amount paid by the borrower for employer contributions for employee health insurance, including employer contributions to a self-insured, employer-sponsored group health plan, but excluding any pre-tax or after-tax contributions by employees.
      • The total amount paid by the borrower for employer contributions to employee retirement plans, but excluding any pre-tax or after-tax contributions by employees.
      • The total amount paid by the borrower for employer state and local taxes assessed on employee compensation (e.g., state unemployment insurance tax), but not including any taxes withheld from employee earnings.

       

    10. What about compensation to owners?

      The SBA’s guidance allows for the forgiveness of amounts paid to owners (e.g., owner-employees, a self-employed individual, or general partner). The amount eligible for forgiveness is capped at the lower of (1) $15,385 (the eight-week equivalent of $100,000 per year) for each individual or (2) the eight-week equivalent of the owner’s applicable compensation in 2019, whichever is lower.

       

    11. What other non payroll costs are eligible for loan forgiveness?

      Covered Mortgage Obligations.  The amount of business mortgage interest payments during the Covered Period for any business mortgage obligation on real or personal property incurred before February 15, 2020.  The guidance defines “business mortgage interest payments” as payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property that was incurred before February 15, 2020.

      Covered Rent Obligations.  The amount of business rent or lease payments for real or personal property during the Covered Period pursuant to lease agreements that were in force before February 15, 2020. 

      Covered Utility Payments. The amount of business utility payments during the Covered Period for business utilities for which service began before February 15, 2020.  The guidance defines “business utility payments” as business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020. 

       

    12. Can we pay for non payroll costs in advance and they be eligible for forgiveness?

      The SBA’s guidance further provides that an eligible non-payroll cost must either be (1) “paid” or (2) “incurred” during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period.  Moreover, the SBA provides that eligible non-payroll costs cannot be more than 25% of the total forgiveness amount. 

       

    13. Can businesses provide raises or bonuses to their employees over the 8-week window and will that be considered payroll and thus forgiven?

      If people are hired during the 8-week period, yes they would count against payroll and the forgiveness calculation at a maximum of $100K per person on an annualized basis. Bonuses should be in the normal course of business and overall reasonable.

       

    14. If you have a deferral for rent or interest, can you take that deferral as an expense and apply that expense to non-payroll costs even though there is no cash outflow? If you have a deferral for rent or interest, can you take that deferral as an expense and apply that expense to non-payroll costs even though there is no cash outflow?

      We believe so. You are not allowed to pre-pay any expenses, but catching up on rent is not expressly prohibited in the CARES Act or guidance. To be clear, however, you need to pay the rent during the 8-week period. For example, if you deferred your March rent and you then pay it in May, during the 8-week period; we believe that “catch-up” payments would be allowed (subject to the 75/25 split). Pre-payments do not seem to be allowable.

       

    15. Can we use the money to pay Q1 payroll taxes and have it considered for forgiveness?

      Employer portion of FICA and FUTA is not considered payroll. The payroll definition includes the gross payroll of the employee (which inherently includes the employee portion of FICA). So any payroll taxes would need to be only the employee portion. Employer SUTA would also be includable as a payroll expense if paid during the 8-week period.

       

    16. What if your pay periods don’t fall nicely into the 8-week time period? For example, we pay semi-monthly, and depending on when the loan is funded, we could have a pay date fall right after the end of the 8 weeks, even though employees would be paid for work/time during the 8 weeks. How does your payroll being paid semi-monthly (15th and 30th) complicate the 8 weeks of wages amount to use in your calculation depending on the funding date?

      Unfortunately, it appears that the CARES Act looks at this on a “cash basis,” and it will be dependent on when those payrolls are paid within the 8-week period.  You could consider working with your bank to defer funding for a few days as that should help with the timing.

       

    17. What is considered a utility payment – cell phones, internet, landlines? Would this also include cell phones? For forgiveness purposes, is the cost of internet service considered a utility payment?

      Utility payments include electricity, gas, water, transportation, telephone and internet, and would be considered an eligible expense for debt forgiveness.

       

    18. As the owner of an S Corp who took a $50k W-2 in 2019, can I “give myself a raise” to use up the 2.5x monthly salary amount to have the entire loan forgiven (assume no rent/utilities for simplicity)?

      The CARES Act and guidance does not explicitly say you cannot, but we would caution against practices that are not consistent with prior practices to simply “use up” the funds and increase forgiveness, particularly if they do not have a reasonable business justification.

       

    19. What happens to the loan if I laid-off employees receiving that extra $600/week on unemployment insurance refuse to return to work when they are offered their jobs back?

      The SBA and Treasury plan to issue a new rule excluding laid-off employees whom the borrower offers to rehire (for the same salary/wages/hours) from the loan forgiveness reduction calculation.

      In other words, an employer will not lose PPP loan forgiveness if they make a good-faith, written offer to rehire a laid-off employee and have documented evidence of being turned down by the employee. Instead the borrower can exclude the employee from the loan-forgiveness reduction calculation required under the Act.

       

    20. What are the calculations used to determine reduction of loan forgiveness eligibility?

      Average number of FTEs/month employed by the borrower from 2/15/19 to 6/30/19 or

      Average number of FTEs/month employed by the borrower from 1/1/20 to 2/29/20

      Restoring employee full time equivalent levels and salary/hourly levels by June 30, 2020 will assist you in maximizing the amount of your loan eligible for forgiveness.

       

    21. How do I estimate my PPP loan forgiveness?

      There are many factors that must be used to estimate your loan forgiveness. We have created a loan forgiveness estimator to assist you with understanding how much of your PPP loan may be forgiven.

       

    22. What are the factors used to determine loan forgiveness? I thought is was 100% of payroll and 25% of non cash expenses (like rent, utilities, etc)?

      Guidance is still forthcoming but we know that 75% of the loan must be used for payroll costs. The amount of the loan that can be forgiven is further reduced proportionately based on the difference between FTEs and wages paid levels during the covered period and the number of FTE and wages paid during a look back period. Then the amount of loan forgiveness attributable to non-payroll costs is limited to 25% of the loan forgiveness amount.

       

    23. What are the calculations used to determine reduction of loan forgiveness eligibility?

      If an employer reduces the number of FTEs during the covered period, then the amount of loan forgiveness eligibility will be reduced proportionately. The following formulas will be used based on reductions in the number of FTEs:

      • Average number of FTEs per month employed by the borrower during the covered period divided by either the:
          • Average number of FTEs/month employed by the borrower from 2/15/19 to 6/30/19 or
          • Average number of FTEs/month employed by the borrower from 1/1/20 to 2/29/20

       

    24. How is the FTE count per month determined?

      The average number of FTEs is determined by calculating the average number of FTEs for each pay period falling within a month.

