Updates on Employment & Labor Issues

May 6 Update

Loan Forgiveness for Business Owners: What You Need to Know about Employees Returning to Work

Many business owners are now becoming the recipient of a loan under the Paycheck Protection Program (PPP) (“Recipient”) and may be eligible for loan forgiveness. The large amount of loan forgiveness is dependent upon payroll costs. Below are answers to many of the questions business owners have in ensuring loan forgiveness by maintaining or returning employees.

How much of the PPP loan is forgiven?

The amount of forgiveness is equal to the following costs incurred and payments made during the eight (8) week period following the date the recipient receives the PPP loan:

  • Payroll costs,
  • Any payment of interest on any covered mortgage obligation,
  • Any payment on any covered rent obligation, and
  • Any covered utility payment.
There are further conditions placed on the amount forgiven. The purpose of these conditions is to incentivize employers to retain full-time employees at the same level of pay or rehire full-time employees after the COVID-19 pandemic. The amount of forgiveness may be reduced proportionally for a reduction in employee headcount or salaries; however, employers can eliminate the reduction in headcount or salaries by June 30, 2020 and restore the maximum loan forgiveness.
 

Are there any limitations placed on payroll cost?

A Recipients’ qualified expenses for which they will seek forgiveness will be those expenses incurred in the eight-week period after the PPP loan is originated. This includes wages, health care expenses, retirement plan contributions, rent, utilities and interest on mortgages. Such amounts cannot be accelerated payments of expenses incurred for a future period.  Recipients will be required to provide proof of payment of PPP qualified expenses.

When can I ask for loan forgiveness?

Recipients may not apply for PPP loan forgiveness until at least eight weeks after receiving the loan proceeds.

What can I do if I furloughed my employees in March and now have received funding for my PPP loan?

If employees were furloughed prior to loan disbursement, Recipients should try to bring those furloughed employees back on payroll as quickly as possible.  Employers may still receive some loan forgiveness if the employer later rehires its full-time employees by June 30, 2020.

What if I have no work for my employees to do, do I still bring them back and pay them? 

There is no requirement for furloughed workers to actually be performing normal work duties. Many businesses, including many in the hospitality industries, are closed by public order. Whether recalled workers come to work and perform services or stay at home and do nothing, either is acceptable under PPP. The object of the program is to keep small businesses afloat and have a ready workforce that can come back to work when it is time to reopen. However, employees rehired will no longer be able to claim unemployment benefits.

Do I have to bring back all of my employees?

At least 75% of the forgiven loan amount must have been used to cover “payroll costs” (wages, health benefits, retirement plan contributions and state taxes on compensation) as defined for the loan application process.

I have asked my employees to return to work for a few hours a week and stop receiving unemployment, however my employees refuse to return to work? 

At present, it may be difficult to convince employees to return to work because of the additional amount of unemployment benefits employees are receiving under the CARES Act or employees may have found other jobs. 

In new guidance dated May 3, 2020, the SBA clarified that if a terminated or furloughed employee rejects a good faith, written offer from the Recipient to re-hire the employee at the same salary and for the same number of hours, loan forgiveness will not be reduced with respect to that employee, provided that the Recipient has documented the offer and the employee’s rejection of the offer. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.

APRIL 16 UPDATE

As mentioned earlier this month, The Family First Coronavirus Response Act was recently passed and The Department of Labor (DOL) has released temporary regulations related to paid leave under FFCRA. There are significant interpretations to which employers should pay attention.

What does it mean for an employee to be “unable to telework”?

The employee may only take Emergency Paid Sick Leave (EPSL) or Expanded Family & Medical Leave (EFML) if the employee is unable to work or telework due to one of the FFCRA qualifying reasons.  Telework is defined in the regulations as:

When an employer has work for an employee to perform and permits the employee to perform that work from the location where the employee is quarantined; and, no extenuating circumstances apply preventing that employee from working.

When is an employee eligible for EPSL?

There are numerous situations as a result of which an employee is eligible for EPSL, including “a quarantine or isolation order.” The DOL expanded this definition beyond formal quarantine or isolation orders (i.e. directives under applicable state law by state or local health officials to specific individuals or groups of individuals based on possible or actual infection) to include “containment, shelter-in-place, or stay-at-home orders issued by any Federal, State, or local government authority.”  The DOL also included the situation when a Federal, State, or local government authority has advised categories of citizens (e.g., of certain age ranges or of certain medical conditions) to shelter in place, stay at home, isolate, or quarantine.  A quarantine or isolation order (whether of the employee or another individual) must result in the employee being unable to work even though the employer has work for them. The DOL goes on to clarify that an employee may not take EPSL where the employer does not have work for the employee as a result of the order or other circumstances.

