The IRS and DOL Announce Plan to Reimburse Employers for Coronavirus-related Paid Leave

On March 20th, the Department of Labor and the IRS announced a plan to soften the blow to employers required to provide Coronavirus-related paid leave under the Families First Coronavirus Response Act beginning April 2d. According to the announcement, “two new refundable payroll tax credits” are “designed to immediately and fully reimburse [employers], dollar-for-dollar, for the cost of providing Coronavirus-related leave.”

Here is how the credits are described under the section entitled “Prompt Payment for the Cost of Providing Leave”

When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees’ share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.

Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.

The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.

The announcement includes the following examples:

If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.

If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.

If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.

Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.

Many employers who have been worried about how to pay for the newly-mandated leave will find this announcement good news. The full announcement can be found here:

Families First Coronavirus Response Act

On March 18, 2020, President Trump signed the Families First Coronavirus Response Act. The new law requires to provide paid leave under the Emergency Family and Medical Leave Expansion Act (EFMLA) and the Emergency Paid Sick Leave Act. The law takes effect on April 2, 2020 and expires on December 31, 2020.

Emergency Family and Medical Leave Expansion Act

Which private employers are covered by the EFMLA?

All employers except with 500 or fewer employees. (The Secretary of Labor is, however, authorized to exempt an employer with fewer than 50 employees if providing the required leave would jeopardize the viability of their business.)

Which employees are covered?

All employees who have worked for the employer at least 30 days before starting leave.  (Employers can exclude employees who are health-care providers or emergency responders.)

What does the EFMLA require?

The law expands the Family and Medical Leave Act (FMLA) to require up to 12 weeks of paid time off for an employee unable to work or telework to care for the employee’s child under the age of 18 if (a) the child’s school or place of care has been closed or (b) the care provider is unavailable because of a public health emergency with respect to the Coronavirus declared by a Federal, State, or local authority.

How is the amount of pay an employee receives calculated?

The first ten days of leave is unpaid, although the employee can substitute accrued leave and the federal Emergency Paid Sick Leave discussed later. After the initial ten days, the employee is entitled to 2/3 of the employee’s regular rate for the employee’s normally scheduled hours. Payment, though, is capped at $200 per day and $10,000 total.

If an employee’s schedule varies, the employer must average the hours worked over the six-month period ending on the date the employee would have taken leave. If the employee has not yet worked for the employer for six months, the employer must use “the reasonable expectation of the employee at the time of hiring of the average number of hours per day the employee would normally be scheduled to work.”

Does an employer have to restore the employee to his or her position when leave ends?

Yes, with one exception. An employer with fewer than 25 employees does not have to return an employee to work if the following conditions are met:

  • the employee takes EFMLA leave;
  • the position held by the employee does not exist due to economic conditions or other changes in operating conditions of the employer that (a) affect employment; and (b) are caused by a public health emergency during the period of leave;
  • the employer makes reasonable efforts to restore the employee to a position equivalent to the position the employee held when the leave commenced, with equivalent employment benefits, pay, and other terms and conditions of employment; and
  • if reasonable efforts to restore the employee fail, the employer must make reasonable efforts over a period of time called the “contact period” to contact the employee if an equivalent position becomes available. The “contact period” is the one-year period beginning on the earlier of (a) on which the qualifying need related to a public health emergency concludes or (b) the date that is 12 weeks after the date on which the employee’s leave commences.

Emergency Paid Sick Leave Act

Which private employers are covered?

Like the EFMLA, all private employers with 500 or fewer employees are covered, and the Secretary of Labor can exempt an employer with fewer than 50 employees if providing the required leave would jeopardize the viability of their business.

Which employees are covered?

Every employee immediately upon hire. (Employers can exclude employees who are health-care providers or emergency responders.)

What absences are covered?

Paid time off is required to the extent an employee is unable to work or telework needing leave because:

1.       The employee is subject to a federal, state or local quarantine or isolation order related to COVID-19; 

2.       The employee has been advised by a health care provider to self-quarantine due to COVID-19 concerns; 

3.       The employee is experiencing COVID-19 symptoms and seeking medical diagnosis; 

4.       The employee is caring for an individual subject to an order described in paragraph 1 or has been advised as described in paragraph 2 (note – care for any individual – not just family members);

5.       The employee is caring for the employee’s child if the child’s school or place of care is closed or the child’s care provider is unavailable due to COVID-19 precautions; or

6.       The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

How much paid leave does an employee receive?

Full-time employees are entitled to 80 hours of paid sick leave. Part-time employees are entitled to the number of hours that such employee works, on average, over a two-week period.

If an employee’s schedule varies, such that an employer cannot determine with certainty the number of hours the employee would have been normally scheduled to work, the employer must average the hours worked over the six-month period ending on the date the employee would have taken leave. If the employee has not yet worked for the employer for six months, the employer must use “the reasonable expectation of the employee at the time of hiring of the average number of hours per day the employee would normally be scheduled to work.”