       

    25. Is there an advantage to hiring more employees now that we have the PPP loan?

      Forgiveness is based on the employer maintaining or quickly rehiring and maintaining wages paid. Forgiveness will be reduced if FTEs declines or if salaries and wages decrease during the covered period. If FTEs and/or wages paid decline, you’ll owe some money back. The same is true if salaries and wages decrease more than 25% for any employee making under $100,000.

       

    26. What is the definition of a FTE?

      According to the Schedule A worksheet in Form 3508, a borrower must, for each employee, enter the average number of hours paid per week, divide by 40 and round the total to the nearest tenth. No one may be counted as more than 1 FTE. A borrower may, if it elects to do so, use a simplified method and simply ascribe 1.0 for each employee who works 40 hours or more per week and a .5 for each employee who works less than 40 hours per week.

       

    27. Will a borrower need to repay all or a portion of the PPP loan amount borrowed even if it applies for loan forgiveness?

      Yes, unless the borrower meets one or both of the safe harbors for loan forgiveness reduction, it is possible that all or a portion of the loan amount will not be forgiven if the borrower has 1) reduced the salary/hourly wages (by more than 25 percent) of any employee who made $100,000 or less in any pay period in 2019 or was not employed by the borrower in 2019 or 2) reduced its average weekly number of FTE employees.

       

    28. What are the Safe Harbors from Loan Forgiveness Reduction?

      This safe harbor is determined on an individual employee level for each employee. 1) who received compensation at an annualized rate of less than or equal to $100,000 for all pay periods of 2019 or were not employed by the borrower in 2019 and 2) whose salary/hourly wage was reduced by more than 25% during the Covered Period or the Alternate Payroll Covered Period compared to the period of January 1, 2020 to March 31, 2020.

       

    29. Must an employer request forgiveness of the loan from the lender?

      Yes, you must request written request of loan forgiveness from the lender. You will do so by completing form 3508.

       

    30. Who do I submit my loan forgiveness documentation to?

      A request should be made to the lender servicing the loan.

       

    31. How long will it take to know if the loan is forgiven?

      The lender must make a decision on forgiveness within 60 days. Loan payments will be deferred for a minimum of six months in the event you do have to pay on the loan. Interest will accrue during this time.

       

    32. What if expenses turn out to be lower than the amount of the loan?

      Any amount of the loan that is not forgiven must be repaid. There are no prepayment penalties.

       

    33. Is the corporation taxed on the full amount of the loan they receive?

      On April 30,2020, the IRS issued Notice 2020-32 to address the deductibility of loan amounts received under the PPP. In summary, the IRS stated no tax deduction will be allowed for expenses paid with PPP loan proceeds to the extent such amounts are forgiven under the terms of the CARES Act.

      In other words, the tax consequences to a loan recipient will be the same as if the PPP loan amounts received were included in gross income and subject to tax.

       

    34. What are the tax consequences of the notice?

      The disallowance of a deduction of Covered Expenses reduces the tax benefit available to PPP loan recipients. In some cases, a prospective loan recipient may be in a better financial position if it does not obtain a PPP loan.

       

    35. Can you provide some examples?

      Example 1 – Net Benefit. Consider a corporate loan recipient that will pay $1 million in employee payroll costs regardless of whether it receives a PPP loan. The recipient obtains a $1 million PPP loan, and uses the loan to pay $1 million in payroll costs that qualify as Covered Expenses. The loan is fully forgiven. Before the Notice, the recipient does not have any additional taxable income from the loan proceeds and has a net benefit of $1 million. After the Notice, the recipient has in effect an additional $1 million in taxable income, producing a federal tax bill of $210,000. For this employer, the PPP loan still produces a net benefit after the Notice in the amount of $790,000.

      Example 2 – Break Even. Consider the same facts as in Example 1, except the loan recipient will not pay employee payroll costs unless it receives a PPP loan. For this employer, there will be no financial benefit in obtaining a PPP loan. If the employer does not receive a PPP loan it will furlough, or lay-off, employees and avoid payroll costs, which results in no tax impact. Under the Notice, the receipt of a $1 million PPP loan will similarly have no tax impact on the employer. The PPP loan is excluded from gross income and the Covered Expenses may not be deducted. Before the Notice, the employer would receive a net benefit equal to the amount of its deduction—$1 million. This employer will want to weigh the additional costs of obtaining a PPP loan (e.g., time spent on application, attorneys’ fees and risk of audit) against the benefit of retaining employees.

      Example 3 – Loss. Consider the same facts as in Example 2, except the loan recipient uses over 25% of the loan proceeds for non-Covered Expenses. In this case, the employer will be out-of-pocket for the non-Covered expenses. The amounts used for Covered Expenses will not be deductible, and result in no tax impact to employer. The employer will then have to repay the portion used for non-Covered Expenses. In this scenario, the employer is better off if it does not obtain a PPP loan. Before the Notice, the employer would have the added tax benefit of the Covered Expense deduction to help offset costs of loan repayment.

      Example 4 – Pass-Through Entities. Pass-through entities face significant tax consequences after the Notice. Consider an S-corporation that receives a $1 million PPP loan. The S-corporation has 10 shareholders, each of which receive a salary of $100,000. Each shareholder is subject to a 40-percent income tax rate (including both federal and state). After the Notice, the S-corporation receives no deduction for payroll expenses at the entity level. Because an S-corporation is a flow-through entity, the disallowance of deductions results in an additional 40-percent tax on the $1 million. Based on the 40-percent income tax rate and 40-percent effective tax due to disallowance of deductions, the S-corporation will only have a net benefit of $200,000.

       

    36. What has not been answered under the new guidance? 

      • Are bonuses able to be counted as cash compensation?
      • What is the deadline for submission of the PPP Loan Forgiveness Application?
      • What if the borrower’s business was subject to local orders that required it to be closed and the borrower was not able to pay its employees during the Covered Period or the Alternative Payroll Covered Period?
      • How does one compare employee salary/hourly wages and calculate FTEs if a borrower is acquired during its chosen covered period?
      • What type of transportation, telephone or internet access payments qualify as a covered utility for purposes of loan forgiveness?
      • Are mortgage obligations only those obligations evidencing indebtedness used specifically to finance the purchase of real (i.e., a warehouse) or personal (i.e., an automobile) property, or do they also include obligations secured by the borrower’s real or personal property where the use of the proceeds of such debt was not limited to such purchase (i.e., for a new acquisition or working capital)?
      • How do the Salary/Hourly Wage Reduction Safe Harbor and the FTE Reduction Safe Harbor work when the June 30, 2020, safe harbor date is during a borrower’s Covered Period or Alternative Payroll Covered Period?
  • Employee Retention Credit

    1. What is the Employee Retention Credit and how do we get it?

      The CARES Act contains a business relief provision known as the employee retention credit. This is a refundable payroll tax credit for “qualified wages” paid to retained employees between March 13, 2020 and December 31, 2020.

