DOL Issues First Round of FFCRA Guidance
- Employer Expanded Family and Medical Leave Requirements
- Employee Family and Medical Leave Requirements
- FFCRA FAQs
Is ALL construction work considered an essential service under the STATE shelter in place order?
Yes (for now), the Governor’s office has provided a full list of who qualifies as an essential critical infrastructure worker under the statewide Shelter in Place (SIP) order. Included in that list are:
“Construction workers who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction).”
“Workers such as plumbers, electricians, exterminators, and other service providers who provide services that are necessary to maintaining the safety, sanitation, and essential operation of construction sites and construction projects (including those that support such projects to ensure the availability of needed facilities, transportation, energy and communications; and support to ensure the effective removal, storage, and disposal of solid waste and hazardous waste).”
The statewide order applies to all Californians but depending on the conditions in their area, local officials may enforce stricter public health orders. They may not loosen the State’s order in any way.
Note: While on this subject, as we advocate for the continuation of construction work as an essential service in California, this is an urgent reminder for construction firms to enforce strict COVID-19 health and safety guidelines and vigilant oversight on every jobsite. Maintaining strict safety protocols that meet or exceed the CDC and state safety standards is the only way to preserve California’s recognition that all construction is an essential service.
To limit our employee’s potential exposure to COVID-19 can we work them four ten-hour days without paying overtime?
It depends, for private work in California the answer is “yes,” so long as your collective bargaining agreement (CBA) provides for the alternative work week. The answer is “no” for California public works projects. All work over eight hours per day on public works is considered overtime. This requirement is in the California State Constitution and cannot be waived by statute, CBA or PLA.
What options are available to file stop notices – mechanics liens etc. if county offices and court houses are closed?
Experts in this area recommend that the best practice is to attempt to record several days in advance, due to backlog at the recorder’s office. It’s also recommended to send liens to the recorder’s office via FedEx or UPS “signature required,” to ensure proof that the lien was at least tendered for recording. Evidence of an attempt to record within the time required by law will best protect the claimant. They also recommend the use of online filing services such as recordmydocs.com.
Does a paid sick leave CBA exemption apply to the new federal Covid-19 paid sick leave?
No, the language found in some California construction CBAs exempting employers from the state paid leave requirements, does not apply to the new Federal paid sick leave requirement under the Families First Coronavirus Response Act. Unlike the California law, the Federal law does not contain language to allow for its provisions to be waived within a CBA.
Are contractors subject to the state and federal laws requiring advance notice of mass layoffs?
Yes, California Labor Code sections 1400 to 1408 – known as “Cal-WARN,” requires employers that operate a “covered establishment” (any industrial or commercial facility that employs, or has employed within the preceding 12 months, 75 or more persons) to give notice of a “mass layoff” (during any 30-day period, 50 or more employees at a covered establishment are separated from their positions due to lack of funds or lack of work). Specifically, when ordering a mass layoff, the employer must, at least 60 days before the order takes effect, give notice of the layoff to affected employees (or their union, if union-represented), the California Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the mass layoff occurs. Failure to provide the required notice subjects the employer to legal liability in a civil action for (1) a daily civil penalty of up to $500; (2) each employee’s lost wages, lost value of benefits, and any medical expenses incurred due to the loss of medical insurance; and (3) the employee’s attorneys’ fees.
On March 17th Governor Newsom issued an Executive Order N-31-20 that provides some relief during the COVID-19 coronavirus outbreak. The Order suspends portions of the law (60-day notice; liability for damages; liability for the civil penalty) on the condition that an employer does all of following:
- Orders a mass layoff because of COVID-19-related business circumstances that were not reasonably foreseeable as of the time that 60-day notice would have been required;
- Gives as much notice as practicable of the layoffs, providing a brief statement of the basis for reducing the notification period along with the information required by the federal WARN Act for notices; and
- Includes the following statement in its notice: “If you have lost your job or been laid off temporarily, you may be eligible for Unemployment Insurance (UI). More information on UI and other resources available for workers is available at labor.ca.gov/coronavirus2019.”
