Now in its 15th year, the LCLD Fellows Program has built a reputation for helping to launch mid-career attorneys into chief legal positions. As part of the year-long, multi-tiered professional development series, Melissa will be connected to LCLD's top leadership, including managing partners and general counsel from prominent organizations.

To learn more, go to: Leadership Council on Legal Diversity.

Melissa is an employment and business litigation attorney licensed to practice in California, Minnesota, and Arizona. Working out of both California and Maslon's primary office in Minneapolis, Melissa focuses her practice on the full spectrum of employment counseling and litigation matters in addition to business disputes involving non-competition and non-solicitation agreements, trade secrets, business contracts and torts, and unfair competition and trade practices.

Melissa also maintains a robust employment investigations practice. Her clients include multinational corporations, small businesses, and individuals, and she often serves as a trusted advisor in a wide variety of litigation matters in state and federal trial and appellate courts, arbitration, and mediation.

Melissa has extensive experience helping clients protect and grow their business in a competitive marketplace. Licensed to practice in Minnesota, California, and Arizona, she focuses her practice on the full spectrum of employment counseling and litigation matters in addition to business disputes involving non-competition and non-solicitation agreements, trade secrets, business contracts and torts, and unfair competition and trade practices.

Melissa also maintains a robust employment investigations practice. Her clients include multinational corporations, small businesses, and individuals, and she serves as a trusted advisor in a wide variety of litigation matters in state and federal trial and appellate courts, arbitration, and mediation.

Working out of both California and Maslon's primary office in Minneapolis, Melissa focuses her practice on the full spectrum of employment counseling and litigation matters in addition to business disputes involving non-competition and non-solicitation agreements, trade secrets, business contracts and torts, and unfair competition and trade practices. Melissa also maintains a robust employment investigations practice.

Melissa earned her law degree, cum laude, from the University of Minnesota Law School.

For more information or to register, go to MSBA: Settling Disputes Through Early Mediation.

Terri, a business attorney and mediator, helps shareholders, family business owners, and companies buy or sell businesses or solve complex legal problems. Whether guiding shareholders through a company split, managing a large merger/acquisition for a buyer or a seller, representing family members or business partners in the sale of a long-held business, or helping a company restructure to better align business and goals, Terri brings a time-tested sense of which approaches work and which do not. In her mediation work, Terri brings her many years of experience negotiating deals to the table—along with her high energy, active listening skills, creativity, and pragmatic approach. View her mediation bio here.

Melissa is an employment and business litigation attorney who enjoys working with clients to protect and grow their business in a competitive marketplace. She focuses her practice on the full spectrum of employment counseling and litigation matters in addition to business disputes involving non-competition and non-solicitation agreements, trade secrets, business contracts and torts, and unfair competition and trade practices. She serves on the board of the Minnesota Infinity Project, an organization focused on gender disparity on the bench throughout the Eighth Circuit, and was appointed in 2019 to the state Commission on Judicial Selection.

The proposed rule, which undoubtedly will face legal challenges, calls non-competes "an unfair method of competition" and would prohibit employers from entering into or attempting to enter into a non-compete clause with a worker. It would also require employers with existing non-competes to rescind them no later than the compliance date, 180 days after the final rule is published.

Prohibition Would Extend to Contractual Terms that Function as Non-Competes
It would not matter what a contract provision is called, but how it functions. The FTC explains that non-disclosure agreements and client or customer non-solicitation agreements generally would not fall under this new rule unless such restrictions were drafted in such a way that they prevented a worker from seeking or accepting employment or operating a business after the worker’s employment with the employer ends.

Notifying Workers
Employers would be required to give notice to workers "in an individualized communication" on paper or through an email or text within 45 days of rescinding the non-compete clause. Model language provided in the proposed rule suggests that employers tell workers subject to a non-compete that "a new rule…makes it unlawful for us to maintain a non-compete clause in your employment contract," and states the clause will no longer be in effect after the 180-day period following publication of the final rule. An employer need not use the model language but must communicate that the worker’s non-compete clause is no longer in effect and will not be enforced.

In addition to providing notice to current workers covered by a non-compete, the proposed rule states that the employer must provide notice to a former worker, "provided that the employer has the worker's contact information readily available."

Implications for State Laws
The new rule would supersede any state law that is inconsistent with it, though if a state has a more stringent requirement for employers, it would remain in effect.

Exception
There is one exception to the proposed rule: it would not apply to a non-compete that is entered into by a person who is selling a business or otherwise disposing of all of their ownership interest in the business, or by a person who is selling all or substantially all of a business's operating assets, when the person restricted by the non-compete is a substantial owner, member, or partner in the business entity at the time the person enters into the non-compete. Such agreements will still be subject to scrutiny by the FTC and DOJ Antitrust Division, however.

The FTC based the proposed rule on a preliminary finding that non-competes constitute an unfair method of competition and therefore violate Section 5 of the Federal Trade Commission Act.

What Happens Next
The public has 60 days to comment on the proposed rule. At that time, the FTC will review the comments and may make changes before the rule is finalized. One important topic identified by the FTC for comment is whether senior executives should be exempted from the rule, or subject to a rebuttable presumption rather than a ban.

We can reasonably expect this rule to be the subject of legal challenges that will no doubt delay its implementation.

Steps Employers Should Take

• Ensure that you are adequately protecting your trade secrets, intellectual property and confidential information through practical, technical, and contractual measures.
• Ensure your employment contracts include a severability clause.
• Consider whether your interests can be adequately protected by a non-solicitation agreement, and work with legal counsel to ensure that the agreement is drafted narrowly so it is not construed as a non-compete under the proposed rule.

We Can Help
If you have questions about how to protect your company’s legitimate business interests in the midst of this changing regulatory landscape, please contact Maslon's employment and non-compete attorneys.

Masks, Vaccination Status and Policies, and COVID-19 Exposure

Masks: OSHA now recommends that fully vaccinated individuals wear masks in public indoor settings in areas of substantial or high transmission. OSHA further recommends that vaccinated individuals wear masks, regardless of transmission levels, if a member of their household is at increased risk for the disease or is not fully vaccinated.

Vaccinations: OSHA now recommends that employers consider adopting policies that "require workers to get vaccinated or to undergo regular COVID-19 testing—in addition to mask wearing and physical distancing—if they remain unvaccinated."

COVID-19 Exposure: For vaccinated employees with known exposure to suspected or confirmed COVID-19, even in areas without substantial or high transmission, OSHA recommends testing three to five days following the exposure and wearing a mask in public indoor settings for 14 days after exposure or until receiving a negative test result.   

 
Specific Steps Employers Can Take

OSHA further outlines the following steps employers should take:

• Facilitate employee vaccination, including providing paid time off for employees to get vaccinated and recover from side effects.
• Instruct employees who are infected, unvaccinated employees who have had close contact with someone who tested positive for COVID-19, and all employees with COVID-19 symptoms to stay home from work.
• Suggest or require that unvaccinated customers, visitors, or guests wear face coverings in public-facing workplaces and that all customers, visitors, or guests wear face coverings in public, indoor settings in areas of substantial or high transmission.

In addition to the above, the updated guidance emphasized steps from prior guidance that employers should continue to take:

• Maintain physical distancing in all communal work areas for unvaccinated and otherwise at-risk employees (those with a medical condition that may affect their ability to have a full immune response to vaccination or conditions that put them at greater risk of severe illness from COVID-19).
• Provide employees with face coverings or surgical masks, as appropriate, unless their work tasks require a respirator or other PPE.
• Educate and train employees on your COVID-19 policies and procedures using accessible formats, in language(s) the employees understand.
• Maintain ventilation systems.
• Perform routine cleaning and disinfection.
• Record and report COVID-19 infections and deaths.
• Implement protections from retaliation and set up an anonymous process for employees to voice concerns about COVID-19-related hazards.
• Follow other applicable OSHA standards.  

Higher-Risk Workplaces
 
The guidance also includes specific recommendations for higher-risk workplaces with unvaccinated and or otherwise at-risk employees. Higher-risk workplaces are those with close contact among employees, prolonged closeness (six to 12 hours per shift) among employees, potential risk to unvaccinated or otherwise at-risk employees from co-workers' coughing or sneezing in a confined or poorly ventilated space, or other characteristics, including the use of employer-provided ride-share vans and communal housing aboard vessels.
 
Steps that employers in higher-risk workplaces can take include: 

• Staggering break times or providing temporary break areas and restrooms to avoid groups of unvaccinated or otherwise at-risk employees congregating during breaks.
• Staggering arrival and departure times to avoid congregations of employees in parking areas, locker rooms, and near time clocks.
• Providing visual cues, such as floor markings or signs, as a reminder to maintain physical distancing.
• Requiring unvaccinated or otherwise at-risk employees, as well as fully vaccinated employees in areas of substantial or high transmission, to wear masks whenever possible, and encouraging and potentially requiring customers and other visitors to do the same.
• Implementing workplace specific strategies to improve ventilation.