      The purpose of this provision is to encourage employers to keep employees on the payroll, even if they are not working during the covered period due to the effects of the COVID-19 outbreak.

       

    2. What credit is available under the Employee Retention Credit?

      The ERC provides an up to $5,000 refundable credit for each full-time employee you retain between 3/13/20 and 12/31/20.

       

    3. What are the key takeaways I need to know to obtain the Employee Retention Credit?

      • You qualify as an employer if you were ordered to fully or partially shut down or if your gross receipts fell below 50% of the same quarter in 2019
      • You can claim your credit immediately by reducing payroll taxes sent to the IRS.
      • If your credits exceed payroll taxes, you can request a direct refund from the IRS.
      • You should compare this credit with PPP since you can’t take advantage of both—but since PPP applications are suspended pending additional funding, look at this especially carefully.

       

    4. How do I qualify as an eligible employer for the Employee Retention Credit?

      In order to qualify to receive this credit you must carry on a trade or business in 2020 and either have had to:

      • Fully or partially suspend business operations during any calendar quarter in 2020 due to orders from a government authority; or
      • Experienced a “significant decline in gross receipts” during a calendar quarter equal to less than 50% of gross receipts in the same quarter in 2019

      For example, if you own a restaurant that is ordered closed to sit-down customers but allowed to continue carryout, drive-thru, or delivery operations, that qualifies you for the credit based on a coronavirus-related partial shutdown. You are qualified for any quarter during which the government order applied—up to four quarters in 2020.

       

    5. How do I determine the number of full-time employees I count for the credit?

      The number of full-time employees you averaged in 2019 determines which employees you can claim for the credit. If you averaged more than 100 full-time employees, only wages for those you retain who are not working can be claimed. If you employed 100 or fewer workers, you can claim wages for all employee whether they are working or not.

       

    6. Are individuals making more than $100,000 threshold counted toward the FTEE count?

      There was some confusion as to what the $100,000 threshold applied to. All employees, regardless of their salary levels, are included for the FTEE count.

       

    7. Can I take both the Employee Retention Credit and the PPP?

      Both the Employee Retention Credit and the Paycheck Protection Program (PPP) provide financial relief to businesses that retain employees. Unfortunately, you can’t take advantage of both. You have to choose.

      You will want to determine which program provides the most economic support for you and your employees.

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The content provided has been prepared from various sources and is for informational purposes only and does not constitute legal advice. We hope you find the information useful. The information should not be used to act upon without first seeking appropriate legal counsel. 

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COVID-19

Your Coronavirus Headquarters

If you are like many of the employers across the nation – you are likely receiving unique questions around your benefit offerings that stem from COVID-19. We have created this page to use as a living resource to answer the most common questions sliding across our desk. 

NEW! H.R. 6201 Mandates Paid Leave

In response to COVID-19, Congress passed H.R. 6201 and the President signed it into law as of March 19th. Known as the “Families First Coronavirus Response Act,” this legislation makes temporary changes that require coverage of COVID-19 testing, paid sick leave, and expanded FMLA coverage. The provisions laid forth in the bill went into effect April 2, 2020 and will sunset December 31, 2020.

Frequently Asked Questions

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CARES ACT Frequently Asked Questions

  1. Regarding the broad definition of the stay at home order – if you are listed as an essential business, is the employee still able to use the sick bank if they do not want to come in and do not have a doctors note?  This is two questions in one. Nobody can use the sick leave without a doctor’s note, or to get diagnosed due to symptoms as described by the CDC (fever, dry cough, or shortness of breath).  
    On the federal level, there has been guidance from the Department of Homeland Security defining essential business and advising local governments to exempt them from stay at home orders.  Localities do not have to follow this guidance at this point, but in the case of Governor Desantis’s order, Florida has done so. All that to say – essential business’s employees still have the ability to take both forms of leave as long as they have a qualifying reason.  Only emergency workers and healthcare workers are unable to utilize this leave under exceptions found in number 56 and 57 of the Department of Labor’s Questions and Answers.
  2. Regarding telework requirements – we have limited laptops available and actually pulled some back from some employees in the event we needed to redeploy them during a quarantine/shutdown.  Since we are an essential business that is still working, if an employee could telework are we required to provide them with a laptop if they do not currently have one? 
    The DOL has encouraged flexibility in this area. If they have a personal computer and are able to use it instead, that is an option.  (See the example in the second paragraph of page 15 of the temporary rules promulgated by the Department of Labor.) It is our understanding that if you are operating in a locality that is following the Department of Homeland Security’s guidance (such as the State of Florida) regarding essential businesses, “Workers should be encouraged to work remotely when possible and focus on core business activities. In person, non-mandatory activities should be delayed until the resumption of normal operations.”  The guidelines encourage you to make every reasonable effort to allow telework, but it is not a requirement.
  3. We pay base plus commission.  If our average commissions go down during the forgiveness verification period, it will be held against us, even though it’s a function of our projects that are paid out. 
    This appears to be true.  Keep in mind that unless there is a 25% reduction in pay compared to the most recent full quarter, it will not be held against you.  It’s only salary reduction in excess of that 25% that will reduce the forgivable portion of your loan. It would be advisable, however, to discuss this with your bank to fully understand how the forgiveness will be handled in this specific instance. As regulations are finalized, this may be addressed more specifically, so stay tuned.
  4. Have you heard if the bill includes the “pause” of student loans for 6 months?  I have heard both yes and no and I have a few employees who have asked me about this. 
    Under the CARES Act, all payments of principal and interest for certain federal student loans are suspended, and will be treated as if made for the purposes of credit reporting.  The bill also allows employers to pay up to $5,250 annually towards an employee’s student loans on a tax free basis for any payments between March 27, 2020 and January 1, 2020. You can find the specific text here, here, and here.  I would encourage these individuals to contact their respective lenders.