It is our understanding that each construction site will be viewed as a separate “covered establishment” for those workers whose first reporting location is the jobsite each day. At any jobsite, if there are fewer than 75 employees who have been employed within the preceding 12 months, Cal-WARN does not apply. If the 75 number is met but 50 or more employees are not laid off at a single site there is not a “mass layoff’ for that location and no notice is required. Where 50 or more are laid off at a jobsite, then the Cal-WARN requirements would apply under the Executive Order guidelines. For purposes of counting the 50 employees at a jobsite, employees who have not worked for the employer for at least 6 of the 12 months preceding the date on which the notice is required are not counted. Therefore, the Cal-WARN notice requirements may affect only a limited number of contractors.
Information provided by our legislative counsel, The Politico Group.
COVID-19 Relief Programs
Congress and the White House are currently debating the specifics of a new stimulus bill and they are expected to agree on the form of the bill this week. California businesses and their employees have been particularly affected by recent mandatory closures and safety measures imposed to help slow the spread of COVID-19, and any such stimulus is intended to help to provide some relief to the economic strain of such measures. There does seem to be some agreement coalescing around the type of relief, as the debate continues regarding the amount of relief.
The Paycheck Protection Loan Program
The program streamlines the Small Business Administration (SBA) loan process for businesses affected by the COVID-19 outbreak.
The loan is non-recourse except to the extent that the borrower uses the proceeds for a purpose not authorized under the act and no personal guaranty is required. There are no loan fees. The typical SBA requirement that the borrower show that it is unable to obtain credit elsewhere is waived, and there are no collateral requirements. (If you were not in business prior to February 15, 2020, please contact us as you may not be eligible.)
While, generally speaking, the borrower cannot have more than 500 employees during the covered period, there are exceptions, so please check with your counsel to see if you are eligible. The extent to which the employees of related entities will be aggregated for purposes of determining eligibility under the program, and whether the determination will be consistent with the Families First Coronavirus Response Act (the Families First Act) which also contains a 500 employee limit is unclear. The covered period is the 8-week period beginning on the date of origination of the Paycheck Protection Loan.
The maximum amount that can be borrowed under the Paycheck Protection Loan is the lesser of (i) $10 million, or (ii) the average total monthly payroll costs during the
1-year period before loan origination, multiplied by 2.5. The “payroll costs” means payment of compensation to employees including (i) salary, wage, commission or similar compensation; (ii) vacation, parental, family, medical or sick leave; (iii) dismissal or other severance payments; (iv) group health benefits, including insurance premiums; (v) payment of retirement benefits; and (vi) state or local taxes on compensation. Payroll costs do not include compensation of an employee in excess of an annual salary of $100,000 or taxes imposed under IRS Chapters 21, 22 or 24.
The interest on the loan will not exceed 4% per annum, and no payments of principal or interest will be due for a period of at least 6 months, but no more than 1 year. To the extent that there is a remaining loan balance after the loan forgiveness (discussed below), the maximum loan term is 10 years.
The loan can be used for (i) payroll costs; (ii) health care benefits and insurance premiums: (iii) sick, family and medical leave payments; (iv) employee salaries and commissions; (v) interest on any mortgage obligation; (vi) rent under a lease agreement; (vii) utilities; and (viii) interest on any other debt incurred before the covered period.
To qualify for the Paycheck Protection Loan, a borrower must make a good faith certification to the SBA and the SBA lender showing that (i) the uncertainty of current economic conditions makes the loan necessary to support ongoing operations; (ii) the funds will be used to retain workers, maintain payroll or pay existing debt (including mortgage interest), leases or utilities; (iii) the applicant does not have any pending loan applications under the Program for the same or duplicative amounts or purposes; and (iv) during the period between February 15, 2020 and December 31, 2020, the recipient has not received duplicative amounts. The borrower is not prohibited from also obtaining an SBA administered Economic Injury Disaster Loan, although the loan must be for a different purpose and you should contact counsel before doing so.
All sums obtained pursuant to the Paycheck Protection Loan Program and utilized as set forth in the program are subject to forgiveness. The SBA will create an application process for forgiveness by which the borrower can request forgiveness and confirm permissible use of loan proceeds (“loan forgiveness”).