The new guidance provides additional recommendations for specific industries, including retail; meat, poultry, and seafood processing; and manufacturing and assembly line operations. 

To review OSHA's new guidance in full, go to: Protecting Workers: Guidance on Mitigating and Preventing the Spread of COVID-19 in the Workplace.
 
Employer Takeaway
 
This most recent OSHA guidance is advisory in nature. It is not a standard or regulation and creates no new legal obligations. However, OSHA's general duty clause does require employers to provide a safe and healthy workplace free from recognizable hazards, and the recent guidance provides practical advice for employers on how to do so with respect to COVID-19. As a result, employers, especially those with higher-risk workplaces or those who may have recently experienced employee infections, should review the new guidance and, to the extent feasible for their workplaces, update practices and policies to conform to the guidance. This will be particularly important for employers who are contemplating reopening their workplaces in coming months.    
 
We Can Help
Revising and implementing masking, vaccination, and other related safety policies or practices can be complicated, and the right approach will often depend on the individual workplace and employer. Maslon's Labor & Employment Group can help clients navigate constantly evolving health and safety guidance and tailor policies and communication strategies that meet each individual employer's needs.

While the CDC has relaxed masking recommendations for fully vaccinated people, employers still need to comply with state and local mask requirements. For instance, although the state of Minnesota has largely eliminated its mask mandate in light of the new CDC guidance, Minneapolis and St. Paul still have mask mandates in place for vaccinated and unvaccinated people.

OSHA Guidance

For now, OSHA is referring employers to the new CDC guidance for safety measures appropriate for fully vaccinated employees. Thus, absent state or local law requirements, OSHA is giving employers the green light to change their mask requirements and only require masks for unvaccinated employees. Employers considering eliminating a mask requirement altogether need to keep in mind that following OSHA's guidance, which includes continuing to require masks for unvaccinated employees, may be the clearest way to ensure compliance with OSHA's General Duty Clause.

Vaccination Policy

Importantly, the new CDC guidance about masks does not impact whether an employer has a voluntary or mandated vaccination policy.

• We discussed employer vaccination policies in a prior Legal Alert: Employers: EEOC Releases New Vaccine Guidelines to Address Five Key Concerns

Mask Requirement

Removing the mask requirement for fully vaccinated employees may incentivize employees to be vaccinated. However, having different mask requirements for fully vaccinated employees versus unvaccinated employees may be difficult to manage in some workplaces, depending upon employee preferences and workplace culture.

There are three key considerations for employers deciding to change their mask requirement for fully vaccinated employees:

1. Employers should consider requiring proof of vaccination.

An employer will need to decide whether to rely on the honor system or require employees to show proof of COVID-19 vaccination. There are good reasons to require employees to show their CDC vaccination card. Having verification of vaccination status on hand would be important in the event of an OSHA complaint or inspection. An employer should have a clearly communicated policy and take steps to verify compliance and correct noncompliance. In particular, the policy should clearly state what documentation is required (the CDC vaccination card) and that without the required documentation, an employee needs to comply with the mask requirement.

When verifying vaccination cards, employers should avoid asking any follow-up questions which may elicit prohibited information about an employee's disability under the Americans with Disabilities Act. Thus, an employer policy should also specify information an employee should not provide, such as any medical or genetic information related to the vaccination.

2. Employers should protect vaccination confidentiality.

The EEOC considers the vaccination status of employees to be confidential medical information even though employees who choose not to wear masks will be broadly disclosing that they are fully vaccinated. The EEOC permits an employer to inquire about an employee’s vaccination status, but the employer is required to keep this information confidential. For this reason, employers should limit who has access to the information employees provide about their vaccination status and should develop a written protocol for collecting vaccine information and maintaining its confidentiality. Personnel with knowledge of vaccination status should refrain from commenting on vaccination status and use this information only for administering the mask policy.

3. Employers should ensure a safe and productive working environment for all employees.

Employers should train managers and supervisors to ensure masked and unmasked employees are treated the same, keeping in mind that a mask/no mask policy is different than a vaccination policy. Fully vaccinated employees may voluntarily take advantage of the policy and forego wearing masks, while some may decide to continue wearing masks. Other employees will not be able to avail themselves of the relaxed mask requirement because they cannot or will not be vaccinated due to a medical condition or a religious belief. The best way to guard against discrimination or harassment based on a protected status such as disability or religion is to make sure masked and unmasked employees are similarly treated by managers and supervisors.

Likewise, employers need to direct employees to not treat each other differently based upon whether they are wearing a mask. Employers should take steps to prevent conflict, as some employees are likely to have strong opinions about mask-wearing. In particular, employees should be discouraged from inquiring, commenting on, or discussing another employee’s vaccination status. It is also advisable to include in the employer’s mask policy a process for employees to share concerns about mask-wearing. The policy should also state that any employee who confronts another employee about their vaccination status will be subject to discipline.

We Can Help

Employers can anticipate that the CDC's new recommendations for fully vaccinated people will spur additional guidance from the EEOC, OSHA, and state and local lawmakers. Maslon's Labor and Employment Group is available to help as you navigate managing your workplace in an ever-changing legal landscape.

Optional FFCRA Leave Extended and Expanded

The Families First Coronavirus Response Act (FFCRA) provided for emergency paid sick leave and expanded family and medical leave to employees absent from work for COVID-19 related reasons. Beginning January 1, 2021, employers had the option of providing FFCRA paid leave. Qualifying employers who elected to provide FFCRA paid leave could take a dollar-for-dollar payroll tax credit through March 31, 2021, for the wages paid.

The ARPA extends the availability of this tax credit for employers through September 30, 2021, and modifies eligibility and coverage in a few significant ways:

• Expanded Coverage for Paid Sick Leave. Employees may now take paid sick leave to obtain a COVID-19 vaccine or to recover from side effects of the vaccine. The ARPA also expanded the qualifying reason for paid sick leave that relates to seeking a medical diagnosis of COVID-19. Paid sick leave is now available to employees seeking or waiting for a COVID-19 test result requested by an employer or following exposure to COVID-19. Employees no longer need to be experiencing symptoms of COVID-19 and seeking a medical diagnosis of COVID-19 from a health care provider to be eligible for paid sick leave under this qualifying reason.
• Reset of Paid Sick Leave Clock. Employees who previously took paid sick leave are eligible for an additional 10 days of leave beginning on April 1, 2021. Unused leave from before March 31, 2021, does not roll over.
• Increased Eligibility for Paid Expanded FMLA. Previously, expanded FMLA was only available to employees taking care of a child whose school or place of care was closed or unavailable due to COVID-19. Employees now may take expanded FMLA leave for any of the qualifying reasons provided in the FFCRA. There is no reset for the paid expanded FMLA. It remains capped at 12 weeks.
• No Waiting Period for Paid Expanded FMLA. Employees are no longer subject to the 10-day (or 2 weeks) waiting requirement. The entire 12-week period of expanded FMLA is paid.
• Increased Cap for Expanded FMLA. The limit on expanded FMLA has increased from $10,000 to $12,000 (because of the two additional weeks of paid leave). The daily limit of two-thirds of an employee's wages up to $200 per workday remains unchanged.
• Non-Discrimination Rules. Employers are eligible for the tax credit only if they uniformly provide leave to all employees, without discriminating against certain categories of employees such as in favor of full-time employees or on the basis of tenure.

Additional guidance from the Department of Labor is anticipated. Maslon's Labor & Employment Group will provide updates as such guidance becomes available.

Extension of Unemployment Benefits

Much of the focus of the ARPA has been on the provisions affecting individuals and extending unemployment benefits. Under the new law:

• The additional $300 weekly federal unemployment supplement will continue through September 6, 2021.
• The Pandemic Emergency Unemployment Compensation (PEUC) is extended to 53 weeks, which means that eligible recipients of unemployment benefits can potentially receive up to 79 weeks of benefits (which includes 26 weeks from states) through September 6, 2021.
• The Pandemic Unemployment Assistance (PUA) program is also extended through September 6, 2021, and the total number of weeks of benefits available to eligible individuals increases from 50 to 79 weeks. The PUA program covers the self-employed, independent contractors, part-timers, and others who are not eligible to receive regular unemployment benefits.
• Taxpayers who made less than $150,000 in 2020 will be able to exclude up to $10,200 in unemployment benefits from federal income tax for the 2020 tax year.

COBRA Subsidies Available to Eligible Employees

Starting April 1, 2021, through September 30, 2021, the federal government will subsidize COBRA coverage for employees (and their covered family members) who lost group health coverage as a result of an involuntary termination or reduction in hours due to the pandemic. In sum, employers will pay an employee's COBRA premiums and will receive a payroll tax credit to cover the cost of the COBRA premiums. The law requires a special enrollment period and notice. A model notice and additional guidance is expected soon from the Department of Labor. Employers should contact their third party administrators or Maslon's Labor & Employment Group to help ensure compliance with the law's requirements.

