Employment law changing on the fly in response to COVID-19

By Mike O’Brien bio

COVID-19 has ushered in a variety of new, and fast-evolving employment law changes, from the Families First Coronavirus Response Act (FFCRA) to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

EMPLOYEE RETENTION TAX CREDIT:  The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes a tax credit for employers that retain employees during the COVID-19 crisis.  The credit generally provides relief to employers of all sizes in the form of a refundable payroll tax credit of 50% of all “qualified wages” paid (up to $10,000 per employee) during the COVID-19 crisis if (i) operations were fully or partially suspended or subject to a shut-down order; or (ii) gross receipts declined more than 50% compared to the same quarter in the prior year.  Note that for employers with fewer than 100 full-time employees in 2019, all employee wages are “qualified wages,” whether or not the employer’s operations were suspended or subject to a shut-down order or whether gross receipts declined by more than 50%.  For additional details see our legal alert by following this link:  JW Legal Alert: Accessing Tax Credits Under the FFCRA and Cares Act.  Additionally, the IRS has published FAQs, available here:  IRS Tax Credit FAQs.

ASSESSING TAX CREDITS UNDER FFCRA AND THE CARES ACT:  The tax credits for both the FFCRA and the CARES Act are generally taken against social security taxes under Internal Revenue Code Section 3111(a).  Employers anticipating a tax credit are advised to retain an amount equal to the “qualified wages” (rather than depositing them with the IRS) of all federal employment taxes related to wages paid between April 1, 2020, and December 31, 2020.  A revised IRS Form 941 will provide instructions on how to reflect the reduced liabilities for the quarter.  Where monies held back from deposit are not sufficient to cover the cost of covering the qualified wages, the employer may file a request for advance payment of tax credit from the IRS using IRS Form 7200, Advance of Employer Credits Due to COVID-19.  Additional details on accessing the tax credits under the FFCRA and the CARES Act can be found in our legal alert available here: JW Legal Alert: Accessing Tax Credits Under the FFCRA and Cares Act.  Additionally, the IRS has published FAQs, available here:  IRS Tax Credit FAQs.  Proper documentation for sick leave or family leave is critical.  See the IRS’s FAQs 44-46 in the above link for additional details regarding documentation.
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RETIREMENT PLAN RELIEF FOR EMPLOYEES:  The CARES Act includes several provisions affecting distributions and loans from qualified retirement plans that are related to the COVID-19 virus.  More specifically, the CARES Act allows qualified retirement plans to permit participants to withdraw up to $100,000 across all employer-sponsored plans and IRAs.  Additionally, plans are permitted to increase plan loan limits to the lesser of $100,000 (up from $50,000) or 100% (up from 50%) of the participant’s vested account balance.  These distribution and loan relief provisions are optional, but if implemented, will require plan amendments.  Critical, however, is that plans electing to implement these relief provisions must be operated consistent with these provisions even before the plan amendment is finalized.  Plan amendments must be finalized no later than the last day of the plan year that begins in calendar year 2022 (December 31, 2020, for calendar year plans).  For additional details, including the automatic change to required minimum distributions, see our legal alert, available here:  JW Legal Alert: Retirement Plan Distributions and Loans Under the CARES Act.

PAYCHECK PROTECTION PROGRAM:  By now, most business owners are aware of the Paycheck Protection Program (Program) which is detailed in Section 1102 of the CARES Act. Under the Program, small businesses can obtain 100% federally guaranteed loans if they maintain their payroll during the pandemic. Importantly, the loans may be forgiven if borrowers maintain their payrolls during the pandemic or restore their payrolls afterward. The loans are offered by private lenders, and all existing SBA-certified lenders have been given delegated authority to rapidly process loans under the Program. These loans will be highly beneficial to businesses who require capital to cover the cost of retaining employees during the Pandemic.

On April 16, 2020 the SBA issued a statement that it is currently unable to accept new applications for the Paycheck Protection Program based on available appropriations funding. The SBA also said that the $10 billion Congress appropriated for Economic Injury Disaster Loans had also dried up. Congress and the administration are currently negotiating additional funding for the Program, which will likely add an additional $250 billion; however, the appropriations have not yet been finalized.

Eligibility: Generally, a business is eligible to participate in the Program if it was in operation on February 15, 2020, had employees for whom it paid salaries and payroll taxes, and it (a) has fewer than 500 employees (subject to SBA affiliation rules), (b) is an independent contractor, (c) is a sole proprietor, or (d) is a 501(c)(3) with fewer than 500 employees.

Loan Amounts: Loan amounts are calculated as follows:

• For businesses that were operating between February 15, 2019-June 30, 2019, the maximum loan amount is equal to 2.5 xthe business’s average monthly payroll costs during that time period. If the business employs seasonal workers, it can choose March 1, 2019 as the time period start date.
• For businesses who were not operating between February 15, 2019-June 30, 2019, the maximum loan amount is equal to 2.5 x the average monthly payroll costs between January 1, 2020 and February 29, 2020.

“Payroll Costs”: For employers, “Payroll Costs” eligible for forgiveness under the Program include (a) salary, wage or other compensation; (b) payment of cash tips; (c) payment for vacation, parental, family or sick leave; (d) severance benefits; (e) group health care benefits; (f) retirement benefits; or (g) payment of state or local taxes on employee compensation. Certain amounts are excluded from “Payroll Costs” under the Program, including compensation to an individual employee that exceeds $100,000, payroll taxes, qualified sick and family leave for which credit is allowed under the Families First Coronavirus Response Act, and payments to independent contractors.

Forgivable Amount: A business is eligible for loan forgiveness equal to the amount spent on the following items during the 8-week period beginning on the date of the first loan disbursement by the lender under the Program; however, at least 75% of the loan amount must be attributable to Payroll Costs: Payroll Costs (as defined above), mortgage interest, rent, and utilities. Loan forgiveness can be reduced if there is a reduction in the number of employees or a reduction greater than 25% in wages paid to employees, based on certain formulas which are discussed more in depth (along with the rest of the Program) at: Legal Update: Cares Act Business Relief.

LCA NOTICE/POSTING REQUIREMENTS FOR H-1B EMPLOYEES WORKING AT HOME:  The COVID-19 pandemic has resulted in many employees needing to work from home. Unfortunately, if you have H-1B employees in this position, you have additional notice and/or posting obligations regarding the Labor Condition Application (“LCA”) used for the original H-1B approval.

The U.S. Department of Labor recently indicated that if an H-1B employee is moving to a new location within the same area of intended employment, a new LCA is not required. However, the employer must still provide either electronic or hard-copy notice of the LCA at the new work location for 10 calendar days. In other words, notice of the LCA must still be provided and/or posted at the H-1B employee’s home. The notice must be given as soon as practical, and no later than 30 calendar days after the worker begins work at home.  For specific information in this regard, go to JW Legal Alert: Working from Home in H-1B Status.

Also, if the H-1B employee’s home is outside the area of the company worksite, a new LCA and amended H-1B petition will generally need to be filed.  If there are other changes in the terms and conditions of the H-1B employment (e.g. the H-1B employee’s wage have been reduced or hours have been cut), you will also need to file a new LCA and amended H-1B.