The amount eligible for loan forgiveness can be reduced (but not increased) by multiplying the loan amount by the quotient obtained by dividing (A) the average number of full time employees per month during the covered period by (B) (at the borrower’s election) either (i) the average number of full-time employees during the period of February 15, 2019 through June 30, 2020, or (ii) the average number of full-time employees per month employed from January 1, 2020 through February 29, 2020, determined for each pay period in any month. However, if a reduction in employees has occurred between February 15 and 30 days after enactment of the CARES Act, and the employer eliminates the reduction within 30 days thereafter, the amount of the loan eligible for loan forgiveness is not reduced.
The loan forgiveness can also be reduced by the amount of reduction in total salaries or wages of any employee in excess of 25% compared to the most recent quarter before the covered period (not including any employee earning, during any pay period during 2019, an annualized salary of over $100,000). Again, if a reduction in employees has occurred between February 15 and 30 days after enactment of the CARES Act, and the employer eliminates the reduction within 30 days thereafter, the amount of the loan forgiveness is not reduced.
Loan forgiveness is not includable in the calculation of gross income. Therefore, it is not taxable to the borrower as would be the case in most instances of loan forgiveness.
The SBA does not presently have applications for the Paycheck Protection Loan, nor has it issued any implementation regulations, to our knowledge, as the CARES Act (including the PPL program) has not yet become law. It will take at least a week or more after the law is enacted for the SBA to create the applications.
Payroll Taxes Holiday
The payroll tax provisions mentioned in our earlier alert are also part of the final CARES Act bill. Employers can defer payment of the employer share of the social security tax that they otherwise are responsible for paying with respect to their employees (the 6.2% tax on employee wages). The deferred employment tax must be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. The underwriting provisions of the Paycheck Protection Loan Program allow your prior payment of these taxes to be considered in calculating the amount of the loan, but you are not obligated to pay them even if you get the loan except as set forth above.
Employee Retention Credit for Employers Subject to Closure Due to COVID-19
The bill provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers
(i) whose operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (ii) whose gross receipts declined by more than 50% when compared to the same quarter in the prior year.
The credit is based on qualified wages paid to the employees. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
The payroll tax credit under the bill is separate and distinct from the payroll tax credit available to employers who pay for leaves under the Family First Act, which is designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing coronavirus-related leave to their employees. It is not clear at this point how these payroll tax credits will be applied relative to each other.
Treasury Loans Under the Coronavirus Economic Stabilization Act
The bill also allocates $500 billion for loans to be made by or through the U.S. Treasury in an attempt to stabilize certain industries particularly impacted by the COVID-19 crisis (namely passenger airlines, cargo carriers and related businesses), as well as national security companies and other companies that may need to tap into additional financing. $454 billion of the allocation is set for business loans, which will be made through a program established by the Treasury to make direct loans, guaranteed loans and/or investments.
Unlike the payroll loans, the Treasury loans are not forgivable, and will have certain terms intended to restrict stock buybacks, restrict dividends and cap compensation for a certain period of time during, and sometimes following, the term of the loan. In addition, because the Treasury loan program is largely a new development (unlike the payroll loan program, which pivots off of the established SBA program), the Secretary of the Treasury will have to implement rules and regulations shortly following the implementation of the bill into law (which rules and regulations should come no later than ten days from implementation). In addition, the bill provides for an oversight committee in Congress as well as an Inspector General to oversee the implementation of the program and the loans, guaranties and other investments to be made by the Treasury. The loans are also deemed indebtedness, thereby creating a tax impact should the loan ever be forgiven, modified or similar.
Because additional guidance is required from the Secretary, greater specifications on the terms and conditions of the Treasury loans should soon be forthcoming.
Information provided by SCGMA’s legal counsel, JMBM.
COVID-19 Government Informational Website
California has launched a comprehensive COVID-19 public awareness website that highlights critical steps people can take to stay healthy and resources available to Californians impacted by the outbreak, including unemployment and other benefit information and assistance.
Statewide Shelter in Place Order
In an effort to control the spread of the COVID-19 virus, California has issued a Statewide shelter in place “Stay-at-Home” Order. Construction, including housing construction, is considered an essential need during the COVID-19 crisis. The directive reads as follows: “The California State Public Health Officer and Director of the California Department of Public Health is ordering all individuals living in the State of California to stay home or at their place of residence, except as needed to maintain continuity of operation of the federal critical infrastructure sectors, critical government services, schools, childcare, and construction, including housing construction.” This important clarification allows our industry to continue working.Executive Order N-33-20 took effect March 19th, 2020 and shall stay in effect until further notice.