We Can Help

The changing legal landscape of COVID-19-related obligations and tax credits is complicated. In addition to the ARPA, there is a patchwork of state and local legislation for employers to maneuver. Please contact Maslon's Labor & Employment Group if you need help navigating obligations and opportunities presented by laws such as the ARPA.

Allegations in the SCA Indictment

The indictment alleges that SCA entered into separate agreements with two unnamed competitor owners/operators of outpatient medical care facilities "to suppress competition between them for the services of senior-level employees by agreeing not to solicit the other's senior-level employees." The indictment alleges that acts in furtherance of the conspiracy included:

1. agreeing not to solicit or proactively approach each other's senior-level employees;
2. instructing employees that "[w]e cannot reach out" to the other companies' employees and to take them "off the list";
3. monitoring compliance at the conspirators' respective HR departments and alerting them of instances of recruitment; and
4. instructing employees, for example, "that although the candidate 'look[ed] great' [we] 'can't poach her.'"

The criminal indictment asserts these agreements constitute per se illegal horizontal conspiracies in violation of Section 1 of the Sherman Antitrust Act. The Sherman Act imposes criminal penalties of up to $100 million for a corporation and $1 million for an individual, along with up to 10 years in prison. This is the first criminal indictment based solely on no-poach agreements brought by DOJ and it is the culmination of policy pronouncements by DOJ and FTC over four years ago.

October 2016 Antitrust Guidance for HR Professionals

The DOJ and the FTC issued in October 2016 its joint "Antitrust Guidance for Human Resource Professions" ("HR Guidance"). The HR Guidance provided "[a]greements among employees not to recruit certain employees or not to compete on terms of compensation are illegal." It made clear that the concern applied to "competitors in the employment marketplace," thus such restraints are illegal "regardless of whether the firms make the same products or compete to provide the same services." The HR Guidance further provided that "an individual likely is breaking the antitrust laws if he or she:…agrees with individual(s) at another company to refuse to solicit or hire that other companies' employees (so called "no poaching" agreements)."

Prior to the HR Guidance, DOJ previously had brought civil, but never criminal, enforcement actions arising out of no-poach or non-solicitation agreements, primarily against technology companies such as eBay and Intuit, Lucasfilm and Pixar, and Adobe, Apple, Google, and others. The HR Guidance provided that "[g]oing forward, the DOJ intends to proceed criminally against naked wage-fixing or no poaching agreements." Although DOJ has the authority to enforce the antitrust laws civilly or criminally, criminal enforcement is restricted to hardcore cartel conduct, such as price fixing or customer allocation. The HR Guidance announced DOJ's policy that going forward it would consider naked no-poaching agreements as fitting within this category of hardcore cartel conduct that rises to the level of criminal conduct. DOJ stated in the HR Guidance that it might: "in the exercise of its prosecutorial discretion, bring criminal, felony charges against the culpable participants in the agreement, including both individuals and companies."

Employer Considerations

Despite periodic statements by DOJ over the four years following issuance of the HR Guidance that criminal enforcement actions would be brought, no such indictments were forthcoming until the SCA indictment last week. The SCA indictment over no-poach agreements reconfirms enhanced regulatory scrutiny of such restraints between companies concerning the solicitation, recruitment, and hiring of employees, including the increased potential of criminal enforcement. As a result, employers should consider:

• reexamining and refining clear corporate compliance policies prohibiting such no-poach agreements.
• regularly communicating to all employees, reinforcing with periodic training, and periodically auditing policies prohibiting such agreements, as recommended with all antitrust compliance policies.

In July 2019, DOJ announced a new policy in which it would "consider compliance at the charging stage in criminal antitrust investigations." The SCA indictment combined with DOJ's policy to incentivize corporate antitrust compliance provides a strong reason to reexamine and strengthen antitrust compliance policies.

We Can Help

Please contact any of the related Maslon attorneys listed below if you need help ensuring your policies are in compliance with antitrust regulations or if you have other competition law concerns or questions.

Congress also provided extended unemployment benefits for employees not able to work because of COVID-19 under the Pandemic Unemployment Assistance ("PUA") program which continues with modification into the new year.

For your convenience, key implications for employers are summarized below:

FFCRA Leave Optional

As of January 1, 2021, employers are no longer required to provide FFCRA leave. However, qualifying private employers may do so voluntarily and continue to receive the dollar-for-dollar tax credit for qualifying leave taken through March 31, 2021.

An employer's decision to voluntarily continue to offer FFCRA leave should be based on the specific workplace and its staffing needs, alternative working arrangements, other available leave, potential effect on employee morale, and employee retention.

If an employer continues to offer leave consistent with the FFCRA, the employer should:

• Continue to request and maintain documentation of the need for leave.
• Ensure it only provides paid leave to employees who have not already exhausted their "bank" of FFCRA leave. Employers will not receive federal tax credits for employees who have already exhausted their 80-hour and 10-week FFCRA leave in 2020.
• Follow the reinstatement rules under the FFCRA.

IMPORTANT: Whether or not employers elect to continue providing such paid leave, employers need to update or remove existing FFCRA policies to reflect expiration of the mandatory provisions on December 31, 2020.

Unemployment Benefits Further Expanded

To address the continued high unemployment rates, Congress expanded the eligibility period for unemployment insurance and provided additional federal benefits:

• Increased unemployment eligibility period. Individuals receiving unemployment insurance benefits through their state programs or through the PUA program are now eligible for an additional 11 weeks of benefits. Combined with the 13-week extension under the CARES Act, the extended unemployment eligibility period is now 24 weeks.
• Further federal supplement. Individuals receiving state unemployment insurance benefits and/or PUA will receive an additional $300 per week through March 14, 2021.

CAUTION: State and local laws may affect unemployment benefits and may create additional leave obligations for employers. Some states and local governments have passed laws providing employees with additional paid leave for reasons related to COVID-19.

We Can Help

Please contact Maslon's Labor & Employment Group if you need help transitioning your leave policies to the New Year.
 

1. Tax Implications: PPP Loan Expenses Are Tax Deductible

The Act provides that business expenses paid for with forgiven PPP loan proceeds are tax deductible under the Internal Revenue Code. This reverses previous IRS guidance that such expenses were not deductible. Providing welcome relief to loan recipients, the Act specifies that "no deduction shall be denied or reduced, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided by [the provision stating forgiven PPP loans do not count as income]." For PPP loan recipients that already submitted a tax return, talk to your accountant about amending your return if you did not previously deduct your expenses.

Additional Deduction: The Act also temporarily allows for the full deduction of business meals provided by a restaurant paid or incurred between December 31, 2020 and January 1, 2023.

2. Second Round of PPP Loans

The Act also injects another $284 billion into PPP loans, allowing first-time borrowers to apply for a PPP loan and businesses that previously received PPP funds in the first round of loans to qualify for additional funding if they demonstrated specified reductions in gross receipts.

To receive a "second draw" of PPP funding, borrowers must:

• employ fewer than 300 people (or meet an alternative size standard),
• have used or will use the full amount of their first PPP loan, and
• demonstrate there was a 25% reduction from the gross receipts of the entity during at least one quarter in 2019 compared to the same quarter in 2020.

Borrowers may receive loan amounts of up to 2.5 times their average monthly payroll costs in the one year period prior to the loan date or the 2019 calendar year, but the second round of funding is capped at $2 million per borrower (rather than $10 million under the first round). The Act also made clear that group life, disability, vision, and dental insurance benefits may be included in calculating payroll costs.

Accommodation and Food Service Industry Adjustment: Borrowers in the accommodation and food service industry (NAICS code 72) are eligible to receive 3.5 times their average monthly payroll costs in the one year period prior to the loan date or the 2019 calendar year (capped at $2 million per borrower), provided borrowers with more than one physical location do not employ more than 300 employees per physical location (down from 500 employees per physical location in the first round of funding).

Seasonal Employer Loan Amount Calculation: For seasonal employers applying for a new PPP loan, the maximum loan amount is based on the average monthly payroll costs for a 12-week period selected by the employer that begins February 15, 2019 or March 1, 2019 and ends June 30, 2019. Or, the employer may elect to use any consecutive 12-week (any 96 consecutive days) period beginning after February 14, 2020 and ending before January 1, 2021 multiplied by 2.5, not to exceed $2 million.

