by Alexandra P. Saddik and Jonathan R. Babione
As we head into the fall season, government policies regarding management of the pandemic have changed. Here are the updates that could impact businesses:
Payroll Tax Holiday: On August 8, 2020, President Trump signed an executive order allowing businesses to defer payment of payroll tax obligations from September 1, 2020 through the end of this year provided that the bi-weekly salary is less than $4,000. It is important to note that this order only defers the payroll taxes. Despite the current discussion indicating that this administration may consider forgiving the taxes entirely, under the IRS guidance as written, taxpayers will have to pay the deferred amount during the first four months of 2021. Furthermore, in a situation where the employee leaves prior to repayment of the payroll tax, the employer may become responsible for repaying not only the employer’s share of deferred taxes, but also the employees’ share. It is important to note that the payroll tax holiday is optional; employers can choose whether they wish to opt into this or not. Given the uncertainty and lack of clear guidance from the IRS, many employers are choosing not to participate in this holiday at this time.
Emergency Paid Sick Leave and Emergency Family Medical Leave Under the FFCRA: On August 3, 2020, the Southern District of New York struck down portions of the Department of Labor’s (“DoL”) regulations implementing the leave requirements of the Families First Coronavirus Response Act (“FFCRA”). The Court held that DoL’s requirement that work must be available to qualify for the leave (the “work availability requirement”) and the requirement that employers provide permission for intermittent leave cannot be enforced, the definition of healthcare provider needs to be narrowed to the definition specifically provided in the FFCRA, and leave cannot be contingent on being able to provide documentation.
In response to this ruling, the DoL issued new regulations on September 11, 2020 to take effect September 16, 2020. These regulations revise the definition of health care provider to those who are licensed to practice medicine and anyone who is employed “to provide diagnostic services,
preventive services, treatment services, or other services that are integrated with and necessary to the provision of patient care and, if not provided, would adversely impact patient care.” This revised definition realigns the regulations with the FFCRA by removing language that implies that anyone working at a healthcare facility would be exempted from the FFCRA. Additionally, the new DoL regulations clarify that the employee must provide documentation supporting the leave “as soon as practicable,” removing the time restrictions the original regulations imposed.
However, the DoL reaffirmed its original positions on the work availability requirement and the intermittent leave requirement. In other words, work must be available for the employee to qualify for taking leave under the FFCRA. Furthermore, employees must have the employer’s permission to take intermittent leave under the FFCRA.
CALIFORNIA STATE MEASURES
New Reopening Guidelines: California recently unveiled a new set of guidelines for reopening businesses based on a four-tier system. Purple is the most restrictive tier and signifies widespread prevalence of COVID-19, red represents substantial spread, orange represents moderate spread, and yellow represents minimal spread. Progression through the tiers is determined based on adjusted case rate and the positivity rate. However, counties may still be more restrictive than the state, so it is important to look at the county restrictions as well as the state restrictions. Further information regarding the reopening process may be found at: https://www.cdph.ca.gov/Programs/CID/DCDC/Pages/COVID-19/COVID19CountyMonitoringOverview.aspx.
Additionally, the state added a tool for businesses to look up whether they may open in a specific county at https://covid19.ca.gov/safer-economy/.
Paid Sick Leave: On September 9, 2020, Governor Newsom signed AB 1867, which requires employers to provide 80 hours of paid sick leave to all California employees if the employee is unable to work due to (1) a federal, state, or local quarantine or isolation order related to COVID-19; (2) an order to self-isolate or self-quarantine; or (3) being prohibited from working “due to health concerns related to the potential transmission of COVID-19.” The rate of paid sick leave is defined by the highest of one of the following: (1) the employee’s rate of pay; (2) the state minimum wage; or (3) the local minimum wage. Unlike the FFCRA, which only applies to employers with less than 500 employees, AB 1867 covers employers with 500 or more employees as well as health care providers who are exempt from the FFCRA. AB 1867 became effective upon signing, meaning that relevant employers must provide paid sick leave under these provisions immediately.
Exclusion of Paycheck Protection Program (“PPP”) Loans from Gross Income: Governor Newsom also signed AB 1577, which allows small businesses to exclude forgiven PPP loans from state taxes. This is significant for businesses who got PPP money as they will not have to pay any taxes on those loans.
Hiring Tax Credit: Finally, Governor Newsom also signed SB 1447, which provides a tax credit to businesses who hire employees. Businesses who may take advantage of this tax credit must have employed 100 or fewer employees as of December 31, 2019 and have had revenue decline by 50% between April 1, 2020 and June 30, 2020. Qualified businesses will receive a credit of $1,000 per employee up to $100,000.
Procedures, reopening policies, and guidance are changing at the federal, state, and county level on a constant basis. Ferber Law is keeping track of these updates and is prepared to answer any questions you may have as we continue to navigate through this pandemic.
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.