Department of Labor Guidance Update and Phase 3 Provisions - What Does It All Mean for Franchising?

Webinar Summary
Attorneys from labor law firm Littler Mendelson outlined several of the key provisions of recent federal stimulus legislation related to the COVID-19 pandemic. The panelists discussed the Families First Coronavirus Response Act (FFCRA), Emergency Paid Sick Leave, Emergency Family Medical Leave, and the CARES Act. The panelists discussed the new mandates on businesses, as well as compliance measures, and loan options open to businesses in light of the stimulus bills.

Below are key bullet points from the webinar –

• FFCRA mandates new requirements for Emergency Paid Sick Leave for all employees, for reasons including personal illness, as well as to care for those sickened by COVID-19 or experiencing related disruption, at different levels of sick leave compensation
• Family Medical Leave Act “+” – requires 12 weeks of leave be available, subject to monetary caps
• Some exemptions to FFCRA requirements, including, such as exempting businesses with less than 50 employees for the FMLA+ provisions only
• CARES Act provides loans, tax credits, and expansion of Unemployment Insurance benefits. Waives affiliation rules for franchises, so that they can take advantage of newly offered loans
• Pay close attention to IRS, Treasury, and DOL for new guidance, application forms, and regulations forthcoming.

Full Bullets –

• Uncertain and unclear time given Congress’ recent passage of legislation
• Legislation is begin turned into regulations at government agencies
• Explain what we know, what we think we know, and what we don’t know
• Change, change, change
• Key provisions of FFCRA and DOL Guidance
• CARES Act
• Questions and answers

FFCRA, Paid Leave, DOL Guidance

• FFCRA – Phase 2 bill
• Not retroactive – April 1 is DOL implementation date
• Covered employers must post poster for employees
• DOL is answering some questions
• EPSL  - require up to 80 hours for full time employees
  • 6 different reasons
  • Includes school closure because of COVID-19
  • Pay subject to monetary caps
• EFMLA – up to 12 weeks
  • 1 reason only
  • Weeks 1-2 unpaid by provision
  • Weeks 3-12 – 2/3 pay subject to monetary caps
  • You may have regular/classic FMLA responsibilities
• EPSL monetary caps – 100% for reasons 1-3, 2/3 pay for reasons 4-6
• Fewer than 500 employees eligibility
  • When? At the time your employee’s leave is to be taken
  • Everyone counts for headcount purposes (part time, full time, temps)
  • Combine entities? DOL is talking joint employer and “integrated employer” under FMLA classic à follow advice on counsel re: combining entities to exceed the 500 count
• Small businesses with fewer than 50 employees
  • Employer with fewer than 50 is exempt from paying ONLY the family leave provision under the FMLA – only exempt from child care or school closure purpose provision
  • Document these circumstances and provision of leave. IRS has yet to establish what documents you need to maintain to show that you’re providing leave benefits. If you are to avail yourself of one of these exemptions, then document why and how
    • If business’s expesnse and obligations exceed business revenues
    • Absence of employee(s), substantial risk to financial health/operations
    • Not sufficient worker. Labor or services are needed for small business to operate at minimal capacity
• Health care provider exemption
  • Determining who is critical/essential employees in a health crisis
  • Health care provider is anyone employed at : hospitals, nursing homes, home health aids, health departments, or any similar institution, employer, entity
  • Health care provider is essential/necessary
  • Judicious use of this definition; use best judgement
• If you already provide generous time off benefits?
  • EPSL and FMLA+ are on top of whatever you are already doing, but any FMLA+ comes out of the existing bank of benefits
• Documentation
  • Statements from employees
  • Consult applicable forms from IRS
  • Make sure payroll systems are tracking these specific leave entitlements and provisions
  • Supporting documentation for leave requirements – be flexible on this
• Furloughs and Layoffs
  • Reduction in hours, schedules
  • If you’ve shut your business down and are not scheduling, then you do not have to provide these FMLA or EPSL benefits
  • Unemployment eligibility may be a factor
    • If you’re paying them FMLA or EPSL, then your employees are not eligible for UI
• Tax Credits
  • Check with IRS
  • Aim is for 1:1 tax credit for EPSL and FMLA+ leave benefits

CARES Act

• Loans, tax credits, expansion of unemployment funds
• Paycheck Protection Program
  • You cannot use this loan to cover other coronavirus related benefits, like paid leave under the FFCRA
• Bill has specific rules around franchises, so that normal affiliation rules (that normally consolidate franchise operations) are waived
• SBA will provide these loans through banks – some banks are ready to accept your information now. Enter into conversations with your bank to see if they’re an SBA approved lender
• SBA requires four employer certification
  • Support operations
  • Retain workers, payroll
  • Employer does not have direct loan application for same purpose elsewhere
  • Employer has not received a loan for same period
• Sliding scale of loan forgiveness – if you can only make 90% of your payroll, then the 10% will become a loan, and 90% will be forgiven
• $500 billion direct lending program
  • Discretionary of the secretary
  • Comes with traditional labor law considerations
    • Employers will not outsource jobs
    • Not abrogate collective bargaining
    • Will remain neutral in union organizing efforts
  • Employers with 500-10,000 employees
  • No interest for 6 months
• Employee Retention Tax Credit
  • Full or partial shutdown
  • Decline of 50% or more since same quarter of prior year
  • Talk to payroll provider/trusted advisor

Are payroll taxes excluded from loan forgiveness from Paycheck Protection Program?

            No, you can pay state and local taxes