Loan Forgiveness: Borrowers will receive full loan forgiveness if they spend a minimum of 60% of their second round PPP loan on payroll costs over a time period of their choosing between eight weeks and 24 weeks. As with the first round of funding, costs eligible for loan forgiveness include payroll, rent, covered mortgage interest, and interest. The Act also makes facility modification expenditures (such as drive-through window facilities and an expansion of additional indoor or outdoor business space), personal protective equipment, and operating costs for software and cloud computing services potentially covered. Publicly traded companies are not eligible for the new PPP loans.

Good Faith Certification: Importantly, although a borrower may technically qualify for the second round of PPP loan funding, borrowers will still need to certify in good faith, as set forth in the CARES Act, that the "uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations" of the borrower. This good faith certification may, in some cases, be more difficult for borrowers to make now than it was in early 2020, depending upon the borrower's financial performance in 2020. For the first round of PPP loans the Small Business Administration ("SBA") issued guidance that any borrower, together with its affiliates, that received PPP loans in an original principal amount of less than $2 million was automatically deemed to have made the required certification in good faith, but it is unclear whether that safe harbor will be applied to the second round of funding. Regulations carrying out the Act must be issued by the SBA within 10 days of the Act's enactment.

3. Simplified PPP Loan Forgiveness Application

The Act also creates a simplified forgiveness form for PPP loans of $150,000 or less, including those made during the first round of lending. Forgiveness will be granted if the recipient signs and submits to its lender a certification that is no more than one page, includes a description of the number of employees the recipient retained as a result of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. Recipients must retain records related to employment for four years and other records for three years. The SBA must create this form within 24 days after the Act's enactment.

4. PPP Loan Audits

Within 45 days of the Act, the SBA must submit to Congress an audit plan for conducting forgiveness rules and audits of PPP loans. This will be of interest to those borrowers who received a loan in excess of $2 million, and thus will be automatically subject to an SBA loan audit.

5. Entertainment Aid

Separate from the PPP program, $15 billion was earmarked for grants to live event operators or promoters, theatrical producers, live performing arts organization operators, cultural museums, movie theaters, and talent representatives. To receive a grant, the recipient must (among other requirements), have been fully operational on February 29, 2020, and have gross earned revenue during the first, second, third, or (with respect to applications submitted after January 1, 2021), fourth quarter of 2020 that demonstrates at least 25% percent reduction from the gross earned revenue during at least one of the same quarters in 2019. Entities that count in more than two of the following groups do not qualify for grants: publicly traded companies, multinational companies, companies that operate in more than 10 U.S. states, employ more than 500 full-time employees, or companies that receive at least 10% of its revenue from federal government sources.

6. Employment Implications

Under the Act, as of December 31, 2020, employers are no longer required to provide Emergency Paid Sick Leave or paid Emergency Family and Medical Leave under the Families First Coronavirus Response Act (FFCRA). However, covered employers can voluntarily provide this leave, and if they choose to do so, they can take the tax credit associated with this leave through March 31, 2021. With that said, all employers should still be mindful of other paid leave requirements under state and local laws, as well as their own paid leave and PTO policies. Many state and local governments enacted similar paid COVID-leave laws and ordinances to assist employees dealing with COVID-19, and while some of those laws also expire on December 31, 2020, some do not.

The Act also extends the Employee Retention Tax Credit—a refundable tax credit against certain employment taxes—to June 30, 2021 and increases the fully refundable portion of the qualified wages from 50% to 70%, meaning employers can receive a 70% credit on up to $10,000 of wages per employee per quarter.

We Can Help

Please contact Maslon's Corporate & Securities Group or Labor & Employment Group if you have questions or need assistance taking advantage of the relief provided under the Consolidated Appropriations Act, 2021.

In order to help employers with this dilemma, the Equal Employment Opportunity Commission (EEOC) recently released new guidance for employers considering vaccination programs.

The EEOC guidance can be found here: What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws (Part K).

For your convenience, we've summarized the five key concerns below:

1. Can I require employees to be vaccinated?

Yes, but not without some risk, including legal challenges based on disability or religious belief, mandatory duty to bargain with employees represented by a union, and possible liability for adverse outcomes for individual employees.

Whether an employer should require vaccinations as a condition of returning to or remaining in the workplace depends on a myriad of factors specific to the individual business, such as the nature and industry of the business (or the duties of the specific employee) and the availability of other precautionary measures. Mandating a vaccine may also create issues with employee morale. After evaluating the risks and costs of mandating the vaccine, an employer may wish to encourage and incentivize vaccinations rather than require vaccinations.

2. Can I administer, or hire a third party to administer, COVID-19 vaccines to employees or can I require employees to provide proof of vaccination from another source?

Not unlike the common practice with seasonal influenza immunizations, employers may administer or hire a third party to administer COVID-19 vaccinations. However, employers should be cautious when asking employees pre-screening questions about their medical status or history, so as not to elicit prohibited information about an employee's disability. Worksite vaccination may be a convenience for both employees and employers.

Employers should also consider allowing employees to provide proof of vaccination by the employee's own healthcare provider or pharmacist.

3. What if an employee says he or she is unable to be vaccinated due to a medical condition?

Once an employee requests an exemption from the vaccine for their medical condition or disability, the employer should engage in a flexible, interactive process to obtain any supporting documentation for the employee's claimed disability and to identify potential accommodations for the specific employee position. Unless the employer can show an "undue burden" caused by the exemption from vaccination, the employer has an obligation to provide a reasonable accommodation to employees with an ADA-covered disability or medical condition. The EEOC advises that the number of employees who have received the vaccination and exposure to others who may not be vaccinated weigh into the undue burden analysis. Additionally, administrative controls used to mitigate COVID-19 spread during the pandemic may be considered in determining whether an employee's accommodation request is reasonable. For example, if an employee was able to successfully work remotely previously, remote work may be viewed as a reasonable accommodation.

4. What if an employee says he or she is unwilling to be vaccinated due to religious belief?

Normally, employers are required to provide reasonable accommodations for employees' sincerely-held religious beliefs, practice, or observance under Title VII, unless it would cause undue hardship. Courts have found accommodations pose an undue hardship where an accommodation diminishes efficiency, impairs workplace safety, or infringes upon other employees' job rights or benefits.

Title VII does not protect social, political, or economic philosophies or personal preferences. An employee objection based purely on concerns related to safety or doubt in science may not qualify for an exemption. However, because "religious beliefs" is defined broadly to include moral or ethical beliefs about right or wrong that generally concern ultimate ideas about life, purpose, or death, to the extent resistance is tied to such ideas, a court could find the employee is entitled to an exemption. The EEOC recommends employers give employees the benefit of the doubt unless they have an objective basis for questioning the nature or sincerity of the belief.

5. Can I exclude unvaccinated employees from the workplace?

Maybe. When an employee has an ADA-qualifying disability or sincerely-held religious belief, the employer can exclude the employee from the workplace if the employer determines that the presence of unvaccinated employees poses a direct threat to the health and safety of persons in the workplace that cannot be reduced or eliminated through a reasonable accommodation. Determining "direct threat" requires individualized assessment of “the duration of the risk; the nature and severity of the potential harm; the likelihood that the potential harm will occur; and the imminence of the potential harm.” The EEOC gives employers direction in making this assessment: "a conclusion that there is a direct threat would include a determination that an unvaccinated individual will expose others to the virus at the worksite."

Even if an employer can exclude an unvaccinated employee due to a direct threat, the employer may not automatically terminate the employee. The employer must assess whether reasonable accommodations may permit continued employment outside the workplace. In addition, an employer must determine whether other federal, state, or local laws protect the employee's position.

Additional Resources:

• Job Accommodation Network COVID-19 Materials
• CDC Guidance on Effective COVID-19 Accommodations
• OSHA Guidance on COVID-19

We Can Help

Determining whether to implement a vaccination program is complicated and will depend on your individual business. Please contact Maslon's Labor & Employment Group if you need help navigating how best to manage workplace safety in the COVID-19 pandemic.

National "Best Law Firm" Ranking:

• Appellate Practice [Tier 3]
• Commercial Litigation [Tier 3]
• Litigation — Banking & Finance [Tier 3]
• Securities Regulation [Tier 3]

Regional/Metro: Minneapolis "Best Law Firm" Ranking:

• Appellate Practice [Tier 1]
• Bet-the-Company Litigation [Tier 1]
• Commercial Litigation [Tier 1]
• Litigation—Banking & Finance [Tier 1]
• Product Liability Litigation—Defendants [Tier 1]
• Securities Regulation [Tier 1]
• Trust & Estates Law [Tier 1]
• Employment Law — Management [Tier 2]
• Litigation—Antitrust [Tier 2]
• Litigation—Intellectual Property [Tier 2]
• Litigation—Labor & Employment [Tier 2]
• Securities / Capital Markets Law [ Tier 2]
• Employee Benefits (ERISA) Law [Tier 3]
• Franchise Law [Tier 3]
• Litigation—Securities [Tier 3]

To view the full rankings, go to: U.S. News - Best Lawyers® 2021 "Best Law Firms" Rankings.