    The sample application specifies average monthly payroll, not mentioning inclusion of rent, debt expense, etc.  This is true, but the definition of “payroll” in the bill clearly includes these other expenses. See here. As your SBC approved bank of choice will be able to clarify, and we would advise you to speak with them directly about their specific application. Since that sample went out, banks have gone live with a final version of the application – be sure to consult with them.
  5. If an employee has to stay home and request paid leave because their spouse can’t stay home with their children, do we pay them, no questions ask?
    This depends on the situation. Regardless, they must provide proof that they have lost childcare due to COVID-19. If their spouse is one of the exempt emergency service or medical personnel, they may not be able to take leave.  Under the most recent DOL Rules, if another parent is available at home to care for a child who no longer has day care or available school, an employee will not qualify for leave. Keep in mind that there is no metric for enforcement, and you cannot require them to prove their spouse is still working. The best you can do is advise them of the rules, and be sure they realize we don’t know how long this crisis will last, and it would be prudent to take consecutive leave so that they have 24 weeks available for childcare. 
  6. On the PPP application at what point in the year do we record # of jobs?
    This will depend on your specific circumstances and your employees.  Consult your SBA approved bank of choice for clarification.
  7. If someone’s child care has closed and they technically can telework, but they’ll need to stay home with two kiddos under the age of 6, are they eligible for sick leave to stay home and not work?
    Yes. The loss of child care qualifies them for the sick leave as long as there is no alternative means for the child. IE – Family member to watch your child etc. 
  8. If we have already submitted our EIDL loan application prior to the passage of the CARES act how do we now modify the application to request the advance of $10k? The application was submitted through the SBA website on 3/23 prior to the site closing to applications.
    The current guidance is to resubmit with the new online portal that was opened last night. It’s very similar than the submission portal from last week but there are some additional questions that are required.
  9. Are PPP and EIDL mutually exclusive?  Do I have to apply for PPP first then EIDL?
    No they are not, and no you do not.
  10. Looks like we need to lay off some people for 2 weeks and will also be applying for the Cares Act SBA loan. Is it possible to do that? If so, how?
    You may rehire them once your loan gets funded to take advantage of the forgiveness provisions
  11. How are amounts determined for EIDL?
    Our current understanding is six months of gross margin, there is ambiguity around the definition of gross margin per industry.
  12. Our company uses independent contractors to deliver services. Can we add the payments to them as part of our request for money from this Cares Act? 
    Yes
  13. Can SBA loans be used for employees that are scheduled to start in April, but have not started yet?
    Yes
  14. For individual tax payers who filed extensions on personal returns to 10/15, do those extensions still hold and were due to file by 10/15?
    Yes
  15. What happens if you already filed your 2019 personal and don’t qualify, but would have qualified if using 2018?
    You will not get a rebate.  It is based on the 2019 filing.  The only time the 2018 filing is used is if a 2019 return has not been filing.
  16. Let’s assume you receive 250% of average monthly payroll and as a restaurant, you have already laid most off. Part of your proceeds will be used for rent, mortgage, utilities, group health etc – when and how many employees must you rehire to forgive all of the debt?
    You will need to have the same level of employees that you did as of 2/15/2020.
  17. Does the one-time check apply to all taxpayers or only citizens?
    You need to have a social security number.  A nonresident alien won’t get a rebate check.  If you are a resident alien with a social security number and file single, you will get a check. If you are married to a person that does not have a SSN or have dependents that don’t have a SSN, no check will be issued.
  18. As a C-corp applying for the PPP relief. If people in the company make more than 100K, does the loan forgiveness on payroll include just the 100k (IE 8,333.000 per month) or if you make more than 100k in a year is that person’s payroll excluded?
    It’s the former not the latter, you always get credit for the employee just up to $100K , this is the case on the loan calculation amount and the forgiveness provisions.
  19. Are bonuses/commissions considered “wages” in the PPP? What about employees who have a base plus commission and their wages fluctuate?
    Yes they are. Payroll costs” are broadly defined to include: salary, wages, commissions, and similar compensation (not exceeding $100,000 annualized per employee); payment of cash tips or their equivalent; payment for vacation, parental, family, medical, and sick leave; allowance for dismissal or separation; payment required for group healthcare benefits, including premiums; payment of retirement benefits; payment of state or local tax assessed on compensation to employees; and payments of compensation to or income of a sole proprietor or independent contractor. Regarding the PPP from an employers standpoint, the lookback period is the average pay over the past 12 months.
  20. Regarding the number of employees, if we have some employees that choose to file with unemployment for a temporary layoff, do those employees lower our employee count?
    No they do not. The questions you will be asked for application require you to list the number of employees within your organization in January of 2020. Then you will be asked to reflect on your number of employees as of February 15th, 2020. 
  21. We have a couple contracted employees — from a staff leasing company (Westaff) — are these counted as our payroll costs?  We are continuing to use their help, will that be part of our forgivable loan expense?
    Yes, our interpretation of the law is that these employees will be factored into your loan forgiveness. The point is to make an employer whole which includes the use of contracted employees within your outgoing expenses.
  22. If we have done layoffs and pay reductions but do not want to hire any back what amount will we not be forgiven on?
    This is dependent on your employee count prior to February 15th. The amount which will not be forgiven will be equal to the total amount of payroll you were paying for those laid off employees. We would suggest putting that additional money aside to immediately pay back to the IRS once given the option. 
  23. Is the only restriction the 500 employee max, or is there any revenue to total value exclusion from this?
    Not at this time. Under Title IV of the CARES Act, the Treasury Secretary is broadly authorized to make up to $500 billion in loans, loan guarantees, and other investments in support of “eligible businesses.” An “eligible business” is “a United States business that has not otherwise received adequate economic relief” under other provisions of the CARES Act. The CARES Act does require the Treasury Secretary to ask the Federal Reserve to create a special direct loan program for businesses and nonprofit organizations with between 500 and 10,000 employees. The interest rate on such loans would be capped at 2% per annum, and for the first six (6) months no principal or interest would be due. We expect more details to be forthcoming as regulations are released.
  24. If we have work, but team members don’t feel comfortable coming to work- will they qualify for unemployment insurance?
    No. Not unless they are under specific medical orders to avoid work, or if they have been directed by local, state, or federal officials to quarantine or shelter in place.
  25. The Disaster Loan and the PPP loan can both be applied for?
    That is correct.
  26. If we have over 500 team members but not all at one location, are we required to follow the FFCRA?
    Ultimately, this will be determined by the SBA’s size standards for small business. You can go here and get more details – some industries have a different size standard. It would be advisable to consult either an attorney or a tax professional who specializes, if you are near this line of delineation.
  27. What about bonuses paid to employees are they included for total payroll costs? What if the bonus makes employee wages exceed $100k?
    The maximum covered amount is $100k per individual. Any amount over that does not qualify.
  28. If a business has already laid off and/or had a salary reduction, in order to have the loan forgivable they would need to make an attempt to hire back those employees and make the salary adjustments? To restore pay by the end of June does not mean to pay back all missed wages?
    Reductions in employment or wages that occur during the period beginning on February 15, 2020, and ending 30 days after enactment of the CARES Act, (as compared to February 15, 2020) shall not reduce the amount of loan forgiveness IF by June 30, 2020 the borrower eliminates the reduction in employees or reduction in wages. The employer will not be responsible for paying back wages.
  29. If you laid off employees and hired them back.  You have to pay their back payroll? What if they filed for unemployment?
    You are not responsible for back wages if you laid off an employee. If you do lay off employees, you won’t be forgiven for any wages you don’t actually pay, but your remaining employees’ wages will still be forgiven.
  30. Is it relief or deferral?
    There are two different programs. Employee Retention Credits under the CARES Act, employers may be eligible for a refundable tax credit for the employer’s share of the 6.2% Social Security tax (the “SSI Tax Credit”). The potential SSI Tax Credit is for 50% of the first $10,000 in qualified wages (including health plan expenses) paid to each employee commencing on March 13, 2020. To be eligible, an employer must (i) have had operations fully or partially suspended because of a shut-down order from a governmental authority related to COVID-19, or (ii) have had gross receipts decline by more than 50% in a calendar quarter when compared to the same quarter in 2019 (and will remain eligible until the earlier of (i) gross receipts exceeding 80% relative to the same quarter in the prior year, or (ii) December 31, 2020). For employers with more than 100 employees (based on 2019 employment levels), qualified wages are limited to wages paid to employees who were not providing services due to the COVID-19 crisis. Note, however, that the SSI Tax Credit is not available if the employer receives a covered loan from the SBA, as discussed above under Forgivable SBA Loan Program.
  31. Regarding deferrals, in addition to potentially receiving the SSI Tax Credit, the CARES Act allows employers to defer the payment of the employer’s share of the 6.2% Social Security tax on wages paid beginning on March 27, 2020 and ending on December 31, 2020. A corresponding deferral is also permitted for the equivalent portion of self-employment taxes. The deferred amounts are payable in two installments, with 50% of such taxes being due on December 31, 2021, and the remainder due on December 31, 2022. This deferral of Social Security taxes is not, however, allowed where the employer has had a covered loan forgiven, as discussed above under Forgivable SBA Loan Program.