The directive is consistent with the federal Memorandum on Identification of Essential Critical Infrastructure Workers During the COVID-19 Response, which was also issued March 19th, 2020.
We are still working to determine whether the Governor’s order supersedes local orders already in place.
Workplace safety and health regulations in California require employers to protect workers exposed to airborne infectious diseases such as the coronavirus. Cal/OSHA has posted general industry guidance to help employers comply with these safety requirements and to provide workers information on how to protect themselves. We encourage contractors to review the Cal/OSHA provided guidance.
Helpful State Agency Information
California Department of Public Health
California Employment Development Department (EDD)
California Labor Commissioner’s Office
Helpful Covid-19 Legal Briefs
CA COVID-19 Website
- There has been an update to California’s COVID-19 website that further clarifies essential critical infrastructure workers. On pages 10-11:
- “Construction workers who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction)”
- “Workers such as plumbers, electricians, exterminators, and other service providers who provide services that are necessary to maintaining the safety, sanitation, and essential operation of construction sites and construction projects (including those that support such projects to ensure the availability of needed facilities, transportation, energy and communications; and support to ensure the effective removal, storage, and disposal of solid waste and hazardous waste)”
- The statewide order now also makes clear that construction suppliers are an essential service.
- In addition, the Governor’s office has provided clarity on how the statewide order interacts with local orders to shelter in place. Pursuant to the California COVID19 resource page, The statewide order applies to all Californians but depending on the conditions in their area, local officials may enforce stricter public health orders. They may not loosen the state’s order in any way.
Sample Cards for Employees
- As the government works on enforcing the orders put in place, you might want to consider providing your employees with cards showing their right to work and where to direct further questions. You can edit use the sample cards provided here.
It is important to stay in communications with your General Contractor or Owner to be better informed on whether job sites you are doing subcontracting work for will be impacted by this Order.
- If you do hear that a job site will be shut down, you should provide employees with a notice of the layoff. If direct deposit is not available, make arrangements to mail their final check to the employee’s home address on record. It would not be prudent or safe to have workers report to a closed job site to pick up their final check.
Federal Paid Sick Leave
Families First Coronavirus Recovery Act was signed into law. Here’s what you should know.
- It only pertains to employers with less than 500 employees.
- Companies with less than 500 employees must provide 80 hours (10 days) of paid sick leave if their employees are unable to work due to the Coronavirus, quarantined, experiencing symptoms, caring for someone who is ill or caring for a child whose school/daycare is shut down.
- March 19, 2020, Governor Newsom ordered all Californians to stay home and leave only for trips and work deemed essential.
- Employers must compensate employees for any paid sick time they take at the higher of: their regular rate of pay, the federal minimum wage, or the local minimum wage. This is maxed out at $511 per day.
- Paid sick leave under the Act must be taken first before using paid sick leave acquired previously through the employer.
- Employers will receive tax credits to offset this cost within three months.
- As of now, provisions will go into effect April 2, 2020 and will expire December 31, 2020. This means that you do not have to pay your employees for this paid sick leave yet, but should you choose to, be aware that it may not count towards the tax credit. More information will be provided as we receive it.
President Trump Signs Family First Coronavirus Response Act
As we expected, the federal government will provide additional sick leave relief and paid child care leave for employees; in anticipation of things to come, California will ease employers’ mass layoff notice requirements.
Families First Coronavirus Response Act
Yesterday, March 18, President Trump signed the Families First Coronavirus Response Act, the legislature’s response to the COVID-19 health crisis. Private employers with fewer than 500 employees and all government employers must be ready to offer emergency family and medical leave and emergency paid sick leave to eligible employees. Additional information and further clarification on these sweeping provisions will likely be provided in the coming days through federal guidance. This program will become effective within 15 days after its enactment by President Trump and is set to expire on December 31, 2020.