What rate do we use to calculate paid leave?

Employees taking time off for reasons 1, 2, and 3 above (self-care) receive their regular rate per day. Employees taking time off for reasons 4, 5, and 6 above (care for others) receive two-thirds their regular rate.

Is there a cap on the amount of pay?

Yes. Paid sick leave for reasons 1, 2, and 3 is capped at $511 per day and $5,110 in the aggregate. Paid sick leave for reasons 4, 5, and 6 is capped at $200 per day and $2,000 in the aggregate.

Can we require notice from employees?

Yes. After the first day of paid sick leave,  an employer can require the employee to follow reasonable notice procedures in order to continue receiving paid sick time

Washington’s Paid Sick Leave Law

Washington’s Paid Sick Leave law goes into effect on January 1, 2018. In general, the law applies to all non-exempt employees and all employers. Under the law, employees accrue 1 hour of paid time off for every 40 hours worked. The law includes a number of specific provisions regarding such issues as notice to employees, whether and how employers can request verification of the need for leave, and other topics. The law includes strict penalties for non-compliance and allows employees to file lawsuits for violations.

Even if you have a policy that provides at least 1 hour of paid time off for every 40 hours worked, you would be well-served to check out the new law and its specific requirements. Because the new law has required provisions such as notification requirements that you need to be aware of. Here is a link to a Fact Sheet put out by the Department of Labor & Industries that summarizes the new law.

Make it easy for the judge to rule in your favor

One of the judge’s hardest jobs at a trial is to decide what happened because each side usually has a different view of events. To win, you want to do things that make it easy for the judge to rule in your favor. One technique frequently used by lawyers, because we know a judge may later be deciding what happened, is using a confirming letter or email.

Assume you are at an unemployment hearing after an employee quits over the phone. The employee testifies that he was laid off, maybe because after he quit he learned the impact it had on eligibility for benefits. The HR Manager testifies that he quit. If we had a celestial video recorder, we could see the employee did quit. But both witnesses are credible and there is no other evidence of what happened.

It is difficult for the judge to rule in your favor in this situation. The scales of justice are equally balanced. But there is public policy that favors awarding benefits to the unemployed which acts as a gentle breeze blowing down on the employee’s side of the scale.

Now, what if you have a letter to offer into evidence that was sent certified mail return receipt requested right after the phone call. (Or an email – hopefully sent with a delivery receipt so you have proof of receipt) The letter, or email, says:

Dear Employee,

This confirms our telephone conversation this afternoon. You informed me that you were quitting effective immediately. We will process the necessary paperwork and mail your final check.

We wish you well.


HR Manager

The employee never responded to your letter. (They rarely do!)

Now, you have tilted the balance of the evidence way over to your side. By not responding to your letter, the employee essentially admitted that he quit. With this simple step, you have made it easy for the judge to rule in your favor.

Long hours, changing conditions, and availability to handle issues are essential functions of a Les Schwab assistant manager.

Peter Atkinson was a long-term Les Schwab employee with a history of chronic migraine headaches. After being promoted to a position of assistant manager, which required a more demanding schedule, he began to miss work, take time off to sit in the break room, and leave before his shift was over because of migraine symptoms. At other times, he continued to work but in a “lesser capacity” because of discomfort. According to his supervisor, Atkinson’s performance and motivation because increasingly worse.

Atkinson wanted Les Schwab to reduce his hours down to 40 to 50 per week and to allow him to schedule consistent, uninterrupted breaks. Les Schwab did not reduce his hours or the scheduled breaks. Les Schwab contended that because of the fast pace and high sales volume, the hours and management team’s presence were essential job functions.

Les Schwab ultimately removed Atkinson from his position. He sued Les Schwab for, among other things, failure to provide him with a reasonable accommodation in violation of RCW 49.60.

The Court of Appeals dismissed his claim. Atkinson v. Les Schwab Tire Centers of Washington, Inc., No. 44326-1-II, 2014 WL 1746110 (April 29, 2014). An employer is not required to eliminate or modify the essential functions of a job. The Court concluded that Atkinson’s requested changes would have required just that. The Court noted:

But long hours, changing conditions, and availability to handle issues that arise unexpectedly are key aspects of a managerial role. The Chehalis Les Schwab averaged more than 5 million dollars in sales annually. To handle this volume, there were nearly 30 employees and only 3 managers at any given time. The management team was expected to be at the location before the hourly employees and to stay later. The luxury of completely uninterrupted breaks was not available to managers as it may have been for others.

This case is another example of the limits on an employer’s obligation to provide accommodations. An employer can require employees, even those with disabilities, to perform essential job functions, with or without a reasonable accommodation. Atkinson, though, did not want an accommodation to enable him to perform essential job functions; rather, he wanted the essential functions altered. That goes beyond an employer’s obligations.

