On April 1, 2020, the US Department of Labor and the IRS put out final guidance today to clarify the paid leave mandates and refundable payroll tax credits under the Families First Coronavirus Response Act.
• The FFCRA webpage contains employee and employer fact sheets, posters, and a question and answer section: https://www.dol.gov/agencies/whd/ffcra
Labor Advice on Paid Leave
The Labor Department’s Wage and Hour Division (WHD) posted a temporary rule, effective today, April 1, 2020. One surprising detail is that the Department announced it will treat government orders for all or most residents to shelter in place or stay at home as triggers for paid sick or family leave. That was a question raised on yesterday’s webinar and all of the experts we consulted presumed that the Department would not take this very expansive reading. This may not be all that large a mandate/entitlement, however, because (a) teleworking employees can still work, so won’t be eligible for paid leave, and (b) the shutdown of the business negates the paid leave requirement (you can’t be on leave from a job that no longer exists, is how DOL sees it). Employees not able to work because of such shutdown orders from governments will likely be eligible for expanded unemployment benefits.
Other notable adjustments occur in two of the definitions. The temporary rules expand the definition of “son or daughter” beyond what’s written in the Families First Act to include children age 18 and older who are unable to care for themselves due to physical or mental disability. The temporary rules also take a flexible approach to “telework.” Ordinarily, the Department is strict about assuming employees working remotely work consistently for eight hours at a time. For the duration of this crisis, the temporary regulations assume parents working from home and caring for children will be clocking in and out throughout the day. Much of the rest of the 124 pages of regulations focus on how to calculate hours worked.
Tax Advice on Refundable Payroll Tax Credits
The IRS website posted an explanation of the refundable tax credits available to small and midsize businesses that are required to provide the paid leave. The explanations, arranged in a helpful Q & A format, clarify the common areas of confusion. For example, they make clear that the tax credit applies to mandated wages paid and associated health plan expenses (#9), employers that have provided paid leave are entitled to retain payroll tax payments (#17), and employers are entitled to claim both the paid leave tax credit and the Employee Retention tax credit (#18). The explanations also address the interplay between Paycheck Protection Program loans and the paid leave tax credits (#19), how to calculate qualified sick leave (##20-24) and qualified family leave (##25-29), and how to claim the credit (##38-43). In all, there are 66 questions and answers.
I’ll close with perhaps the most important of the IRS Q&As –
56. May a tax-exempt employer receive the credits?
“Yes. The FFCRA entitles Eligible Employers that pay qualified sick leave wages and qualified family leave wages to refundable tax credits. Qualified sick leave wages and qualified family leave wages are those wages for paid sick leave and paid family and medical leave that are required to be paid under the FFCRA. Tax-exempt organizations that are required to provide such paid sick leave or expanded paid family and medical leave may claim the tax credits.”