U.S. News Media Group and Best Lawyers® rank more than 15,000 firms nationally. The rankings are based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their field, and review of additional information provided by law firms as part of the formal submission process.

1. Are employees entitled to time off from work to vote?

Federal law does not require this, but some states do have laws entitling employees time off to vote. In particular, Minnesota, Wisconsin, Iowa, North Dakota, and South Dakota each have different laws for employers to follow, presented below:

Minnesota

• Time Off to Vote: On Election Day, employees have a right to be absent from work for the time necessary to go to the employee's polling place, cast a ballot, and return to work.
• Notice Requirements: Employees do not have to provide advance notice of their intent to take voting leave. They can just let their employer know on Election Day that they need to leave work to vote. Employers can ask that employees coordinate their absences to minimize workplace disruptions.
• Pay: Voting leave is paid. An employer cannot deduct from an employee's pay because of voting leave.

Wisconsin

• Time Off to Vote: Employees have up to three hours of leave while the polls are open.
• Notice Requirements: Employees must provide notice of the need for leave before Election Day. Employers may specify when the leave may be taken on Election Day.
• Pay: Voting leave is unpaid. An employer may deduct from employee's pay the time taken off to vote.

Iowa

• Time Off to Vote: Employees may take voting leave for the amount of time necessary to have a total of three consecutive hours of non-working time to vote while the polls are open.
• Notice Requirements: Employees must provide written notice of the need for leave before Election Day.
• Pay: Voting leave is paid. An employer cannot deduct from an employee's pay because of voting leave.

South Dakota

• Time Off to Vote: Employees have up to two hours of leave to vote, but only if the employee does not have two consecutive hours to vote outside of working hours.
• Notice Requirements: Employees do not have to provide advance notice of their intent to take voting leave but an employer may specify the hours when employees may be absent to vote.
• Pay: Voting leave is paid. An employer cannot deduct from an employee's pay because of voting leave.

North Dakota

• Time Off to Vote: Encourages but does not require employers to provide employees leave to vote if their regular schedule conflicts with polling hours.
• Notice Requirements: N/A
• Pay: N/A

2. Are employees entitled to time off to serve as poll workers?

An employee's right to leave for election-related activities also depends on state law. Both Minnesota and Wisconsin law provide leave for election officials:

• Minnesota: Election judges are entitled to partially-paid leave on Election Day, but at least 20 days written notice is required. The employee's notice needs to include the election office's certification stating the hours the employee will serve as an election judge and how much the employee will be paid per hour. The employer may then deduct this amount from the employee's pay. Employers can limit this leave to no more than 20 percent of the workforce at any single worksite.
• Wisconsin: Election officials are entitled to a 24-hour period of unpaid leave, if they provide their employers at least 7 days' notice.
• Iowa, South Dakota, and North Dakota: These states do not provide leave for poll workers.

3. Does an employee have the right to discuss politics at work?

Private employees do not have a First Amendment right to free speech in the workplace. So the First Amendment does not require an employer to permit employees to express their political opinions at work. But before reacting to an employee's political opinion, an employer should consider whether there is another law that may protect the employee.

• National Labor Relations Act: The National Labor Relations Act protects employees, even non-union employees, who engage in "concerted activity for mutual aid or protection." Political speech may be protected if it is related to employees' working conditions.
• Anti-Discrimination Laws: An employee's political opinion may be tied to characteristics (i.e. race, sex, disability, or age) protected under anti-discrimination laws.
• Unlawful Workplace Conduct: Political speech may also be protected if it relates to possible unlawful conduct in the workplace.

Keep in mind that an employee does not have the right to express themselves in a way that is offensive to other employees in violation of an employer's anti-harassment policy.

We Can Help

Please contact Maslon's Labor & Employment Group if you have questions related to voting leave rights or political speech in the workplace.

1. The Work Availability Requirement is Reinstated
   
   The DOL affirmed its rule that employees are only eligible for FFCRA leave if an employer has work available for that employee. This means that employees who are temporarily furloughed do not qualify for paid leave.
    
2. Employer Permission is Still Required for Intermittent Leave, But Most Leaves Related to Distance Learning are Exempt from this Requirement
   
   The DOL reasserted that an employee must obtain their employer's permission to take leave intermittently. However, according to the DOL, employees taking leave to care for a child whose school is closed due to COVID-19 do not need employer permission to take leave non-consecutively. The DOL views each day or period of time a school closed as a separate qualifying reason for FFCRA leave.
   
   This means employees taking leave on non-consecutive days to care for a child whose school operates under a hybrid model (with both in-person and distance learning) are not taking intermittent leave and do not need employer permission to take leave non-consecutively. For instance, a qualifying employee may take leave each Tuesday and Thursday to care for their child whose school is closed for distance learning on those days without employer permission. According to the DOL, however, this exemption only applies if the employee is using FFCRA leave for the entire time the school is closed on that particular day. If the school is closed all day, but the employee only wishes to take 2 hours off of work to assist with distance learning, that would qualify as intermittent leave and would trigger the requirement for employer permission.
   
   Takeaway: While an employer may deny intermittent FFCRA leave under some circumstances, an employee has a right to take leave on non-consecutive days to care for a child whose school is closed for distance learning.
    
3. New Definition for Health Care Provider Exemptions
   
   Under the FFCRA, employers do not need to provide FFCRA leave to "health care providers." The new regulations narrow the definition of "health care provider" focusing on an employee's role and duties:
    
   • An employee is a health care provider under the FFCRA if the employee is capable of providing health care services or employed to provide diagnostic services, preventative services, or treatment services.
      
   • A health care provider also includes employees whose services are otherwise so integrated with and necessary to provision of patient care that their absence would adversely impact patient care. 
      
     • Examples of integral services include taking patient vitals, setting up medical equipment for procedures, transportation of patients and samples, and patient bathing, dressing, and hand feeding.
        
4. Documentation for FFCRA Leave Is Required As Soon As Practicable
   
   The DOL has revised documentation requirements for FFCRA leave. To take Paid Sick Leave and Expanded FMLA leave, an employee must provide documentation "as soon as practicable." Where the need for leave is foreseeable, an employee must generally provide documentation in advance of the leave.

These changes are effective upon publication in the Federal Register. Publication is anticipated on September 16, 2020. As with the initial DOL regulations, these regulations are subject to court review. Maslon's Labor & Employment Group will continue to monitor developments and will provide additional updates regarding any challenges.

We Can Help

The changing landscape of FFCRA leave is complicated. Maslon's Labor & Employment Group is available to help answer your questions, draft policies, and assist with leave requests.

As a reminder, the FFCRA requires employers with fewer than 500 employees to provide two types of paid leave to qualifying employees: up to 80 hours of Paid Sick Leave and 12 weeks of Emergency Family Medical Leave (10 of which may be paid leave). Employers are reimbursed for paid leave through an employer tax credit. The regulations struck down in State of New York v. United States Department of Labor provided key rules for FFCRA leave.

By vacating these rules, the court expanded eligibility for FFCRA leave, removed barriers to intermittent use of FFCRA leave, and eliminated prior documentation requirements. The Department of Labor is expected to appeal the federal court's decision. Maslon's Labor and Employment Group will continue to monitor this developing situation and will provide additional updates regarding the impact of this decision.

In the meantime, employers should be aware of the decision's impact on paid leave under the FFCRA:

1. More Employees May Be Eligible for FFCRA Leave.
   
   There is no longer a work-availability requirement.
    
   • The DOL regulations stated that qualifying employees are only eligible for FFCRA leave if an employer had work available for the employee—meaning that employees placed on a temporary furlough did not qualify for paid leave. The federal court held this restriction was not a proper interpretation of the statute, expanding eligibility for FFCRA leave.
      
   • Takeaway: Employers must now consider requests for FFCRA leave even if there is no work available for the employee. This includes employees who are temporarily furloughed, employees with reduced hours, and employees out of work due to a business shut down based on a government order. These employees still must meet other eligibility criteria for FFCRA leave.
      
   The "Healthcare Provider" exemption is limited.
    
   • Under the FFCRA, employers do not need to provide FFCRA leave to "health care providers." The federal court disagreed with the DOL's expansive definition of health care providers, which included all employees of an organization providing health care services and supply chain businesses and contractors.
      
   • Takeaway: An employer may properly deny FFCRA leave to health care providers such as doctors of medicine or osteopathy, but may not be able to deny leave to other key employees such as registered nurses, certified nursing assistants, and medical technicians.

2. Employees Do Not Need Employer Approval to take Qualifying FFCRA Leave Intermittently.
    
   • The federal court agreed with the Department of Labor that FFCRA leave may not be taken intermittently where it would increase COVID-19 exposure risk (such as when an employee takes leave due to COVID-19 diagnosis, exposure, or symptoms, and cannot work remotely). However, the federal court vacated the DOL's rule that leave can only be taken intermittently with employer permission.
      