How can I fire a pregnant employee without getting sued?

You can’t.   OK, that’s an overstatement; there are times it might make sense, but it is always a high-risk move.

What is the most important factor in whether an ex-employee files a lawsuit against an employer? Anger? Feeling unfairly treated? Need for money? Those are all way up there. But I think the top reason lawsuits are filed is that the ex-employee consults with a lawyer.

When you fire a pregnant employee, she is going to tell her co-workers, spouse, girlfriend or boyfriend, mother, father, grandparents, cousins, brothers and sisters-in-law, neighbors, best friends, casual friends, Facebook friends, acquaintance at the dog park, gym . . . you get the picture. EVERYONE she talks to will say “They can’t do that!” and urge her to see a lawyer.

Although “everyone” is wrong about whether you can fire a pregnant employee, there are a lot of laws that come into play. Some laws require favorable treatment such as time off when the employee is sick or disabled because of the pregnancy. Some laws prohibit treating the pregnant employee differently because of the pregnancy. For example, you cannot discharge an employee because she is pregnant.

To make matters worse, if the soon-to-be mother files a lawsuit, she is likely to find an audience with a very sympathetic jury and judge.

The likelihood she will consult with a lawyer at everyone’s urging, the complexity of the applicable laws. and the fact she will be a sympathetic plaintiff combine to make discharge a high-risk move.

This does not mean an employer’s hands are tied. There are steps to reduce you can take to reduce the risk of litigation. You could some things like making sure (a) you are aware of all applicable laws regarding pregnant employees and have documented proof of compliance with all these laws; (c) you have documented proof that the pregnant employee understood your expectations; (d) you have documented proof she not meeting your expectations; (e) you have documented proof that you gave her a meaningful opportunity to improve and the necessary tools to do so; (f) you notified her in writing that failure to meet expectations would result in discharge; (g) you use progressive discipline; and (h) you have documented proof that similarly-situated non-pregnant employees have been treated the same way as the pregnant employee.

Your goal is to build such an air-tight case that even an opposing lawyer or sympathetic juror or judge looking at the evidence feels compelled to rule in your favor. You are also trying to treat her in a way that almost agrees with the discharge decision. You would like her to feel so comfortable with the result and the overall process that her inner voice telling her that she was treated well is loud enough to drown out the voices that tell her she must see a lawyer.

Even under the best situation, though, I think discharging a pregnant employee will always be a high-risk move for employers.

What happens if you fire an employee who has given notice?

One of your non-exempt employees, Robert, tells you he is quitting in four weeks. You will be sorry to see him go, but you appreciate the notice.

Over the next few weeks, you find a replacement to start the Monday after Robert’s last day. You start to notice, though, that Robert’s heart is not in his work. He slacks off a lot and talks constantly to coworkers about his future plans. On Thursday of Robert’s last week, you decide you’ve had enough. You are better off without him and tell him you are making Thursday his last day. You do not pay him for Friday because you know you do not have to pay non-exempt employees when they don’t work.

Is Robert eligible for unemployment benefits?

Probably. An employee whose job ends because of a voluntary quit is disqualified for unemployment benefits unless the quit is for “good cause.” The statute sets out a specific list of reasons that constitute good cause and none of the reasons apply here. See RCW 50.20.050. On the other hand, a discharged employee is eligible for benefits absent specific reasons considered disqualifying “misconduct.” See RCW 50.04.294.

Here, and although each case has to be decided on its specific facts, even though Robert was going to work only one more day, his job did not end because he quit. It ended because he was discharged. And because nothing he did would likely rise to the level of “misconduct,” he will probably be eligible for benefits.

If, on the other hand, the employer had paid Robert through Friday, you get a different result. Paying the employee through their notice period preserves the “voluntary quit” nature of the resignation making the employee in most cases, ineligible for unemployment benefits.



Get the employee’s side of the story in his or her own words

An employee’s version of events resulting in discharge often change significantly over time. One cause of this change is likely because the employee’s interests change. When an employer is addressing performance or conduct issues before discharge, the employee’s primary interest is usually working with the employer to remain employed. When an employee files a lawsuit or other claim following discharge, the employee’s primary interest is beating the adversary – the employer.

Getting employees to put their version of events into writing when their primary interest is remaining employed makes it more likely you will get an accurate and honest description. And it will make it difficult for the employee to change their version when they become the employer’s adversary.

For example, assume that John complains to you that a co-worker, Robert, angrily yelled at him with a barrage of profanity when John asked Robert if he needed assistance. And also assume that what John says is absolutely true. You want to talk to Robert about the incident to get his version of what happened.