    Can we elect to request less loan amount than our 2.5 x monthly average amounts to?
    This information has not yet been disclosed and we expect more information next week. 
  32. What about companies who are essential business – employees are coming to work – but there is not enough work to keep them productive. Can we send them home and use the PPP to cover their wages?
    Yes, you can use PPP to cover their wages. The purpose of this relief is to help you keep employees on the books for the duration of this virus outbreak. 
  33. For 1099 employees, the company can not include those “wages” as lost pay?  Does the 1099 have to file for the loan, or would it be the company that they partner with that does this? 
    The 1099 will have to file for the loan. If you work as an independent contractor, you are by default considered to be a sole proprietor in the eyes of the IRS. This means your freelance income gets reported annually on a Schedule C within your personal tax return. You will have a Schedule C even if you pick up odd jobs or do freelance work, and this Schedule is based on the 1099-MISC forms you collect from the companies or individuals who have hired you as a contractor.

    Your salary is most easily determined by looking at the net profit listed on your Schedule C. If you have already filed your 2019 taxes, or prepared a 2019 return, this will be reported on line 31 of the Schedule C. If you have not filed your 2019 taxes but have accurate bookkeeping completed for all of 2019, this will be the Net Profit line on your Income Statement.

    If you have neither of those things, your best estimation would come from adding all of your 1099-MISC income together. To find your monthly average, simply divide this amount by 12. If your annual net profit is over $100,000, you may only claim up to $100,000 divided by 12.
  34. Do you know how the unemployment claims during covid 19 will affect the employer’s rate?
    We have not seen any guidance to suggest that this will be the case.
  35. Can you apply for both an SBA Grant and the SBA PPP portion or is it just one or the other?
    You may apply for both.

Do you offer a STD Policy?

If you offer an STD policy to employees it is important to confirm if your policy has a quarantine benefit. Some policies will exclude paying the insured a benefit during a quarantine while others will offer the benefit in full. 

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The content provided has been prepared from various sources and is for informational purposes only and does not constitute legal advice. We hope you find the information useful. The information should not be used to act upon without first seeking appropriate legal counsel. 

COVID-19

Frequently Asked Questions

If you are like many of the employers across the nation – you are likely receiving unique questions around your benefit offerings that stem from COVID-19. We have created this page to use as a living resource to answer the most common questions sliding across our desk. 

NEW! H.R. 6201 Mandates Paid Leave

In response to COVID-19, Congress passed H.R. 6201 and the President signed it into law as of March 19th. Known as the “Families First Coronavirus Response Act,” this legislation makes temporary changes that require coverage of COVID-19 testing, paid sick leave, and expanded FMLA coverage. The provisions laid forth in the bill will go into affect April 2, 2020 and they sunset December 31, 2020.

Frequently Asked Questions (Updated 3/27/2020)

Do you know how we can claim payroll tax credits to reimburse the company to pay for leave to employees due to the COVID-19?

When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees’ share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.

Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.

The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.

If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week. 

Are per diem (as needed) employees eligible, even if they have a full time job somewhere else? 

If they are part time and were scheduled to work prior to the outbreak, I would say yes.  Though this is likely to be addressed in the final rules released by the DOL.

If an employee utilizes EFMLA after 12-weeks do they have to be returned to the same shift of work?  They would be doing the same work, just possibly on a different shift. 

As it currently stands there is no direct guidance on this matter however, we would suggest making every effort to keep things as they were. For groups who are under 25 employees and may qualify for an exemption to the Job Resotraton portion of the act, an argument might be possible that due to financial hardships to the company their original shift was unavailable.  Otherwise shifting their shift may open you to liability. We expect further guidance upon release of the final rules. 

If an employee is able to and refuses “Tele-Work from Home” are they eligible for paid leave or EFMLA?

If the employee has all of the tools necessary to work from home and refuses to work this would not qualify them for EFMLA. 

Have you heard anything about what to do for sure regarding Sales Commission employees who do not get any paid time off or do not have a salary?

The average regular rate based on the last six (6) months prior to the commencement of leave. If the employee has not worked for the employer for the last six (6) months, then the employer uses the average regular rate of pay for each workweek the employee has worked prior to the start of leave. If employees receive commissions or tips in addition to a direct cash wage, the employer must factor-in these amounts to determine the employee’s average regular rate of pay. Thus, under this statute, the employer is paying for a portion of the tips an employee previously received from a customer. 

Has DOL released a form for employees to use to claim the paid leave or EFMLA?

There is no official form as of yet. We expect these to be released next week and will keep you updated.

We have an employee over 65, one with compromised lung issues and one that has asthma… would each of these be allowed to take sick leave?  Is a doctor note required? Are we allowed to ask for proof?

I believe this falls under FMLA and ADA and would need to follow those guidelines. There are not currently any qualifications for sick leave due to being immunocompromised. 

Any idea as to when guidance will be issued as to which employers are exempt that have less than 50 employees.

We expect this information to be released next week 3/30/20

While an employee is on the emergency sick leave should their health benefits still be deducted?

This depends.  The DOL released FAQs that indicated that insurance premiums will be covered along with the cost of paying employees using sick leave.  Whether or not this includes the employee only share or the employer share of the premium isn’t clear, though we expect clarification with the release of the rules. 

What will happen if an individual has 2 separate instances where they qualify for the FFCRA?

If you are referring to someone who works to separate jobs, they would qualify in both instances. The point of the bill is to make these employees’ income whole. 

How does the law pertain to a staffing agency. The sick time and the FMLA.

