FFCRA provisions for paid leave were impermissibly narrow
On Aug. 3, 2020, the U.S. District Court of the Southern District of New York ruled that certain provisions of the Department of Labor (DOL) final rule regarding mandatory paid leave provided in the Families First Coronavirus Response Act (FFCRA or the Act), unduly restricts the paid leave provided in the statute. The federal district court thus vacated the relevant sections of the DOL rule that broadly define ‘health care provider’ and the ‘work-availability’ requirement. The remaining pieces of the rule are not affected by the decision.
As summarized in a prior Tax Alert, Congress enacted the FFCRA to help individuals and businesses impacted by COVID-19. The Act focuses on two types of mandatory paid leave for employees – Emergency Family and Medical Leave, and Emergency Paid Sick Leave and provides tax credits to help employers pay for the mandatory paid leave. The DOL was quick to respond by issuing guidance to help employers comply with the new requirements.
The state of New York challenged the DOL rule on the following provisions: (1) the ‘work-availability’ requirement; (2) the definition of health care providers who may be excluded from FFCRA eligibility; (3) the requirement for employer consent to intermittent leave; and (4) the advance documentation requirements, resulting in the federal district court finding that the DOL acted outside its administrative authority in the listed provisions.
With the striking down of the work-availability requirement, employees may still be eligible for paid sick leave under the FFCRA even if there is no work for them to do. In other words, if the employee otherwise qualifies for paid sick leave under one of the qualifying reasons listed in the Act, an employer cannot deny an employee paid sick leave for lack of available work.
Health care provider exemption
Likewise, by striking down the DOL’s broad definition of health care provider, the federal district court has limited an employer’s option to deny paid sick leave to a broad range of employees who work in the health care field. While FFCRA permits employers to exclude health care providers from coverage, the federal district court found that the DOL definition exceeded the DOL’s authority under the FFCRA. Notably, the court did not provide a new definition though.
Intermittent leave provision
The DOL rule requiring employer consent for intermittent leave has also been struck down.
Advance documentation requirements
With the striking down of the advance leave documentation requirement, employers can no longer condition leave on advanced documentation. Employees may now be entitled to paid leave without providing FFCRA documentation in advance of taking the leave.
Although the ruling may not apply nationally and the DOL may still appeal the ruling, employers need to be aware of the potentially expanded rights of employees to claim leave under the FFCRA and consider discussing with their counsel the potential impacts. If additional leave is provided under the FFCRA, that would then open up availability for the corresponding tax credits. Employers may also consider any paid time off employees already took that would now qualify as paid sick or family leave eligible for a tax credit as there may be an opportunity to recharacterize the leave and recredit the earned paid time off the employee took, and subsequently take the tax credit available under the FFCRA.