Those of you who are keeping up with the pronouncements of our federal government regarding an employer’s obligations under the Families First Coronavirus Response Act are aware that there are still some questions outstanding. Yesterday the DOL answered three of those questions when it issued Q&A’s 98, 99 and 100. (You can find the Q&A’s here https://protect-us.mimecast.com/s/_ACiCERPgZCW49OkTNCJIo?domain=dol.gov).
Specifically, the DOL indicated that:
98. If a child’s school requires the child to alternate between in-person and remote-learning on a day-to-day basis, the parent is entitled to take FFCRA leave on the days that the child is required to remote-learn, assuming that other requirements of the Act are met.
99. If a school gives parents a choice between remote or in-person learning, the parent may not take FFCRA leave if they choose to have their child remote-learn, even if the parent did so out of fear that the child would contract COVID-19.
100. A parent may take FFCRA leave even if a school is utilizing remote-learning on a temporary basis and intends to open to in-person schooling in the near future.
None of these Answers prohibit an employer from allowing an employee to take leave when it is not required by the FFCRA. However, if an employer does so, it should not deduct that leave from the employee’s FFCRA leave “bank” or utilize the tax deduction allowed by the FFCRA for that additional leave.
Due to the pandemic some of your employees may have exhausted their paid leave and be in desperate need of more. Some of your other employees may have a surplus of accrued paid leave and want to assist their less-fortunate co-workers. While you can technically allow employees to “give” accrued paid leave to each other, the IRS says that you have to jump through some hoops if you don’t want the donor employees to take an unnecessary tax hit.
IRS Notice 2006-59 addresses this issue. You can find the Notice here: https://www.irs.gov/pub/irs-drop/n-06-59.pdf. The IRS also recently also published a brief Q&A addressing such plans related to the COVID-19 pandemic. You can find the Q&A here: https://www.irs.gov/newsroom/leave-sharing-plans-frequently-asked-questions
If the employer follows the IRS Notice, the employee who gives leave under such a plan will not have to include the donated leave in her income or wages. Conversely, the employee who receives the “given” paid leave will be taxed on the amount that she receives. Unfortunately, the employee giving the leave may not claim an expense, charitable contribution, or loss deduction for the amount of leave given. Please note that I said that this works “If the employer follows the IRS Notice.” If you fail to do so, your employees will face some unexpected taxes on the paid leave that they “gifted.”
I would recommend that you refer to Notice 2006-59 if you are considering implementing such a leave-sharing plan. I have summarized some of the key criteria below:
- The plan must allow a leave donor to deposit accrued leave in an employer-sponsored leave bank for use by other employees who have been “adversely affected by a major disaster” as defined by the Notice.
- The plan cannot allow a leave donor to deposit leave for transfer to a specific leave recipient. (This has been a major point of contention with the plans that I have assisted clients to implement. Most employees want to give leave to a particular co-worker, not to all eligible co-workers in general. Consider this before you spend your time and money drafting a plan.)
- An employee cannot take more leave in a year than the maximum amount that she accrued in the year.
- A leave recipient must use this leave for purposes related to the major disaster.
- The plan must have a reasonable limit on the period of time that leave may be deposited and received from the bank.
- A leave recipient cannot convert leave received into cash. (This is another common point of contention.)
- The employer must make a reasonable determination, based on need, as to how much leave each approved leave recipient may receive under the leave-sharing plan. (Ouch! This will undoubtedly lead to cries of favoritism.)
- Leave deposited on account of one major disaster may be used only for employees affected by that major disaster. (If you implement a plan for COVID-19, it could not also be used for our next hurricane.)
- Unused leave must be returned to the donor.
Don’t hesitate to call me directly if you have any questions or would like assistance in drafting and implementing your own COVID-19 Leave Sharing Plan.
Earlier this week a federal court in New York vacated four key provisions of the U.S. DOL’s Final Rule implementing the Families First Coronavirus Response Act. In April, the State of New York sued the DOL claiming that the DOL had exceeded its statutory authority in a way that denied FFCRA leave to eligible employees. The District Court largely agreed with the state of New York and vacated four provisions of the DOL’s Final Rule. Specifically, the Court vacated the provisions:
- That employees are only eligible for paid FFCRA leave where the employer had work available (This opens the door for furloughed and laid-off employees to make claims for FFCRA paid leave); This could be huge.
- Defining healthcare providers that can be declared exempt from the protections of the FFCRA. (This would eliminate a health care provider’s ability to exempt it’s employees from the FFCRA.);
- That employees may only take intermittent leave for certain reasons if their employer consents. (This would allow employees to take intermittent leave to care for a child without employer permission.); and
- That employees must provide documentation before taking FFCRA leave. (Employers would still be able to require documentation, just not before the employee began leave.)
Before you start pulling your hair out, we do not know if or how this ruling will impact those of us blessed to live and work in the Fifth Circuit. This ruling was issued by the United States District Court for the Southern District of New York. Rulings of this Court will ordinarily not be binding on the Federal Courts of Louisiana. However, we can expect similar suits to be filed in other jurisdictions. Of course, if you employ employees in the jurisdiction of the Southern District of New York, this ruling will be controlling if it stands. It is very likely that the DOL will either appeal this judgment on you or amend its Final Rule in such a way to make it compliant with this ruling. In the meantime, employers should make themselves familiar with this ruling and determine what, if any, steps they should take. You can read the opinion here: https://www.fmlainsights.com/wp content/uploads/sites/813/2020/08/State-of-NY-v.-USDOL.pdf I will track the progress of this case through the inevitable appeals process and keep you informed. As always, call me if you have any questions.