This depends on whether your agency is  considered a “joint employer” or “integrated employer” under FLSA.  If an employer is a joint employer under the FLSA, all of the employees it holds in common with the other joint employer must be counted toward the 500-employee threshold for purposes of the Emergency Paid Sick Leave Act and the Emergency FMLA Expansion Act. This includes temporary employees who are jointly employed by the employer and another employer (regardless of whether the jointly-employed employees are maintained on another employer’s payroll).  Under the FMLA, companies can be considered so interrelated that they constitute a single employer. The factors generally considered in evaluating integrated employer status include (1) common management; (2) interrelation between operations; (3) centralized control of labor relations; and (4) degree of common ownership or financial control. No single factor is determinative; rather, the entire relationship between the entities is considered. As with joint employers, if two or more entities are considered an integrated employer under the FMLA, employees of each of the entities making up the integrated employer will be counted in determining employer coverage under the Emergency Paid Sick Leave Act and the Emergency FMLA Expansion Act.

Employers may be weighing whether to rely on the joint employer theory or the integrated employer theory to argue they are not subject to the Emergency Paid Sick Leave Act or the Emergency FMLA Expansion Act. Employers should carefully consider this option before invoking it, as relying on these theories could have ripple effects across a host of federal and state laws, including the FMLA, FLSA, ERISA, and state workers compensation and unemployment compensation rules. It may also affect eligibility for benefits under future COVID-19 relief legislation. Therefore, employers should conduct a detailed assessment of their operations and consult with counsel regarding any attendant risks before relying on these theories.

 
And when will the IRS issue the form to request a refund if the tax credit is more than the payroll taxes.

For any overages that the immediate dollar for dollar tax exclusions do not cover they expect to disperse payment to companies within two weeks of application for reimbursement.

If our employee has told us that her child care (which was provided by an individual not a daycare center) is no longer available – the person who was watching is now afraid of the virus and no longer watching the child… does this qualify for sick leave? for efmla leave?

You must require your employee to provide you with appropriate documentation in support of such leave, just as you would for conventional FMLA leave requests. For example, this could include a notice that has been posted on a government, school, or day care website, or published in a newspaper, or an email from an employee or official of the school, place of care, or child care provider. This requirement also applies when the first two weeks of unpaid leave run concurrently with paid sick leave taken for the same reason. If you intend to claim a tax credit under the FFCRA for the expanded family and medical leave, you should retain this documentation in your records. You should consult IRS applicable forms, instructions, and information for the procedures that must be followed to claim a tax credit, including any needed substantiation to be retained to support the credit.

County has issued a stay at home order does this fall under quarantine under the sick leave guidelines.

Yes, provided the employee has been advised to self-quarantine due to concerns related to COVID–19. 

Will O&A present any details on funding, refunds and other financial issues?

Yes. Please stay tuned for updates as they become available. 

I think you said wages we pay under this program are not subject to FICA. Is that correct? 

Correct.  The FICA withholdings are used to pay the leave. However FICA should be deducted from the employee’s paycheck just as it has been in the past as it will be put into the pool of funds used to cover leave. 

We’re an employer with only 12 employees; does any of this apply to our company? Are we required to file the small business exemption?

This applies to all companies with less than 500 employees, so yes it will apply. The Department of Labor will further specify the criteria to meet the small business exemption in forthcoming regulations.

If a person is quarinteended, but is not really sick. Do I have to pay that person sick leave?

In order to qualify for this leave, they will need to have been diagnosed with COVID-19 symptoms and ordered to isolate or quarantine by a medical professional. 

In the hospitality industry where the restaurants are closed, do the service staff qualify for this pay?

Yes. The guidance affirms that commissions, tips, and piece rates should be incorporated into the regular rate calculation.

If we pay someone for the shelter in place and then it comes out that they DON’T qualify for that pay – is there a way to recoup that money?

There is currently no mechanism in place within this legislation to recoup money already paid to an employee. Per guidance from the DOL:  you must require your employee to provide you with appropriate documentation in support of the reason for the leave, including: the employee’s name, qualifying reason for requesting leave, statement that the employee is unable to work, including telework, for that reason, and the date(s) for which leave is requested. Documentation of the reason for the leave will also be necessary, such as the source of any quarantine or isolation order, or the name of the health care provider who has advised you to self-quarantine. For example, this documentation may include a copy of the Federal, State or local quarantine or isolation order related to COVID-19 applicable to the employee or written documentation by a health care provider advising the employee to self-quarantine due to concerns related to COVID-19. If you intend to claim a tax credit under the FFCRA for your payment of the sick leave wages, you should retain this documentation in your records.

If my business loses revenue which is used to pay commission and we lose revenue, do I have to pay my commissionable sales people?

Yes. The guidance affirms that commissions, tips, and piece rates should be incorporated into the regular rate calculation. 

Also in the hospitality industry, should the service staff be paid an average rate including tips for their PTO or just minimum wage?

Under both the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act, paid leave is to be calculated based upon the employee’s regular rate of pay. Note that “regular rate of pay,” as a general matter, includes all remuneration paid to the employee. The guidance affirms that commissions, tips, and piece rates should be incorporated into the regular rate calculation. The guidance clarifies that, for purposes of calculating paid sick leave, an employee’s regular rate of pay will be the average of their regular rate over a period of up to six months prior to the date that the employee takes leave. If the employee has not worked for the employer for six months, the regular rate of pay will be the average of the employee’s regular rate of pay for each week worked for the employer. Alternatively, an employer may calculate an employee’s regular rate of pay by adding all compensation that is part of the regular rate over the prior six months (or lesser period of time worked) and dividing that sum by all hours worked in the same period.

Say someone is preparing to take FMLA for pregnancy.  Would they get the 12 weeks for the birth of the child and possibly 10 additional weeks because of child care?

No, they would not qualify to “double dip”

Do we have any issues with reducing hourly employee hours?

A company may reduce hours as needed.

Transit agency?  Where do they fall?  JTA is considered a public agency but JTM is considered a private agency which houses all of our bus operators and maintenance staff, all union workers.  A previous webinar stated transit agencies would fall under both because of the quasi government stipulation.

It would be wise to consult counsel as this situation is a bit more complex. DOL guidance states: Typically, a corporation (including its separate establishments or divisions) is considered to be a single employer and its employees must each be counted towards the 500-employee threshold. Where a corporation has an ownership interest in another corporation, the two corporations are separate employers unless they are joint employers under the FLSA with respect to certain employees. If two entities are found to be joint employers, all of their common employees must be counted in determining whether paid sick leave must be provided under the Emergency Paid Sick Leave Act and expanded family and medical leave must be provided under the Emergency Family and Medical Leave Expansion Act.

In general, two or more entities are separate employers unless they meet the integrated employer test under the Family and Medical Leave Act of 1993 (FMLA). If two entities are an integrated employer under the FMLA, then employees of all entities making up the integrated employer will be counted in determining employer coverage for purposes of expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act.