The DOL used the following example: If a coffee shop closed due to a downturn in business or a stay-at-home order, an employee who is subject to a stay-at-home order would not be able to work even if he were not required to stay at home. Therefore, the employee would not be able to use EPSL. An employee may take the paid sick leave if the employee would be able to perform work at the normal workplace or telework, but for an isolation order. However, an employee is not eligible for the paid sick leave if the employer does not have work for the employee as a result of the order.

An employee is eligible when a health care provider advises the employee to self-quarantine if the employee has COVID-19, may have COVID-19, or “is particularly vulnerable to COVID-19.” This may include older employees and those with underlying health care conditions, in order to avoid possible exposure.

An employee would also be eligible when they are seeking a diagnosis, but would be limited to the time that the employee is unable to work because they are taking affirmative steps to obtain a medical diagnosis, such as making, waiting for, or attending an appointment for a test for COVID-19.

If a child’s school or place of care has been closed, or the child care provider is unavailable, the employee is entitled to EPSL and EFML only if “no other suitable person is available to care for the child during the period of such leave.” The DOL further elaborated that a “suitable individual” can be a co-parent, co-guardian, or a usual child care provider.

Can an employee take intermittent leave?

The regulations state that the employer and employee must mutually agree to the use of intermittent leave under the FFCRA, and then the regulations go on to reiterate the conditions under which intermittent EPSL or EFMLA leave may be permitted, as set forth in its Q&A.

What documentation can an employer require of its employees requesting FFCRA leave?

Such documentation must include a signed statement from the employee including an Employee’s name; Date(s) for which leave is requested; COVID-19 qualifying reason for the leave; and a statement that the employee is unable to work or telework because of the qualified reason for leave.

For an employee requesting EPSL for a qualifying COVID-19 reason, the employee must provide the name of the government entity that issued the Quarantine or Isolation Order, and the name of the health care provider who advised the employee to self-quarantine due to concerns related to COVID-19. In order to care for an individual, the employee must provide the name of the government entity that issued the Quarantine or Isolation Order to which the individual being cared for is subject; or provide the name of the health care provider who advised the individual being cared for to self-quarantine due to concerns related to COVID-19. If the request is for EPSL or EFML to care for a child, the documentation must include the name of the son or daughter being cared for along with the name of the school, place of care, or child care provider that has closed or become unavailable; and  representation that no other suitable person will be caring for the son or daughter during the period for which the employee takes EPSL or EFML.

 

APRIL 1 UPDATE

We recently briefed our clients and friends on the newly passed Family First Coronavirus Response Act (“FFCRA”). The Department of Labor (“DOL”) issued additional guidance addressing numerous questions related to the implementation of FFCRA ( https://www.dol.gov/agencies/whd/pandemic/ffcra-questions ).

Here are some highlights:

Business with Fewer than 50 Employees Exemption

The exemption criteria for businesses with fewer than 50 employees under the DOL initially stated employers with fewer than 50 employees would be exempt from the FFCRA where compliance would jeopardize “the viability of the employer’s business as a going concern.”

The DOL has clarified that a small business is exempt from certain paid sick leave and expanded family and medical leave requirements if providing an employee such leave would jeopardize the viability of the business as a going concern. This means a small business is exempt from mandated paid sick leave or expanded family and medical leave requirements only if the:

  • employer employs fewer than 50 employees;
  • leave is requested because the child’s school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons; and
  • an authorized officer of the business has determined that at least one of the three conditions described below is satisfied.

The conditions are as follows:

  1. The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity; 
  2. 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 
  3. 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.

This exemption criteria only applies to leave that is requested because of the child’s school or child care provider being closed. The DOL may also issue small business exemption criteria pertaining to paid leave provided for other qualifying reasons under the Emergency Paid Sick Leave Act (EPSLA), presently, businesses still need to comply with the EPLSA for the other 5 qualifying reasons.

  1. The employee is subject to a federal, state, or local quarantine or isolation order related to COVID–19.
  2. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19.
  3. The employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis.
  4. The employee is caring for an individual who is subject to either number 1 or 2 above.
  5. The employee is experiencing any other substantially similar condition specified by the secretary of health and human services in consultation with the secretary of the treasury and the secretary of labor.

Individuals Who are Not Eligible for FFCRA

The DOL further clarified that individuals are not eligible for EPSL and EFMLA in the following situations:

  • Employees who, prior to April 1, 2020, were sent home and are no longer being paid because the employer worksite closed.
  • Employees who, on or after April 1, 2020, are sent home and are no longer being paid because the employer worksite is closed.
  • Employees who are already on EPSL or EFMLA when the employer closes the worksite on or after April 1, 2020 (in this case, the employer must pay for any leave taken prior to the closure).