Monthly Archives: March 2020

The Paycheck Protection Program . . . a brief summary

Part of the relief package passed by the federal government (the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act includes the Paycheck Protection Program.  The Paycheck Protection Program will provide cash to support emergency loans to qualifying businesses. Through the Program, the Small Business Administration (“SBA”) has the authority to provide 100% federally backed loans through December 31, 2020 to help eligible businesses pay operational costs such as payroll, rent, and utilities. If a business satisfies certain conditions, portions of the loans are forgivable!

Who is Eligible?

Generally, businesses (including, sole-proprietors, independent contractors, and other self-employed individuals) with fewer than 500 employees, that were in operation on February 15, 2020, and paid (salaries, compensation, and payroll taxes) employees or independent contractors are eligible for the Paycheck Protection Program. The 500-employee threshold includes all employees, including full-time, part-time and any other status. There are some limited exceptions to the 500-employee eligibility requirement for certain industries, such as businesses in the hospitality and food sectors that have multiple locations, which can have up to 500 employees per physical location of the business.

What is the maximum loan amount?
During the Covered Period (February 15, 2020 through June 30, 2020),  an eligible business’s maximum loan amount is based upon the business’s average total monthly payroll costs incurred during the one-year period before the date of the loan. (There is an adjustment for a seasonal workforce). For the period, an eligible business may receive up to 2.5 times its average monthly payroll costs subject to a $10 million limitation.

When determining what the “average total monthly payroll costs” are, the following are excluded:

  • Individual employee compensation over $100,000;
  • Payroll and income taxes;
  • Compensation for an employee with a principal place of residence outside the United States; and
  • Qualified sick leave or family leave wages for which a business will receive a credit under the Families First Coronavirus Response Act.

What can the loaned funds be used for?
During the Covered Period, an eligible business can the founds for the following:

  • Payroll costs;
  • Cost related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
  • Employee salaries;
  • Interest payments on any mortgage;
  • Rent and utility payments; and
  • Interest payments on any other debt obligations that were incurred before February 15, 2020.

This loan might forgiven?!!!
A loan through the Program is eligible for loan forgiveness. The amount of forgiveness cannot exceed the principal amount of the loan, but may equal up to a business’s costs during the 8 weeks following the date of the loan’s origination for the following categories of expenditures:

  • Payroll costs;
  • Interest on real or personal property mortgage obligations in existence before February 15, 2020 and incurred in the ordinary course;
  • Rent under a lease agreement in force before February 15, 2020; and
  • Utility payments, including electricity, gas, water, transportation, telephone or internet, for which service began before February 15, 2020.

The amount of loan forgiveness is subject to reduction based on a business’s decline in headcount or wages. Declines in headcount or wages between February 15, 2020 and April 26, 2020 will not trigger a reduction in loan forgiveness if the business reverses the decline and returns to pre-decline levels by June 30, 2020. Loan forgiveness will not be included in a business’s taxable income.

What else?

  • Collateral and a personal guarantee are not required (except if the funds are used for non-allowable uses).
  • SBA loan fees are waived for a loan.
  • Payments of principal and interest on a loan are deferred for a period of six months to one year.
  • There is no prepayment penalty.
  • The maximum rate of interest that can be charged for a is four percent; the maximum term is ten years from the date on which the business applies for loan forgiveness.

How does this program work with the Payroll Tax Credits under the FFCRA (for paid sick leave and emergency FMLA)?

A business that gets a loan through the program will not be able to use the payroll tax credits available under the FFCRA.

 

As per all these emergency laws, more guidance is forthcoming from the SBA!

Remember: A termination is (usually) a termination and we have RULES in California about that!

In California, when an employee is involuntarily terminated, all wages earned (including earned commissions and bonuses) and all accrued paid time off (vacation or PTO) must be paid out at termination.

When these amounts are not paid at termination, the employer must pay waiting time penalties. These can be costly – a full days’ wage for every day any of those monies are unpaid, up to thirty calendar days.

If a California employer lays off an employee without a return date within the pay period (or “furloughs” the employee or “sends them home without an expected return date because of a Stay at Home / Shelter in Place order”), the final pay rules are triggered.

The Labor Commissioner’s policy is that if there is a return date within the pay period and the employee is scheduled to return to work, the wages may be paid at the next regular pay day (and the payment rule isn’t triggered).

These are complicated issues given the Stay at Home orders (county and state). Be sure to check with legal counsel to help you navigate them.

