FFCRA Update: Documentation is Never on Leave
As the paid time off provisions of the Family First Coronavirus Response Act (FFCRA or the Act) begin to take effect, employers are busy establishing processes to help them administer the expected leave requests. Guidance released by the Department of Labor thus far, has made it clear that much of the responsibility for how to administer compliance with the Act’s provisions, falls on the employer.
The guidance also provides a great deal of autonomy for employers, including establishing an employee’s “regular rate of pay”, determining the tax credits taken to cover leave expense, and developing their case for declaring an exemption (if they are a small employer) from the paid time off provisions of the Act. Due to the speed of implantation of the Act, the DOL is also deferring enforcement actions until April 17, 2020, however when enforcement commences, it will be retroactive to April 1, 2020.
While this flexibility is welcomed by employers, it should also serve as a word of caution regarding how employers should develop and document the processes they put in operation. Although the oversight from the DOL has been relaxed for the time being, employers should not assume that strict enforcement will not return in the future.
In this article we will discuss three important areas of the Act that rely on the employer to establish the processes they will use to comply with the act, and how the employer should document their processes.
This guidance is for information purposes and should not replace guidance from legal counsel.
1) Tracking and Documenting Leave
Many employers have decided to rely on their existing leave processes to provide the paid leave benefits under the Act. Existing request forms should be used in their current format or revised to accurately document the employee’s requests.
The form should, at a minimum, include:
- Dates of the leave,
- FFCRA reason for the leave,
- Names of individuals – including children – that are going to be cared for,
- And a declaration that the employee is unable to work or is not eligible for telework.
The Act also allows employers to request employees to provide documentation to support their request for paid leave. Documentation may include items such as:
- The physician’s name who has issued the quarantine order
- Or local notices for school or day care closures.
Lastly, it will be very important for employers to be able to provide documentation as to how much leave was taken by its employees. Where possible, employers should work with their internal or third-party payroll providers to establish separate benefit classifications to accurately track paid leave.
In the age of paperless processes, it will be important to maintain the physical records necessary to support (1) your payment of the paid leave and (2) the tax credits you seek to reimburse the company for the expenses related to providing the paid leave. The terms of the Act are temporary; therefore, it may be advisable that employers establish a separate file to gather and store related documentation and have it ready when needed. In order to comply with IRS regulations, the leave request forms, and accompanying documentation should be kept on file for a period of four (4) years.
2) Calculation and Documentation of “Regular Rate of Pay” and “Scheduled Work Hours”
The amount of leave available and the rate of pay that employees are entitled to, are based on the actual history of their employment. The Emergency Paid Sick Leave (EPSL) section of the Act provides for 80 hours of paid time for qualified employees. For part-time employees, the employer is required to establish the number of hours available to the employee based on (1) their regularly scheduled hours, or (2) for employees with a variable schedule, an average of the number of hours worked over a specified period of time.
If the employee is considered a part-time employee, the number of hours available to the employee is based on the number of hours in a week that the employee is regularly scheduled to work. For example, if the employee is scheduled for 20- hour work weeks, they would be eligible for 40 hours of EPSL. If the employee has a variable schedule, the DOL recommends using a six- month period to average the number of hours in a week the employee actually works. If the employee has not been employed for six-months, the DOL recommends that the employer use either (1) the number of hours agreed to at the time of hire, or (2) calculate the actual hours worked each week since the date of employment.
When calculating the employees “regular rate of pay”, the FFCRA relies on the definition used in the Fair Labor Standards Act (FLSA). In short, the calculation of the employee regular rate of pay includes all forms of compensation the employee is qualified to receive as a regular part of their job. These forms of compensation may include their base rate, tips, piece rate, commissions and bonuses. The calculation of the regular rate of pay, is also determined over a six-month period, or as long as the employee has been employed, whichever is shortest.
It is important to maintain comprehensive documentation of the process you used to establish each employee’s regular rate of pay, and their regular work hours, and the records you used as the basis of your calculation. It is recommended that these records be maintained for each individual employee who requests and takes paid leave, and that these records be kept separate and apart from your normal payroll records for a period of 4 years. If you will be requesting tax credits in excess of what the company pays in qualified taxes, the IRS has established Form 7200 “Advance of Employer Credits Due to COVID – 19”. The form should be maintained along with the records that establish the need of the advance.
3) Applying for the Small Employer Exemption
The Act provides for an exemption from parts of the paid leave provisions for employers with fewer than 50 employees. The exemption applies to EPSL and EFMLA when the reason for leave is related to school or place of care closures or when a childcare provider is unavailable due to COVID -19 related reasons. Ultimately, an employer must demonstrate that complying with the Act would jeopardize the “viability” of the small business.
Generally, the Act requires that an authorized officer of the business determine that the expenses associated with providing paid leave would exceed business revenue and result in the small business ceasing operations. The expenses that can be considered when determining the viability question are not limited to the actual payment of leave. Expenses also include the cost of absent employees (loss of production) or the lack of qualified replacements that are available to the small business.
The DOL encourages the company and employees to work together to identify ways to both provide the mandated benefits and maintain its financial viability. If a small business determines that the exemption applies to them, it is extremely important that the business prepare and maintain detailed records to support their position. These records should include the methodology used to reach the decision, as well as the supporting documentation and financial forecast used to form the basis of your exemption.
It is likely that the DOL will approach any investigation into the application of the exemption with a degree of skepticism. Accordingly, eligible small businesses should be prepared to aggressively defend their decision. It should also be noted that as a check and balance on the employer, the DOL has encouraged employees who feel that their employer claimed the exemption improperly, to contact them and file their concerns with the Wage and Hour Division of the DOL.
Although the FFCRA is a temporary law, employers should view their responsibilities under the Act seriously and be prepared to defend your decisions if, or when they are challenged. It is encouraged that small businesses work closely with their legal representatives and finance team to study their situation and to make an informed decision regarding the manner with which the business with comply with the Act.
Helping You Navigate the Road to Recovery
Fahrenheit Advisors is ready to help you navigate through the uncertainty of COVID-19 and down the Road to Recovery. Contact us or learn more, visit Insights today.
About the Author
Nathan Duet brings expertise in building sustainable human resources functions within rapidly growing organizations and making strategic adjustments to policies and practices to accommodate an organization’s strategy and development. With nearly 40 years of experience, Nathan collaborates with clients to build a balanced approach to human resources management that facilitates the growth of team members while achieving, and exceeding, organizational objectives. He is skilled in all areas of human resources management including employee relations, compensation, benefits, communications, performance management, and compliance with state and federal labor laws.