The 99.5 Percent Act has been proposed in the Senate, which could result in the most extensive changes to the federal estate and gift tax in decades.
As discussed in a previous article, the President signed into law the Families First Coronavirus Response Act (FFCRA), which addresses employee leave taken between April 1, 2020 and December 31, 2020 in response to COVID-19 (coronavirus), and includes both the Emergency Family and Medical Leave Expansion Act (EFMLA) and the Emergency Paid Sick Leave Act (EPSLA). The Department of Labor has released temporary rules and guidance to help employers and employees navigate these new laws.
The FFCRA gave the Secretary of Labor the authority to exempt small businesses (employers of 50 or fewer employees) from having to provide an employee with paid sick leave pursuant to the EPSLA or to provide an employee with expanded family and medical leave to care for his or her child whose school or place of care is closed, or child care provider is unavailable, pursuant to the EFMLA, when such leave would jeopardize the viability of the business as a going concern. This, however, raises the question of what “jeopardize the viability of the business as a going concern” means. The new rules and guidance answer this question.
To that end, a small business may be exempted from providing paid leave when an authorized officer of the business has determined that:
(1) The leave requested 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 leave would entail a substantial risk to the financial health or operational capabilities of the 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 leave, and these labor or services are needed for the small business to operate at a minimal capacity.
In other words, an employer of fewer than 50 employees may deny an employee leave under the FFCRA if the employee is critical to the business’ operations, if the labor pool at the business is too small to take over the employee’s duties, or if paid leave would cause the business to operate in the red.
In determining whether your own business may reject an application for leave, it is worth noting that the Department of Labor estimates than only 10% of all businesses employing fewer than 50 employees will be able to take advantage of the exemption; these exemptions are therefore very much intended to be the exception and not the rule.
Moreover, if a small business denies an employee leave under the EFMLA or EPSLA by invoking one of the above three reasons for exemption, the employer must document the facts and circumstances that warrant that determination. Although the employer should not send this documentation to the Department of Labor, the employer should retain the record of such action in its files. The issued guidance requires that the documentation be retained for four years. Similarly, when an exemption does not apply, and a small business employee does take leave, the employer should retain the records the employee provides in support of their leave, as these documents may be required when the employer files for tax credits or other purposes under the FFCRA.
Importantly, the foregoing exemptions apply only to businesses with fewer than 50 employees, and the Department of Labor has defined an ‘employee’ broadly for purposes of calculating total number of employees. Under the EFMLA and EPSLA, an employer’s calculation of number of employees includes: (i) full-time employees; (ii) part-time employees; (iii) employees on leave; (iv) temporary employees who are jointly employed by the employer and another employer; and (v) day laborers supplied by a temporary placement agency. These employees must be employed within the United States, including the District of Columbia, and any Territory or possession of the United States. Neither independent contractors that provide services for the employer nor employees who have been laid off or furloughed and not subsequently reemployed count toward this number.
You can view these new rules and guidance in their entirety here. As with much of the COVID-19 related legislation, these regulations are temporary and subject to change.
Gawthrop Greenwood and its team of lawyers will continue to review legislation and governmental decisions as they unfold, as we are committed to providing guidance to our clients. If you have any questions, please do not hesitate to call us at 610-696-8225.