The Governor’s Temporary “Suspension” of parts of Cal-WARN

Just to keep the blog links going . . . Here is a link to the Labor Commissioner’s Guidance on Conditional Suspension of California WARN Act Notice Requirements under Executive Order N-31-20.  And below is some guidance about the “suspension” of parts of Cal-WARN.

FedWARN.  There are two “WARN” acts that California employers have to be mindful of – the federal WARN act and California’s Cal-WARN. And of course, they are different!

The federal WARN act applies to employers of 100 or more full-time employees (or 100 full-time and part-time employees who work a total of 4,000 non-overtime hours per week. A covered employer must give 60-days notice to affected employees and specified government officials before it: (i) shuts down an employment site that causes employment loss for 50 or more full-time employees; (ii) conducts a layoff that effects 50 or more employees and 33% or more of the total workforce at a single location; or (iii) lays off 500 or more employees at a single location. Of note during this current crisis is that federal WARN has several exceptions. WARN does not apply to layoffs lasting less than 6 months. Nor does WARN apply to closures or layoffs resulting from a “natural disaster.” Finally, an employer could give less than 60 days notice in the case of a closure or layoff resulting from “business circumstances that were not reasonably foreseeable.”

Cal-WARN. Cal-WARN applies to an employer who has employed 75 or more persons, including part-time employees, at a single industrial or commercial facility (called a “covered establishment”) within the preceding 12 months. An employer has to give 60-days notice before (1) terminating operations at the covered establishment; (2) relocating the covered establishment’s operations more than 100 miles; or (3) laying off 50 or more employees at the covered establishment in a 30-day period. For an employee to count as part of the 50-employee threshold, that person must have worked for the employer for at least 6 of the preceding 12 months. Cal-WARN doesn’t have some of the helpful exceptions of WARN with regard to the shelter in place, etc. While WARN only applied to layoffs exceeding 6 months, Cal-WARN applies to layoffs of any duration. As such, employers must comply with Cal-WARN even for a short-term layoff. Prior to the Governor’s Executive Order, Cal-WARN had no express exception for unforeseen business circumstances.

The Executive Order Change About Cal-WARN.  Governor Newsom’s  Exeuctive ORder, which I blogged a link to here: Relief regarding mass terminations from Governor Newsom applies from March 4, 2020, through the end of the declared State of Emergency, suspends the 60-day notice requirement of Cal-WARN for employers who meet certain conditions.

While Cal-WARN still applies, the notice requirement is to be given “as soon as practicable.” The notices must include a basis for reducing the notification period, including reference to being due to “business circumstances that were not reasonably foreseeable as of the time of the notice would have been required.” In order to avail themselves of the exception, then, employers must:

  • Provide the requisite written notices to employees impacted by the mass layoffs or shutdown, and state and local government;
  • Provide as much paid notice as possible, and to explain in writing to the impacted employees and state and local government why full notice cannot be given, and
  • Expressly notify employees of their eligibility for unemployment insurance benefits (the written notice must contain the following statement: “If you have lost your job or been laid off temporarily, you may be eligible for Unemployment Insurance (UI). More information on UI and other resources available for workers is available at labor.ca.gov/coronavirus2019“)

Employers must establish a causal connection between the mass layoff or shutdown and COVID-19. For example, if an employer was already planning a Cal WARN-triggering mass layoff or shutdown before the onset of the COVID-19 emergency, the executive order would not apply to such a layoff or shutdown.

DOL issues Poster for FFCRA and more FAQs

The DOL published a poster for employers to use regarding the FFCRA – a link is here that you can use to print out and post.

The DOL also issued guidance / FAQs about the notice.

DOL’s Guidance on Federal Paid Sick Leave and Emergency FMLA

The DOL issued some Facts Sheets for employees and employers regarding FFCRA.  They also published some FAQs.  Hopefully, we’ll get more guidance . .  but here is an initial round.

OF NOTE – the DOL says the FFCRA is effective April 1 in the guidance. I (and others) had it as April 2 – so note the date the DOL says is the one! 

Are your employees working from home? Cut them some slack!

This is the rare blog post I am doing that is NOT just links to other resources.  But here goes: it is HARD to work from home when everyone else is home!  It is hard to respond to bosses and colleagues and customers and vendors when family members (especially kids) need some attention.  “Distance Learning” for children (and by “children” I mean anyone under 22, honestly) is hard.  Working from home for people who like a collaborative office, or just the “space” going to an office brings, is hard!