Emergency Paid Sick Leave
The paid sick leave portion of the Act requires covered employers to provide all employees who cannot work or telework due to COVID-19 related circumstances, with up to 80 hours of paid sick time, prorated for part-time employees. Employees are eligible if they meet any one of the following circumstances:
- The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
- The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
- The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
- The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).
- The employee is caring for a son or daughter if the school or place of care of the son or daughter has been closed, or the child care provider of the son or daughter is unavailable, due to COVID-19 precautions.
- 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.
If an employee is taking the leave for any one of the first three reasons listed above, the employee must be compensated at the higher of his or her regular rate, the federal minimum wage, or the local minimum wage. If an employee is taking the leave for one of the three subsequent reasons listed above, the employee must be paid two-thirds of the rate he or she would otherwise receive. This paid leave is separate and above any existing sick leave entitlements that employees may already have.
Compliance with the provisions of the emergency paid sick leave portion of the Act also requires employers to post notices explaining employees’ entitlement to the paid sick leave. Similar to the emergency family and medical leave provisions, the Act provides that the Secretary of Labor shall have the authority to exclude certain health care providers and emergency responders, as well as small businesses with fewer than 50 employees from the paid sick leave requirements.
Emergency Family and Medical Leave
Employees who have been employed for 30 consecutive days will be eligible for 12 weeks of job protected leave if they are unable to work (or telework) due to a need to care for a child under 18 years of age because the child’s school or place of care has been closed or because the child care provider is unavailable due to COVID-19. While the first 10 days of the leave may be unpaid, the remainder must be paid at no less than two-thirds of an employee’s regular rate of pay, not to exceed $200 per day and $10,000 in the aggregate. Employees may choose to use previously available sick leave, vacation leave, or paid time off; however, employers cannot require employees to utilize such leave. The Act allows certain health care providers, as well as employers with fewer than 50 employees, to seek an exemption from the emergency family and medical relief provision’s requirements.
Tax credits are available to help off-set the costs of the paid leave requirements, subject to certain caps. Employers can file for a refundable tax credit for paid sick leave or family leave—they may seek a credit of up to $511 per day for an employee’s own sickness or self-isolation and a credit of up to $200 per day when employees have taken time off work to care for a child after a school or child care closure or an ill family member.
California’s Executive Order N-31-20 in Anticipation of Mass Lay-offs
As California employers brace for the difficult days ahead and face tough choices about its workforce, California’s Governor Gavin Newsom signed California’s Executive Order N-31-20 on March 17, shortening the notice requirements mandated by California’s Worker Adjustment and Retraining Notification (WARN) Act applicable to unforeseeable mass layoffs, relocations and terminations from 60 days to as soon as practicable. Pursuant to the Order, the Labor Workforce and Development Agency should provide further guidance on the order by March 23, 2020.
Under the Order, an employer must still give the same types of notice to the affected employees and government agencies, however the employer is not required to provide the ordinary 60 days’ written notice so long as the employer gives as much notice as is “practicable” and, at the time such notice is given, provides a brief statement of the basis for reducing the notification period. The employer must order “a mass layoff, relocation, or termination” that is caused by COVID-19-related “business circumstances that were not reasonably foreseeable as of the time that notice would have been required. Finally, an employer must include the following statement in any written notice given after March 17, 2020: “If you have lost your job or been laid off temporarily, you may be eligible for Unemployment Insurance (UI). More information on UI and other resources available for workers is available at labor.ca.gov/coronavirus2019.”
The Federal WARN Act already includes unforeseeable business circumstances as an exception to the 60 day notice period. Like the Order issued by Governor Newsom, the exception applies to both closings and layoffs that are caused by business circumstances that were not reasonably foreseeable at the time notice would have otherwise been required. Given that an important indicator of an unforeseen business circumstance is that the circumstance is caused by some sudden, dramatic, and unexpected condition outside of the employer’s control, the COVID-19 health crisis would likely qualify under this exception.
Employers need to stay abreast of changes being made in response to the coronavirus pandemic and must update policies and practices to ensure that they are fulfilling their obligations under the new laws and regulations. Our team of labor and employment attorneys remain available to assist you with any of the unique questions and needs facing your business.
Information provided by SCGMA’s legal counsel, JMBM.