   • Takeaway: Employers can no longer deny intermittent use of FFCRA leave where it does not increase risk of exposure to COVID-19 in the workplace. This means employees may elect to take FFCRA leave due to school or childcare closure intermittently. Teleworking employees may opt to take FFCRA leave intermittently for any qualifying reason, even those related to illness. Employers should remove any approval requirements for intermittent leave in these instances.
      
3. Employees Do Not Need to Provide Documentation Prior to Taking FFCRA Leave.
    
   • The federal court struck down DOL documentation rules to the extent they required documentation of the need for leave before an employee may take leave.
      
   • Takeaway: Employers can no longer require employee documentation before employees take leave. Employers can still require documentation to substantiate leave requests but documentation cannot be required in advance unless the need for leave is foreseeable, such as taking leave for childcare or school closure. Employers should update FFCRA policies and practices to reflect this change.

We Can Help

Maslon's Labor and Employment Group is available to help your business navigate FFCRA leave requests, policies, and procedures.

• Employees need to wear face masks covering nose and mouth completely when:
  • Inside businesses and public indoor spaces.
  • Working outside where social distancing cannot be maintained.
  • When mandated by applicable industry guidance.
    
    Additional Resource: Industry Guidance Library​
    
    Periodic reminders to employees on how to properly wear a face mask may be helpful to assure compliance with this new requirement.
     
• Employers need to update their COVID-19 Preparedness Plans to include the face mask requirements of new Executive Order:
  • Employees need to be informed of changes to the plan.
  • The revised plan needs to be made available to employees.
• New signage is required:
  • At least one sign needs to be posted.
  • Sign needs to be visible to employees, customers, and visitors instructing them to wear required face masks.
    
    Additional Resource: Printable Posters on Executive Order 20-81
     
• Employers need to make reasonable efforts to require customers and visitors to follow the new face mask requirements:
  • This requirement ties into employer's obligation to provide a safe and healthy workplace.
  • Employers need to train employees on steps to take to respond to customers or visitors who enter business.
  • Below are suggested steps to take when a customer or visitor enters business without a mask:
    • Remind individual of the mask requirement;
    • Offer the individual a disposable mask;
    • If individual still refuses to wear mask, request that the person leave the premises; and
    • If the individual refuses to leave the premises, follow normal procedures for handling difficult individuals on the premises.
  • Note: No one is required to enforce the face mask requirement if doing so would be unsafe. Additionally, no one is authorized to restrain, assault or physically remove someone who refuses to comply with the face mask requirement.
  • Offer reasonable accommodations to customers or visitors who are unable to wear a mask due to a medical or mental condition or disability such as:
    • Reusable face shields;
    • Curbside pick-up or home delivery; and/or
    • Expedited service if individual can wear a face mask for a short time, i.e. allow the individual to move to front of line.
  • ​Note: A business cannot require a customer or visitor to explain the nature of their condition or disability, or require proof of their condition or disability.
    
    An accommodation is not reasonable if it jeopardizes the health of employees or other visitors or customers.
    
    If no reasonable accommodation is available, a business may refuse service and ask the customer or visitor to leave the premises.

 
OTHER KEY CONCERNS FOR EMPLOYERS

Who provides face masks?

• Employers are encouraged, but not required, to provide face masks.
• If any employer does not provide face masks, employees are responsible for obtaining their own. 

When can an employee work without a mask?
 
An employee can work without a mask when:

• Alone in an office or room, a vehicle, or a cab of heavy equipment or machinery;
• In a cubicle so long as the cubicle walls are higher than face level and social distancing is maintained; and/or
• When communicating with an individual who is deaf, hard of hearing, or otherwise has a disability or medical or mental health condition that makes communication while wearing a face mask difficult, provided social distancing is maintained.

At all times, an employee should have a face mask on hand for person-to-person interactions.

What if an employee cannot wear a mask?
 
If an employee has a disability or medical or mental health condition that prevents them from wearing a face mask, an employer should handle the situation according to its usual policy for addressing requests for reasonable accommodations under applicable laws such as the Americans With Disabilities Act and the Minnesota Human Rights Act.
 
Accommodations suggested by the Minnesota Department of Health:

• Offer the employee the option of wearing a face shield instead.
• Take steps to mitigate the employee's interaction with others.

Additional Resources:

• Minnesota Department of Health: Frequently Asked Questions About the Requirement to Wear Face Coverings
• CDC: How to Make Cloth Face Coverings

We Can Help

Please contact Maslon's Labor & Employment Group if you have questions related to face masks in the workplace.

New OSHA Guidance: COVID-19 Frequently Asked Questions on Face Coverings

Key Takeaways:

• OSHA emphasizes that face masks are not personal protective equipment (PPE) and are not a substitute for surgical masks or respirators.
• Face masks are not required in the workplace, but OSHA recommends that employers encourage their use, and an employer may choose to require face masks. Requiring face masks would help satisfy the employer's general duty under the Occupational Safety and Health Act (OSH Act) to provide a workplace free from recognized hazards that are likely to cause death or serious physical harm.

Recommended Next Steps:

If employers require employees to wear face masks in the workplace, employers should:

• Provide the face masks to employees at no charge.
• Train employees on the proper care and use of face masks.
  • Instructions for care should include how to properly wash face masks and when to replace face masks.
  • Instructions for use should state when a mask is required and how to properly wear and adjust the mask.
  All instructions should be clear and easy-to-understand.
  
  Additional Resource: CDC: Use of Cloth Face Coverings to Help Slow the Spread of COVID-19
• Recognize that face masks are only one measure used to reduce the risk of exposure to COVID-19 in the workplace. Employers should take other administrative and engineering control measures such as requiring social distancing or installing physical barriers, e.g. clear plastic sneeze guards.
  
  Additional Resource: OSHA: Guidance on Preparing Workplaces for COVID-19

If employers do not require face masks in the workplace, employers should respect employees' choice to wear a face mask. Minnesota Executive Order 20-54 makes it unlawful for an employer to discriminate or retaliate against an employee who wears their own protective gear if the employee reasonably believes the protective gear will protect them, their coworkers, or the public from harm. However, there is a limit to what an employee can wear. The employer does not need to tolerate protective gear that violates industry standards or the employer's own policies related to health, safety, or decency.

We Can Help

Please contact Maslon's Labor & Employment Group if you have questions related to face masks or other return-to-work safety measures.

Start With A Conversation With The Employee: Identify All the Ways In Which the Employer Has Followed Workplace Safety Guidance from the CDC, OSHA, and State and Local Authorities.

The number one thing employers can do to assuage employee fears is to assure employees that they are taking reasonable measures to keep employees safe and to reduce the risk of COVID-19 transmission in the workplace. In the ever-changing COVID-19 environment, employers should continue to stay up-to-date on public health guidance regarding COVID-19 workplace safety.

Employers should also pay attention to all industry-specific recommendations from the federal Occupational Safety and Health Agency (OSHA), as well as follow any state or local guidelines for reopening. OSHA and CDC safety standards may vary based upon the industry, OSHA's designated risk exposure level for the business, and whether the business is in a "critical sector."

Minnesota currently requires non-critical businesses to create a "COVID-19 Preparedness Plan" before reopening to comply with certain workplace protocols and protections.

Additional Resources:

• CDC: Interim Guidance for Businesses and Employers
• MN Department of Health: Businesses and Employers: COVID-19
• OSHA: COVID-19 Safety and Health Topic Center
• MN Department of Labor and Industry: COVID-19 Resources
• MN Department of Employment and Economic Development: Guidance on Safely Reopening Minnesota Businesses, Industry Guidance
• MN Department of Labor and Industry: Employer Preparedness Plan Template and Instructions
• MN Department of Labor and Industry: Employer Preparedness Plan Checklist

Takeaway: Employers should ensure their workplaces comply with the complex framework of federal, state and local COVID-19-related workplace safety guidance. Workplace safety is not a one-size-fits-all solution–the recommended safety measures will vary based on a number of factors, including industry and sector. If an employee is afraid to come to work, the employer should start with a conversation highlighting the workplace safety measures implemented to protect the employee and discussing specific concerns that the employee may have about the workplace.

Under OSHA, An Employee's Refusal To Work Is Not Protected Based On A Generalized Fear Of Contracting COVID-19.

A generalized fear of returning to work due to the COVID-19 pandemic, with nothing more, is not enough to excuse an employee from work. However, OSHA does protect employees from discrimination or retaliation for refusing to work if:

• The employee has a good faith belief that an imminent danger exists and that belief has been communicated to the employer;
• A reasonable person would agree that there is a real danger of death or serious injury; and,
• There is no time to correct the hazard through regular enforcement channels such as an OSHA inspection.