Your employees, and especially their kids, are feeling isolated and scared. This is true even when it is not coming out in those words, but instead the words “make me a snack!” So. . . be kind to your employees.  Be kind to each other. Don’t get upset when the Zoom meeting goes awry.  Stuff is getting done. Everyone is TRYING (at least, I am until the magic hour of puzzles and beer kicks in. Just kidding!)

We’re all in this, separately and socially distanced, together!

 

The Labor Commissioner, Paid Sick Leave and COVID-19

This is just a link to the DLSE’s FAQ’s about California’s Paid Sick Leave and the Labor Commissioner’s interpretation of its use for COVID-19 related events (sick employees, employees’ sick relatives, employees staying home to care for kids).

Who is “Essential”?

I opened my laptop this morning to draft an incredible, helpful blog post about what industries and workers are “essential” under the various government orders right now.  And Rob Nuddleman had already posted one! Rassafrassa!  Rather than blatantly plagiarize, please check it out.

Please let me know if you have questions, concerns, etc. about your employment law needs.

Please stay safe (and sane).

The New Federal Paid Leave and Paid Sick Leave Law

The Families First Coronavirus Response Act was signed into law last night and will take effect April 1, 2020 (fifteen days later). By that date, the U.S. Department of Labor is to issue guidelines to assist employers in calculating how much paid leave their employees should get. After that, employees should be able to notify their employer, take the leave, and get paid by their employer the amount specified in the law.

The law is a response to the impact of COVID-19 on employees with respect to the need to shelter in place, the closing of businesses, and the closing of schools.  The law also contains provisions about nutrition for families (WIC and SNAP, etc.), I’m not addressing those changes here.

The two new programs this post will focus on about the Families First Coronavirus Response Act (FFCRA)  are the two provisions providing paid leave to employees forced to miss work because of the COVID-19 outbreak: an emergency expansion of the Family Medical Leave Act (FMLA) and a new federal paid sick leave law. I also talk about how these programs will be paid for.

In general, the FFCRA gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. This is the Paid Sick Leave portion.

The law also gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of coronavirus. This is the Emergency FMLA part.

As above, the law takes effect April 2, 2020 and is to end December 31, 2020. 

Emergency Family and Medical Leave Expansion

  • Expanded Coverage and Eligibility

FFCRA significantly amends and expands the FMLA on a temporary basis (through December 31, 2020).

Under existing law, the FMLA only applies to employers with 50 or more employees.  Under the FFCRA, employees who work at companies with fewer than 500 employees are eligible for the job-protections of the FMLA.

Another big change is that any employee who has worked for the employer for at least 30 days prior to the designated leave may be eligible to receive paid family and medical leave (“Emergency FMLA”). Employers must provide job-protected leave to employees for a COVID-19 coronavirus-designated reason.

Healthcare providers and emergency responders may be exempt.  Also, small businesses with fewer than 50 employees may be exempt if the required leave would jeopardize the viability of their business.

  • Reasons for Emergency FMLA

The reasons for leave that will trigger the Emergency FMLA paid time off are somewhat limited: 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.

  • Paid Leave

The first 10 days of Emergency FMLA may be unpaid. During this 10-day period, an employee may elect to substitute any accrued paid leave (like vacation or sick leave) to cover some or all of the 10-day unpaid period. After the 10-day period, the employer generally must pay full-time employees at two-thirds the employee’s regular rate for the number of hours the employee would otherwise be normally scheduled up to a limit of $200 per day and $10,000 in the aggregate per employee.

  • Calculating Pay for Non-Full Time Employees

Employees who work a part-time or irregular schedule are entitled to be paid based on the average number of hours the employee worked for the six months prior to taking Emergency FMLA. Employees who have worked for less than six months prior to leave are entitled to the employee’s reasonable expectation at hiring of the average number of hours the employee would normally be scheduled to work.

  • Job Restoration

Employers with 25 or more employees will have the same obligation as under traditional FMLA to return any employee who has taken Emergency FMLA to the same or equivalent position upon the return to work. However, employers with fewer than 25 employees are generally excluded from this requirement if the employee’s position no longer exists following the Emergency FMLA leave due to an economic downtown or other circumstances caused by a public health emergency during the period of Emergency FMLA. This exclusion is subject to the employer making reasonable attempts to return the employee to an equivalent position and requires an employer to make efforts to return the employee to work for up to a year following the employee’s leave.