Do these benefits apply only to employees who meet the requirements on or after April 1st or can an employee take advantage of these benefits if they have already met the requirements prior to April 1st.  meaning they have already missed work due to either symptoms or diagnosis.

Benefits apply only to COVID-19 related matters on or after April 1st. If an employee is on continued leave from prior to these dates, the benefit will become available only on or after April 1.

Have a question we haven’t answered?

Frequently Asked Questions (Updated 3/25/2020)

Does the paid leave focus on days specifically or 80 hours? Meaning do we need to give employees the full 14 days off or simply two working weeks totaling 80 hours?

The bill specifies 80 hours and is not specific to actual days. 

If ordered by the provider to self-quarantine can we request proof of this from the provider? I have heard conflicting answers on this.

Yes, you are allowed to request proof from the provider. 

Do we have any more guidance for what is defined as a healthcare provider? Are nurses included in this definition?

Healthcare Providers who are exempt will be determined the same way as companies who are under 50. There will be an application and approval process through the Secretary of the Department of Labor. Once these rules are released we’ll have the details of the application.

Payroll tax credit – does this only apply to social security taxes paid for the employee? Does it apply to medicare taxes also?

The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.

Can the 10 days full paid leave to be “stacked” with the emergency FMLA leave?

Yes. Keep in mind that the FMLA leave is only available to those who have lost childcare under the final version of this legislation.

I have an FT employee that has to work from home due to schools being closed. She can only do 70% of her job from home. Can we not supplement her leave with SL/FMLA because the leave has to be consecutive? 

According to §5102(c), the leave terminates when the next scheduled shift of the employee begins, so to answer your question, no you cannot supplement the work schedule with this leave. This will remain the case unless the DOL guidelines indicate otherwise.

If someone can’t perform their job at home (service tech) and they are being told to shelter in place, is that grounds for the paid sick leave two-week pay?

If they are being told by some official source, I.E. a local, state, or federal government, or if they have an order from a healthcare provider, then yes, that qualifies them for the 80 hours of paid sick leave.

In regards to effective date – is it on or after 4/2/20? Not before? Updated 3/26/20

The legislation was originally thought to begin on 4/2/2020. However, the DOL has released the official start date as 4/1/2020.

Suggestion on proof of illness if a doctor’s note is not available?

There are so many options through telehealth that a doctor’s note is easy to get. Outside of this, you are allowed to take their temperature and could use this method if they are unable to get a note from the doctor.

Do you have material we can present a nutshell version to our team?

Yes – we have one that O&A has put together. However, the department of labor will issue official notices for you to give out. We expect those within a week or so.

What if a new employee hits 30 days after 4/1? Once they are at 30 days, can they take EFMLA then?

Yes. Keep in mind that the FMLA leave is only available to those who have lost childcare under the final version of this legislation.

You mentioned exceptions to the FMLA portion for Emergency Responders is this something in the law or something we make a decision to exclude them?

This is an exception that you will have to apply for the Department of Labor. The specifics will be part of the final rules that we expect to see shortly.

With this new policy…how are employers communicating these changes to their employees? My concern is once communicated or how this is communicated, based on the majority of our team having children and etc., we may have a flood of current employees taking advantage of these programs but still have a business to run. Just curious how (if known) any other employers plan to communicate the new changes.

There will be a required communication from the department of labor. The paid sick leave will be available to individuals who have children without child care, but the E-FMLA will only be available to them if they both have no daycare and if they cannot telecommute. I would communicate the leave to your employees and stress that if they are taking it for child-care, they will only get 2/3rds pay. Hopefully, this will incentivize them away from a mass leave.

If we already have an employee on FMLA due to other medical reasons, does that employee now fall under the new guidelines?

Only if they do not have child-care and are unable to work remotely.

The guidance that I am seeing says that we can use the current FMLA standard designation form. Have you seen anything different?

The legislation says that the DOL will release specific guidelines. They may be the same as existing designation forms, but we will know for sure when they release them. There is no need to utilize any forms for this leave, however, until April 1 when the law goes into effect. By this point, the rules should be available from the DOL.

We laid off all hourly employees on March 16 due to school closing. Are we required to include these employees with leave after April 1?

No, you are not. If they are no longer employees, they do not receive this time off. There are expanded unemployment provisions under this legislation, however, so these individuals should pursue that avenue.

Healthcare providers being exempt, does that apply to the back office personnel?

This will be clarified in the rules – we expect there to be an application for exemption put in place, but we won’t have the specifics until they are released by the DOL.

Have any specific employee-facing forms released to claim sick time?

Not yet. We expect there will be guidance in the new rules but we don’t know if any specific employee-facing forms will be included, as they weren’t part of the directive given to the Secretary of the Department of Labor.

What qualifies as quarantine order – is that the same as Lenny Curry’s recent mandate?

Yes, that would be correct. Keep in mind that the quarantine order under the final version of the legislation would only qualify people for the 80 hours of paid sick leave. E-FMLA will only apply to those who can’t telecommute and have no child care due to COVID-19 closures.

If an employee calls in for cold symptoms and has a low fever do they get paid the sick leave or do they have to test positive for COVID-19 first? We have an employee that called in on Monday with said symptoms and then was told to stay home until the cold symptoms were gone.

It is up to the employer as to whether they want to require proof of diagnosis. It is wise to keep sick people home, particularly if symptoms are similar. Keep in mind, that until April 1, this employee will not have these benefits available to them, and will need to utilize existing PTO and sick leave.

If we have to lay people off can they still keep their benefits?

No, benefits are offered to employees only. They can, however, opt for COBRA coverage. Many carriers are making allowances for non-payment as well. UHC, for example, will give an individual 60 days before they cancel to non-payment of premiums.

What does it mean that healthcare providers are exempt from the FMLA Expansion Act? What part are we exempt from? Does that apply to us and all personnel?

We are still awaiting final elements to be released next week and I can answer this at that time. If you do qualify, apply and are approved you will be exempt from the entire bill. This would apply to your entire demographic.

How do you determine who is essential personnel and who isn’t? I know our techs and front desk people would be obvious, but what about back-office personnel such as billing, payment posters or call center personnel?

As it currently stands, this is decided by you as the employer.

If the Mayor of Jacksonville tells people to stay home, we can’t require them to come in, right? Or is it if they are considered essential personnel, we can require them to?

The requirement of personnel to stay home will be entirely dependent on what restrictions the Mayor outlines at that point in time and I am happy to help clarify if and when that outline is presented.

Everything that we read states that only those caring for a child that their school or daycare has closed can claim the extended FMLA

Any individual employed by the employer for at least 30 days (before the first day of leave) may take up to 12 weeks of job-protected leave to allow an employee, who is unable to work or telework, to care for the employee’s child (under 18 years of age) if the child’s school or place of care is closed or the childcare provider is unavailable due to a public health emergency. This is now the only qualifying need for Emergency FMLA and a significant change from the prior version of the bill passed by the House over the weekend, which contained several other COVID-19-related reasons to provide Emergency FMLA.