This inquiry is very fact-specific, and will focus on imminence of the danger under all of the circumstances and the reasonableness of the employee's belief.
 

Takeaway: After reviewing with the employee all measures taken to follow the CDC's and OSHA's recommendations for the workplace, employers should assess whether the employee has a reasonable and specific workplace safety concern and whether there are additional safety measures that could be implemented to address it. In addition to considering how to legally handle an employee's refusal to work, employers may want to also consider goals they have for employee retention when managing employees who have a genuine fear of contracting COVID-19 in the workplace.

Maslon's Labor and Employment Group is available to help you assess whether an employee's concern is reasonable and whether additional safety measures could be taken. We can work with you to identify creative ways to maintain a productive workforce during this time.

Employers Cannot Discipline or Retaliate Against Employees Who Voice Concern Over Working Conditions Related To COVID-19.

The Federal and Minnesota OSH Acts prohibit employers from taking adverse action against employees who have a reasonable belief their workplace is not safe and make a good faith complaint. A reasonable belief means that under the circumstances, a reasonable person would believe they are at risk. Minnesota Governor Walz, in Executive Order 20-54, emphasized that employees are protected from retaliation and discrimination for communicating, orally or in writing, with management personnel about occupational safety or health matters related to COVID-19. According to the Order, this encompasses more than complaints, it also includes employees just asking questions or expressing concerns.

Additionally, the NLRA protects employees, even non-union employees, who engage in "concerted activity for mutual aid or protection." Thus, an employer may be restricted in disciplining or discharging employees who are acting together to protest working conditions. For instance, if two employees reasonably refuse to work because there is insufficient legally-required personal protective equipment, indicating that they are acting on behalf of themselves and others, generally an employer may not discipline the employees.

Takeaway: Employees who are afraid to return to work have a right to ask questions and complain about perceived safety issues in their workplace. However, this fear must be reasonable in order to trigger any legal protections against discipline or discharge for refusing to work.

Employees May be Entitled to Reasonable Accommodations Under the Americans with Disabilities Act (ADA) and State Law.

An employee with a disability may be entitled to a reasonable accommodation under the ADA or parallel state laws, such as the Minnesota Human Rights Act (MHRA). A generalized fear does not amount to a disability under the ADA (or state laws such as the MHRA). Keep in mind though that a fear of COVID-19 in the workplace might be a symptom of a covered disability, such as an anxiety disorder.

The EEOC has issued specific guidance to address employees who have one of the medical conditions that the CDC says may put the individual at a higher risk for severe illness from COVID-19. Employers should continue to monitor guidance from the CDC, state and local health departments, and state or local stay-at-home orders for guidance on the medical conditions that may place individuals at a higher risk for severe illness from COVID-19.

Additional Resources:

• EEOC Guidance: What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws
• CDC Guidance: People Who Are at Higher Risk for Severe Illness

For a reasonable accommodation under the ADA (or MHRA), employees must first request a reasonable accommodation:

An employer's duty to provide a reasonable accommodation under the ADA is triggered by an employee request for a reasonable accommodation:

• An employee or a third party, such as the employee's doctor, must inform the employer that the employee needs a change related to a medical condition.
• The employee need not use the term "reasonable accommodation" or reference the ADA.
• The request for an accommodation can be made orally or in writing.

There are no magic words required to request an accommodation. If an employee requests to work from home, or to take a leave of absence, and the employee informs the employer that they have a medical condition that places them at higher risk for severe illness from COVID-19, that is likely enough to trigger the employer's obligation to begin the accommodation request process. (Note: in some circumstances, such employees may be eligible for two weeks of Emergency Paid Sick Leave under the FFCRA. For example, if the employee has also been advised by a health care provider to self-quarantine due to concerns related to COVID-19.)

If an employee has a medical condition that places them at higher risk for severe illness if they get COVID-19, but the employee does not request an accommodation, the employer does not have to take any action. The EEOC has made clear that employers are prohibited from excluding these employees from the workplace or taking any other adverse action because the employee has a medical condition that could put them at higher risk of severe illness from COVID-19 – unless the employee's disability is a "direct threat" to the employee's health that cannot be eliminated or reduced by a reasonable accommodation.

A "direct threat" is a high standard that requires individualized assessment of the employee's medical condition, objective, and medical evidence regarding the severity, likelihood, and risk of potential harm. If an employer determines that the employee's disability does pose a "direct threat" to the employee's safety, the employer needs to then consider whether there is a reasonable accommodation (absent undue hardship) that can be provided to reduce the risk to the employee so that it would be safe for the employee to return to the workplace.

Takeaway: It is up to an employee with a disability to request a reasonable accommodation due to a medical condition that places them at higher risk for severe illness if they get COVID-19. Employers should be cautious in taking any action that would exclude or adversely impact employees they expect are at higher risk for serious illness due to COVID-19.

Maslon's Labor and Employment group is available to counsel you through return to work accommodation requests and can help identify what accommodations may be available for employees.

Once an employee requests a reasonable accommodation, an employer can engage in an "interactive process" with the employee.

An interactive process means an employer may ask questions and/or request medical documentation to determine whether the individual has a disability and if there is a reasonable accommodation that can be provided without undue hardship.

Questions may include:

• how the requested accommodation will effectively address the issue;
• whether another form of accommodation could effectively address the issue; and
• how a proposed accommodation will enable the employee to continue performing the essential functions of the employee's position.

Because the COVID-19 pandemic has placed stress on the healthcare system, employers can elect to provide an accommodation on a temporary basis pending appropriate medical documentation. The accommodation may then be reconsidered upon receipt of medical documentation.

As with any ADA situation, an employer does not need to provide the requested accommodation if an alternative can effectively address the limitation. The EEOC has identified some potential accommodations:

Additional or enhanced protective gowns, masks, gloves, or other gear beyond what the employer may generally provide to all employees returning to the workplace.

Additional or enhanced protective measures like:

• Erecting protective barriers between the employee with a disability and coworkers and the public;
• Increasing space between the employee with a disability and others; or
• Moving the location where the employee works within the workplace to increase social distancing.
• Eliminating or substituting "marginal" job functions.
• Modifying work schedules to decrease contact with coworkers or the public when working or commuting.

The EEOC refers employers to the Job Accommodation Network website for other possible accommodations.

Takeaway: The EEOC advises employers and employees with disabilities to be creative and flexible to identify effective reasonable accommodations based upon the employee's specific job duties and the workplace itself.

We Can Help

Please contact Maslon's Labor & Employment Group if you have questions related to returning to work in the midst of the global COVID-19 pandemic.

1. Federal Pandemic Unemployment Compensation,
2. Pandemic Emergency Unemployment Compensation, and
3. Pandemic Unemployment Assistance.

Please note: Although the above programs are 100% federally funded, the benefits will be administered by a state's unemployment office once the state enters into an agreement with the U.S. Department of Labor ("DOL").

FEDERAL PANDEMIC UNEMPLOYMENT COMPENSATION

The Federal Pandemic Unemployment Compensation ("FPUC") program provides an additional $600 per week payment to individuals who are collecting regular unemployment benefits as well as those who are now eligible for unemployment benefits as a result of the CARES Act. The additional $600 per week is only available through July 31, 2020.

According to DOL guidance issued on April 4, 2020, the two-step process to calculate and determine entitlement to the $600 FPUC payments is:

1. The state will calculate the weekly benefit amount that the individual would be entitled to receive under regular unemployment compensation or under one of the expanded unemployment compensation programs provided for in the CARES Act; and
    
2. If the individual is eligible to receive at least $1 of such unemployment benefits for the claimed week under either the regular state program or one of the expanded programs, the individual will receive the full additional $600 FPUC payment. Each state's maximum weekly unemployment benefits amounts (or caps) are not changed or impacted by the FPUC benefits.

Eligibility Requirements: To be eligible for benefits, an employee must have hours reduced to under 32 hours per week and be receiving wages that are less than their weekly benefit amount. Minnesota's weekly unemployment benefit amount is approximately 50% of an individual's average weekly wages up to the maximum unemployment benefit of $740 per week.

Examples based on Minnesota's unemployment compensation program:  

Scenario A: Employee is laid off, with no continuing salary or wages. Employee's average weekly wages at time of termination were $1,480.

Benefit Calculation: 50% of employee's regular wages is $740. Therefore, this individual would likely be entitled to the maximum possible payment of $740 per week, plus the additional $600 FPUC payment per week.

Scenario B: Employee is still working, but has had hours and pay reduced. Employee's average weekly wages had been $1,480. Employee had been working full time, but is now working only 15 hours per week and receiving wages of $500 per week.