Emergency Paid Sick Leave

  • Reasons for Paid Sick Leave

The FFCRA allows an eligible employee to take paid sick leave because the employee is:

  1. Subject to a federal, state or local quarantine or isolation order related to COVID-19;
  2. Advised by a health care provider to self-quarantine due to COVID-19 concerns;
  3. Experiencing COVID-19 symptoms and seeking medical diagnosis;
  4. Caring for an individual subject to a federal, state or local quarantine or isolation order or advised by a health care provider to self-quarantine due to COVID-19 concerns;
  5. Caring for the employee’s child if the child’s school or place of care is closed or the child’s care provider is unavailable due to public health emergency; or
  6. 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.

Of note, caring for another who is subject to an isolation order or advised to self-quarantine as described above is not limited to just family members.

  • Eligibility

This provision requires employers with fewer than 500 employees to provide full-time employees (regardless of the employee’s duration of employment prior to leave) with 80 hours of paid sick leave at the employee’s regular rate (or two-thirds the employee’s regular rate to care for qualifying reasons 4, 5, or 6 listed above).

  • Cap on Paid Sick Leave Wages 

The FFCRA places limits on paid sick leave. Specifically, paid sick leave wages are limited to $511 per day up to $5,110 total per employee for their own use and to $200 per day up to $2,000 total to care for others and any other substantially similar condition.

  • Carryover and Interaction with Other Paid Leave

This paid sick leave will not carry over to the following year and may be in addition to any paid sick leave currently provided by employers.

  • Calculating Rate of Pay

Employees who work a part-time or irregular schedule are entitled to be paid based on the average number of hours the employee worked for the six months prior to taking paid sick leave. Employees who have worked for less than six months prior to leave are entitled to the average number of hours the employee would normally be scheduled to work over a two-week period. A business employing fewer than 500 employees is required, at the request of the employee, to pay a full-time employee for 80 hours of mandated emergency paid sick leave instead of the initial 10 days of unpaid leave permitted by the Emergency Family and Medical Leave Expansion Act (summarized above).

HOW DO EMPLOYERS PAY FOR THIS?

Employers will be reimbursed for the full amount of what they pay out under the FFCRA within three months, in the form of a payroll tax credit.  (If an employer can’t wait that long, the Trump Administration said it will advance the money – we await the mechanics of that).

The reimbursement will also cover the employer’s contribution to health insurance premiums during the leave.

The amount paid out by the employer is fully refundable – which means that if the amount an employer pays out to workers under the FFCRA is larger than what they owe in taxes, the employer will be paid by a check for the difference.

Specifically, the FFCRA creates provides a series of refundable tax credits for employers who are required to provide the Emergency Paid Sick Leave and Emergency Paid Family and Medical Leave. These tax credits are allowed against the employer portion of Social Security taxes.

Employers are entitled to a refundable tax credit equal to 100% of the qualified sick leave wages paid by employers for each calendar quarter in adherence with the Emergency Paid Sick Leave Act. The qualified sick leave wages are capped at $511 per day ($200 per day if the leave is for caring for a family member or child) for up to 10 days per employee in each calendar quarter.

Similarly, employers are entitled to a refundable tax credit equal to 100% of the qualified family leave wages paid by employers for each calendar quarter in accordance with the Emergency Family and Medical Leave Expansion Act. The qualified family leave wages are capped at $200 per day for each individual up to $10,000 total per calendar quarter. Only those employers who are required to offer Emergency FMLA and Emergency Paid Sick Leave may receive these credits.

Questions!

We have a few!  Like does an employer need to verify that an employee “has kids”?  What if your employee doesn’t actually have custody of the school-age children – do we have to track down the employee for “proof”?

What if an employee is already on protected FMLA and then this hit – do they get another 12 weeks of protected time off (with pay)? (I read the law as “yes” to that)

More to come?

We’ll keep you updated as we learn more about the response of local, state and the federal government to the COVID-19 situation.

 

California FTB Already extended the tax deadlines!!

Rob Nuddleman (www.nuddleman.com) pointed out that I didn’t mention that California’s FTB ALREADY extended the state tax deadlines!

On March 13, 2020, the Franchise Tax Board announced special tax relief for California taxpayers affected by the COVID-19 pandemic.
Affected business and individual taxpayers are granted an extension to file 2019 California tax returns, and make certain payments, until June 15, 2020. According to the Franchise Tax Board, a taxpayer does not have to be directly impacted to qualify for relief. Taxpayers who experience any difficulty in filing or paying, as a result of COVID-19, are included in this relief. 
Thanks Rob!