How to Protect Your Practice Under the New Emergency Paid Sick Leave Rules
May 2020Practice Management Personnel - Compensation
Recently, the Department of Labor (DOL) issued regulations interpreting the newly enacted expanded Family and Medical Leave Act (FMLA) and paid sick leave provisions of the Families First Coronavirus Response Act.* These rules became effective April 1 and continue through December 31 when the law expires. These provisions could be costly to your practice after it reopens, unless you use the proactive strategies discussed below.
Do the Rules Apply to Your Practice?
The new rules apply to businesses with fewer than 500 employees, so virtually all dental practices will be affected. However, the law doesn’t apply to employees on layoff or furlough who have not yet returned to work. Thus, while these provisions were not applicable while your practice was closed due to COVID-19, they will apply once your practice reopens.
Qualifying Reasons for Leave
Under the law, up to 80 hours paid sick leave (based on their regular pay rate) must be paid to eligible employees (those who have worked for your practice at least 30 calendar days), who meet any of the following tests:
- The employee is under a federal, state or local quarantine, or isolation order because of COVID-19. Originally, many interpreted this to mean that the individual employee must be under a specific, rather than general, quarantine or isolation order. However, the DOL rules state that the employee will qualify if they are included under a shelter-in-place or stay-at-home order issued by the government. Since many states have these orders in effect, this means that any employee working in those states is entitled to paid leave provided that he or she is otherwise eligible, and cannot perform the job remotely.
- The employee is advised by a healthcare provider to self-quarantine because of COVID-19.
- The employee has symptoms of COVID-19 and is seeking a medical diagnosis.
- The employee is caring for an individual who meets one of the first 2 conditions above.
- Up to 12 weeks paid leave (expanded FMLA leave) is available if the employee is caring for a son or daughter whose school or “place of care” is closed due to COVID-19, or whose care provider is unavailable for the same reason.
Full-time employees (those working 40 hours a week) receive up to 80 hours of paid sick leave. Other (part-time) employees are entitled to pro rata number of hours of sick leave, based on their average number of hours worked over 2 work weeks. For example, a 2 day a week staffer would be eligible for up to 32 hours of paid sick leave (16 hours/40 X 80).
The amount of paid sick leave is capped at $511 a day, or $5,110 total, if claimed due to reasons 1, 2, or 3 above, or $200 a day, or $2,000 in the aggregate, if claimed due to reasons 4 or 5 above.
As noted above, employees who were terminated, laid off, or furloughed are not eligible for paid leave, unless and until they are rehired. However, the cost of the paid leave, including maintaining health insurance, can be fully offset through payroll tax credits as explained below.
Claim the Tax Credit
In order to offset your practice’s cost, the new law provides the full amount of sick leave pay, as well as all practice contributions for staff health insurance, will be reimbursed within 3 months in the form of a payroll tax credit to your practice. Once your practice begins paying qualified sick leave pay, you should alert your payroll provider and CPA immediately.
You claim the tax credits on your practice’s federal payroll tax returns (Form 941); however, you can accelerate the financial benefit by reducing your practice’s federal payroll tax deposits. Furthermore, if your credits exceed your regular tax deposits, you can file Form 7200, Advance Payment of Employer Credits, with the IRS to have the credits refunded to you.
You will need to retain documentation showing how the paid leave and qualified health plan expenses are calculated, as well as your related practice payroll records, along with Form 941 and Form 7200 that were submitted to the IRS. These records must be retained for at least 4 years.
More good news! If you claim the tax credits, your practice can still receive the Employee Retention Tax Credit, as well as a PPP loan and related forgiveness, but not for the same wage payments.
Claim the Small Business Exemption from Expanded FMLA Leave
Under the law, the DOL has the authority to exempt small businesses with fewer than 50 employees from the expanded FMLA leave (the requirement to offer 12 weeks of paid leave to care for children under 18 whose schools are closed or whose child care provider is unavailable (reason number 5 above)), if it would jeopardize the viability of the business going forward. The regulations provide that your practice is exempt if an authorized officer of the practice, such as the President of your corporation, determines that: 1) the leave would cause the practice’s expenses and financial obligations to exceed available business revenues and cause the small business to cease operating at a minimal capacity; or 2) the absence of the employee requesting leave would put the company’s operational or financial health at risk because of the employee’s specialized skills, knowledge of the business, or responsibilities; or 3) there are not enough employees with the requisite skills who are available to perform the work the employee performs and that employee’s “labor or services are needed for the small business to operate at a minimal capacity.” In order to be exempt, you must sign the determination and retain it, but you are not required to file it with the DOL. For your convenience, you can print and sign the determination to claim your exemption from expanded FMLA leave for paid leave due to closing here.
As an employer, you must post the DOL Employee Rights Notice or a notice containing the same information in a conspicuous place. Alternatively, it can be posted on the practice’s website, or it can be mailed or emailed to your employees.
* See our April 2020 article, “How the New Emergency Paid Sick Leave Law Affects Your Practice.”
The McGill Advisory content is provided for informational purposes only and does not constitute legal, accounting, or other professional advice.
Copyright © 2020 John K. McGill & Company, Inc.