At this point, Robert is likely to act in ways consistent with his primary interest of staying employed. Sure, he may deny yelling or swearing at John. But there is a high probability that he may admit to the alleged behavior and try to justify his actions or appeal to you to give him another chance. If, at this point, Robert writes down what happened in his own words, the employer has the best chance it will ever have of getting the accurate and honest description of events from Robert’s perspective. And whatever his motivation for admitting the alleged behavior, it is still an admission that he did what John alleged.

Once you discharge Robert and he files a charge of discrimination, lawsuit, or a claim for unemployment benefits, his interest changes. Rather than trying to persuade you that his actions did not warrant discharge, he now wants to win. He has a strong interest in a version of events in which he did not swear or yell at John.

I cannot overemphasize the value to an employer of an early narrative in the employee’s own words. One of the key issues in any discharge case is proving what actually happened and proving that the motivation for the discharge was not an unlawful one. Having a written statement from the employee admitting to the misconduct or poor performance can convince an employee’s lawyer not to file a claim or lawsuit against the employer or, if a claim or lawsuit is filed, make it much more likely the employer will prevail.

There are several ways to get this type of description in the employee’s own words. I think the best way is for the employee to handwrite a statement. You could also have the employee type up a statement in a document or email. With either of these approaches, it is a good idea to include appropriate language and signature so that the statement is made under oath. And if you are worried that the employee’s own version may miss relevant issues, you can always ask the employee to address specific questions from you.

Another approach is to type up a statement or make detailed notes while interviewing the employee and then have the employee sign under oath that the statement or notes are accurate and complete. I think these approaches are not as powerful as a statement in the employee’s own words, but these approaches are better than not getting anything in writing from the employee. If you do not have the employee put things in his or her own words, I recommend that you also give the employee an opportunity to review the notes or statement before signing, to add information to make the document complete, to ask questions, or to revise the statement.

Avoid the use of a “Probation Period”

In my last post, I talked about firing employees during their first 90-days. There is a danger employers need to be aware of when referring to this initial period as a “probation” period.

One way employers alter the “at-will” employment relationship is by an express or implied promise, often in a handbook, not to fire employees unless the employer has a good enough reason for doing so, usually called “good cause.” A court could use your use of a “probation period” as a promise, by implication, that once an employee gets beyond the “probation period,” he or she cannot be discharged unless the employer has “good cause.” (And, in fact, this is often what union contracts provide.)

Here is the reasoning that an employee’s lawyer would likely use to file a lawsuit. During the 90-day “probation period,” everyone agrees that the employee can be fired for any reason. Once the employee passes the “probation period,” though, the employee must have some greater rights than before passing through that period. Unlike while in the period, the employee now cannot be fired unless the employer’s reason is a good enough one. The existence of the “probation period” is, in effect, an implied promise not to fire employees who have completed the period absent good cause. As a result, the employee can file a lawsuit to have a judge or jury decide whether that reason was good enough to justify discharge or whether the employer wrongfully fired the employee without good cause.

There are counter arguments employers can make. But to reduce the risk of this becoming an issue in litigation, avoid having a “probation period” in your handbook and train supervisors not to refer to a any “probation period” in day-to-day language.

Fire someone within the first 90 days

One way employers can avoid litigation is to fire poor performers before they have worked 90 days.

Most believe that after an employee works for certain length of time, typically 90 days, the company can’t fire the employee unless his or her performance is terrible (and the employer has first warned the employee) or the employee engages in gross misconduct like theft.

But this is not the law for most private employees. Washington, like most states, has “at-will” employment. Unless one of the limited exceptions to “at-will” employment applies, an employee can be fired without notice for any reason the employer thinks is good enough. One exception is when a collective bargaining agreement is in place. Another one is that an employee cannot be fired for race, age, sex, religion or other characteristic or activity expressly prohibited by a statute.

Lawsuits, though, are often less about the law and more about an employee wanting to remedy a perceived wrong. When someone has worked for an employer for a period of time, the employee develops a sense of job-entitlement. For whatever reason, maybe because union contracts have historically often incorporated a 90-day “probation period,” the ninetieth day has developed into a benchmark of sorts for when this job-entitlement belief really starts to take hold.

I have found that when the discharge of an employee is before the ninetieth day, the employee is much less likely to file a lawsuit, file a charge with a state or federal agency, or even to consult an attorney. On the other hand, the longer an employee is on the job after 90 days, the stronger the employee will develop a sense of job-entitlement and the greater the risk that the employee, when discharged, will file a lawsuit or take other action to remedy the perceived wrong.

When you have a new employee who is struggling with performance or conduct issues, if you do whatever is needed to resolve the issues or make a decision to discharge before 90 days has passed, you will reduce your risk of litigation. On the other hand, when deciding whether to fire long-term employees, recognize that the length of service, although legally irrelevant, affects the risk of litigation. It does not mean that you cannot fire the employee, but it may warrant more careful consideration about what steps you can take to mitigate the risk.