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FFCRA Partially Vacated, President Orders Payroll Tax Deferral

By Higginbotham on August 11 , 2020

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NY Federal Court Partially Vacates FFCRA Leave Regulations

In a case brought by the New York attorney general, a New York federal district court has vacated portions of regulations issued by the U.S. Department of Labor (DOL) under the Families First Coronavirus Response Act (FFCRA). 

The opinion struck down the following provisions in the FFCRA leave rules:

  • The requirement that an employer have work available for an employee taking leave;
  • The definition of health care providers who may be denied leave;
  • The requirement that employers consent to intermittent leave; and
  • The requirement that employees provide documentation for leave before taking leave.

Our partners over at ThinkHR broke these down even further:

  • The requirement that work be available for an employee to use leave:
    • DOL Rule: The DOL said that for employees to use Emergency Paid Sick Leave (EPSL) or Emergency Family and Medical Leave (EFMLA, aka EFMLEA), the employer had to have work available for them during the time they needed leave. For instance, if an employee was furloughed while sick with COVID-19, he or she would not be eligible for EPSL.
    • The Court’s Ruling: Availability of work is irrelevant. If employees are still employed, whether on the schedule or not, they should be allowed to use FFCRA leave for qualifying reasons (this could mean even furloughed employees would be eligible for leave).
  • The requirement that employers agree to intermittent leave:
    • DOL Rule: Employees must get approval from their employer to use intermittent leave to care for their children when their school or place of care is unavailable because of COVID-19.
    • The Court’s Ruling: If an employee needs intermittent leave (partial weeks or partial days off) to care for their child whose school or place of care is unavailable because of COVID-19, the employer must allow it.
  • The requirement that employees provide documentation before taking leave:
    • DOL Rule: Employers could require that employees provide certain documentation before being allowed to take FFCRA leave or before designating the leave as EPSL or EFMLA.
    • The Court’s Ruling: Employers can still require documentation (which is necessary to get their tax credit), but they can’t prevent an employee from starting leave until the documentation is received. The law clearly states that an employee must provide notice “as is practicable” when taking EFMLA leave and after the first workday of leave when taking EPSL.
  • The definition of health care provider, for the purpose of exemption from leave:
    • DOL Rule: The DOL had defined health care providers broadly to include anyone who works for a health care entity and many who contract with one (the rule was so broad that a custodian working at a drugstore or an English professor at a university with a medical school could be exempt).
    • The Court’s Ruling: The definition is too broad. However, the court did not provide a new definition. We recommend that employers apply the exemption only to those employees capable of directly providing health care services.

Employer Takeaway
As of yet, it is unknown whether the DOL will appeal the decision, whether other states will bring similar court actions or if they do, whether courts in other jurisdictions would reach the same result. We will be watching closely for activity in this case — employers are advised to stay updated on developments in these areas to ensure their FFCRA leave policies comply with the law.


President Trump Orders Payroll Tax Deferment

On Aug. 8, 2020, President Trump ordered the U.S. Department of Treasury (the Department) to defer — not waive — collecting certain payroll taxes from Sept. 1 to Dec. 31, 2020. Because the order is for a deferral, the unpaid taxes will need to be recouped at a later time, unless the Department can find an avenue to eliminate the obligation to pay the taxes. Under the order, employers will be able to defer taxes that help pay for Social Security and Medicare for individuals who receive less than $4,000 during any bi-weekly pay period (the equivalent of $104,000 per year) on a pre-tax basis. Affected taxes will be deferred without any penalties, interest, additional amount or addition to the tax

Employer Takeaway
There is still some question as to whether or not the President has authority to issue such an order (changing tax laws or collections is typically reserved for Congress). Further, government agencies hold employers and payroll providers responsible for withholding an adequate amount of payroll taxes from their employees’ wages and compensation. At this time, it is still unclear whether employers will opt to release the affected payroll taxes to eligible employees for two reasons:

  1. Implementing changes in payroll processes and procedures is not always a quick or easy process — an obstacle aggravated by the fact that the Department has a scarce few weeks to issue guidance to implement this presidential directive; and
  2. There is a possibility that the deferred taxes will need to be collected at a future date, and employers would be responsible for them.

 

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