Not sure what experiencing substantially similar conditions specified by Sec of Health and human services actually means in connection with emergency sick pay?

This is an excellent observation, and one of the ambiguous portions of the bill that I was talking about during the presentation. I expect we will see rules clarifying from these agencies, but as of right now we don’t have specific “conditions” as described in that portion of the legislation.

If employees can work from home but may not be able to get there full weekly hours in are they eligible for emergency sick pay while caring for school-age children up to the 80 hrs. (10 days) max?

Our personal interpretation is that they can’t both work and utilize PTO. However, this is one of the things that need clarification. We are reaching out to the DOL for clarification and will let you know when we get an answer.

Frequently Asked Questions

Are there any protocols in place for premium holidays due to the economic impact of the pandemic? 

No protocols as of now. Carriers are working with several parties including state regulators. We will keep you informed as things evolve.

Can an employer institute a reduction in hours due to the pandemic and allow for benefits to continue? If so, are there minimum work requirements?

During the pandemic, carriers are taking an employer management response. Meaning employers make the call but it needs to be non-discriminatory and based on the current FT class. Meaning, redefining FT class to PT does not allow for current PT to be eligible for benefits.

Are quarantine benefits offered on STD policies? And if so, is this benefit payable for non-illness related quarantine’s during the pandemic?

The answer here depends on your policy. Some STD policies allow for payment during quarantine separate from an illness if the employee cannot work remotely. Some only pay if there is an illness associated with it.

If an employee is affected by a reduction in hours and has a disability, what will the benefits be based on (before or after reduction due to pandemic)?

The earnings definitions will apply to the policy so it depends on how the policy was set up originally. If based on W2 earnings, then the reduction in hours/income will not be affected because benefits are based on 2019 earnings.

If a company has either Basic Life or Voluntary Life and a member passes away due to the COVID-19 virus, will benefits be payable? Asked another way, are there any exclusions for deaths related to pandemic illnesses?

Again, this goes back to the carrier and plan in effect. We recommend looking into the exclusions and limitations of the policy itself.

If an employee is terminated today, will they be able to go back to the employer and say they did not offer them their COVID-19 paid leave benefit? If so, what are the penalties?

Remember, the legislation covers sick pay and FMLA. So if an employee was laid off due to a company-wide lay-off or closure for economic impact, this is different than COVID-19 paid sick leave.

How can an employer ask for proof of the Coronavirus test if no tests are available? If it is “showing symptoms” – who makes that call? A medical professional? The employer? If the employer, is that a HIPAA violation?

Keep track of employees who have contracted the COVID-19 virus internally. Not just for federal funds but safety for other employees. You will need to ask the EE to identify all individuals who worked in close proximity with them in the previous 14 days. Note do NOT identify by name of the infected employee or you could risk a violation of confidentiality laws.

Do you offer a STD Policy?

If you offer an STD policy to employees it is important to confirm if your policy has a quarantine benefit. Some policies will exclude paying the insured a benefit during a quarantine while others will offer the benefit in full. 

Frequently Asked Questions

What kind of paperwork will need to be filled out for employer reimbursement from the government?

Guidance is expected and forthcoming.

Is the paid sick leave retroactive since it does not go into effect until 4/1/20?

No. It is not retroactive

If we have employees who need to take paid leave under E-FMLA due to childcare, how do we get reimbursed?

Under guidance that will be released next week, eligible employers who apply to qualify sick or child-care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child-care leave that they paid, rather than deposit them with the IRS.

We will be executing a plant furlough. Employees will be immediately eligible for unemployment. How does the sick leave policy apply, if at all, during the period of furlough and employees receiving unemployment?

Furloughed or Laid Off Employees: An argument can be advanced that if an employer places its employees on furlough or lay off prior to the FFCRA’s effective date (April 1), then they would not be eligible for leave under this provision; however, the express language of the Act is unclear on that topic. At a minimum, employers should take care not to base lay off or furlough decisions on which employees are likely to need leave—or risk claims for retaliation/interference.

Can I require my employees to take their accrued vacation or PTO before the emergency leave?

No. Employers may not require employees to use vacation, PTO or other forms of paid leave before using emergency paid sick leave.

Can we ask an employee to stay home or leave work if they exhibit symptoms of the COVID-19 coronavirus or the flu?

Yes, you are permitted to ask them to seek medical attention and get tested for COVID-19. The CDC states that employees who exhibit symptoms of influenza-like illness at work during a pandemic should leave the workplace. The Equal Employment Opportunity Commission (EEOC) confirmed that advising workers to go home is permissible and not considered disability-related if the symptoms present are akin to the COVID-19 coronavirus or the flu.

Can I take an employee’s temperature at work to determine whether they might be infected?

Yes. The EEOC confirmed that measuring employees’ body temperatures are permissible given the current circumstances. While the Americans with Disabilities Act (ADA) places restrictions on the inquiries that an employer can make into an employee’s medical status, and the EEOC considers taking an employee’s temperature to be a “medical examination” under the ADA, the federal agency recognizes the need for this action now because the CDC and state/local health authorities have acknowledged community spread of COVID-19 and issued attendant precautions.

If our employees are no longer working, are they still entitled to group health plan coverage?

Not necessarily. You need to check your group health plan document (or certificate of coverage if your plan is fully insured) to determine how long employees who are not actively working may remain covered by your group health plan. Once this period expires, active employee coverage must be terminated (unless the insurance carrier or self-funded plan sponsor otherwise agrees to temporarily waive applicable eligibility provisions), and a COBRA notice must be sent. If your plan is self-funded and you would like to waive applicable plan eligibility provisions, you should first make sure that any stop-loss coverage insurance carriers agree to cover claims relating to participants who would otherwise be ineligible for coverage.

What happens to group health plan coverage if employees are not working and unable to pay their share of premiums?

In the normal course of events, group health plan coverage will cease when an employee’s share of premiums is not timely paid. However, several actions might be taken that could allow coverage to continue.

Must we keep paying employees who are not working?

Under the Fair Labor Standards Act (FLSA), for the most part, the answer is “no.”One possible difference relates to employees treated as exempt FLSA “white collar” paid on a salary basis.

We caution employers to consider the public relations aspect of not paying employees who may not be working if they have contracted or are avoiding the COVID-19 coronavirus. Given the publicity surrounding this outbreak, it is possible that situations involving these kinds of issues could reach the media and damage your reputation and employee morale. Consider the big picture perspective when making decisions regarding paying or not paying your employees.

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The content provided has been prepared from various sources and is for informational purposes only and does not constitute legal advice. We hope you find the information useful. The information should not be used to act upon without first seeking appropriate legal counsel. 

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