Benefit Calculation: 50% of employee's regular wages is $740, so that is their maximum weekly benefit amount. Fifty percent of the employee's current weekly earnings—so, $250—will be deducted from the employee's benefit amount, resulting in an anticipated unemployment benefit of $490 for that week [$740 – $250 (50% of $500) = $490]. Because this employee was still eligible that week for state unemployment benefits, they will also receive the additional $600 payment per week through FPUC.

Scenario C: Employee is still working, but has had hours and pay reduced. Employee's average weekly wages had been $1,000. Employee had been working full time, but is now working only 30 hours per week and receiving wages of $750 per week.

Benefit Calculation: 50% of employee's regular wages is $500, so that is their maximum weekly benefit amount. Because employee is receiving wages higher than their maximum benefit amount, employee is not entitled to any unemployment benefit for that week. Because this employee is not eligible to receive even $1 of regular state unemployment benefits, they will not receive the additional $600 payment per week through FPUC.

NOTE: FPUC is all or nothing—it is not prorated.

No impact on employer's experience rating

The FPUC benefits will not impact an employer's experience rating for purposes of calculating an employer's unemployment contribution rate. And in Minnesota, the Governor ordered that the Minnesota Unemployment Insurance Program may not use unemployment benefits paid as a result of the COVID-19 pandemic in computing the future tax rate of a tax paying employer.

No waiting period

For unemployment insurance benefit accounts established between March 1, 2020, and December 31, 2020, the State of Minnesota, like many other states, is suspending the non-payable week requirement, which will allow individuals to become eligible for unemployment benefits as quickly as possible.

Minnesota now requires employer notice to separated employees

In Minnesota, as of April 6, 2020, employers must notify separated employees that they can apply for unemployment insurance benefits. This notice requirement is effective through December 31, 2020. Many employers have been providing this notice already but it is now required.

PANDEMIC EMERGENCY UNEMPLOYMENT COMPENSATION

The CARES Act also provides an additional 13 weeks of Pandemic Emergency Unemployment Compensation ("PEUC") to individuals who have already exhausted their unemployment benefits. This 13-week extension/continuation of state unemployment benefits is available for weeks of unemployment ending on or before December 31, 2020. PEUC benefits include the unemployment benefits that an individual is entitled to receive under applicable state or federal law, plus the $600 FPUC payments while such FPUC benefits are in effect.

To be eligible for PEUC benefits, an individual must have exhausted their applicable unemployment benefits under state or federal law, not be receiving unemployment compensation under Canadian law, and be able and available to work and be actively seeking work. However, states must allow flexibility around the "actively seeking work" requirement where individuals are unable to search for work for reasons relating to COVID-19.

In Minnesota, unemployment benefits are typically available for up to 26 weeks, but as a result of the PEUC program under the CARES Act, an individual in Minnesota may receive unemployment benefits for up to 39 weeks, through the end of December 2020. (But remember that the $600 FPUC payments end on July 31, 2020.)

PANDEMIC UNEMPLOYMENT ASSISTANCE

The CARES Act also establishes the Pandemic Unemployment Assistance ("PUA") program which provides up to 39 weeks of unemployment benefits (including the $600 FPUC payments, until they expire), to those individuals who have exhausted their regular unemployment benefits or who are not typically eligible for regular unemployment benefits, including individuals who are:

• independent contractors,
• self-employed,
• seeking part-time employment, or
• lacking sufficient work history.

The PUA program is not available to individuals who have the ability to work remotely or telework or who are receiving paid leave benefits; however, if such telework hours with pay or paid leave benefits are for less than the individual's customary work week, they may be eligible for a reduced benefit.

An individual who qualifies for and is covered by the PUA benefits must self-certify to the applicable state that they are able and available to work except that they are unemployed, partially unemployed, or are unable to work as a result of one of the COVID-19 related reasons set forth in the CARES Act and listed below:

1. The individual has been diagnosed with COVID-19 or is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
2. A member of the individual's household has been diagnosed with COVID-19;
3. The individual is providing care for a family member or a member of the individual's household who has been diagnosed with COVID-19;
4. A child or other person in the household for which the individual has primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the COVID-19 public health emergency and such school or facility care is required for the individual to work;
5. The individual is unable to reach the place of employment because of a quarantine imposed as a direct result of the COVID-19 public health emergency;
6. The individual is unable to reach the place of employment because the individual has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
7. The individual was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of the COVID-19 public health emergency;
8. The individual has become the breadwinner or major support for a household because the head of the household has died as a direct result of COVID-19;
9. The individual has to quit his or her job as a direct result of COVID-19;
10. The individual's place of employment is closed as a direct result of the COVID-19 public health emergency; or
11. The individual meets any additional criteria established by the U.S. Secretary of Labor for unemployment assistance.

On April 5, 2020, the DOL issued guidance [Unemployment Insurance Program] with a list of examples and explanations for each of the foregoing COVID-19 circumstances that may allow an individual to qualify for PUA benefits and further instructs that while such list is non-exhaustive, any other qualifying circumstances must be applied by the states in a manner consistent with the examples provided in the guidance. The PUA benefits are available through the end of December 2020.

We Can Help

Please contact Maslon's Labor & Employment Group and Corporate & Securities Group if you have questions related to the unemployment benefits changes or programs under the CARES Act.

President Trump signed into law an updated version of the CARES Act (the "Act") on March 27, 2020. The Act provides an estimated two trillion dollars' worth of relief for individuals and businesses in an effort to mitigate the effects of the ongoing COVID-19 pandemic. The Act makes available emergency funds in the form of loans, credits, and grants to businesses of all sizes.

Given the emergent situation, the Act was drafted and passed expeditiously, which resulted in certain provisions (and programs) lacking detail or otherwise requiring further rulemaking. The summary below provides our current understanding of the Act, but as more details are made available (i.e., rules are promulgated by the applicable government bodies and/or insight is gained from our experience with the Act), Maslon will provide updates. 

Update: The summary below has been updated to include information on the Main Street Lending Program announced on April 9, 2020, and to reflect clarifications found within the Interim Final Rule for the Paycheck Protection Program released on April 2, 2020 (the "Interim Final Rule"). The full Interim Final Rule is available at sba.gov.

Scroll down to view the full information on key resources available to businesses, including provision eligibility and processes, or use the below links to go directly to the section which interests you most:

• Business Loans
  • Paycheck Protection Loans for Small Businesses
  • Expansion of SBA Disaster Loans
  • Direct Loans for Eligible Businesses
  • Mid-Size Direct Lending Program (Pending)
  • Main Street Lending Program
• Tax Credits
  • Employee Retention Tax Credits
  • Delay of Payment of Employer Payroll Taxes
  • Net Operating Losses
• Additional Provisions

Business Loans

Paycheck Protection Loans for Small Businesses

The most significant financial resource available for small businesses under the Act is the "Paycheck Protection Program" (the "Program"). Employers with 500 or fewer employees can obtain loans under this Program through the Small Business Administration ("SBA") Section 7(a) loan program to pay for payroll costs and other expenses (e.g., interest on mortgage loans and other secured debt, rent and utility costs) from February 15, 2020, through June 30, 2020. Payroll costs include employee salary (up to $100,000/year for an individual employee), wages, commissions, payment for vacation, parental, family, medical, or sick leave, health and retirement benefits payments, and other costs.

The SBA clarified in the Interim Final Rule that payments made to independent contractors do not constitute payroll costs. The SBA clarified in the Interim Final Rule – Additional Eligibility Criteria and Requirements for Certain Pledges of Loans that payroll costs also include partnership draws. Partnerships and limited liability companies filing taxes as a partnership may report the self-employment income of general active partners as payroll costs (up to $100,000 annualized) on a PPP loan application filed by or on behalf of the partnership. A partner cannot submit a separate loan application as a self-employed individual. The Interim Rule is inconsistent on whether the payroll cost calculation is based upon the trailing twelve months prior to submitting a loan application or the prior calendar year. Maslon will provide additional updates as more guidance becomes available.

Loan Eligibility

Loans under the Program are available to the following businesses as long as the business was operational as of February 15, 2020, had employees, and paid wages and payroll taxes:

• Businesses with up to 500 employees, including part time employees.
• "Small business concerns" are generally eligible for SBA loans, which are independently owned and operated for-profit companies with a place of business in the U.S. (and that operate primarily within the U.S. or make significant contributions to the U.S. economy through the payment of taxes or use of American products, materials, or labor). This would generally exclude nationally-recognized companies. Whether a business is an eligible small business concern is determined by established SBA regulations, based upon limits on either revenue or employee count. Such limits vary by industry. Refer to the SBA's Table of Small Business Size Standards Matched to NAICS Codes, available at sba.gov.
• Businesses in the Accommodation and Food Service Industries (e.g., full-service restaurants, hotels) are eligible provided that if the business has more than one physical location, it does not employ more than 500 employees at each location.
• SBA "affiliation rules"—meaning that the SBA generally counts the employees or annual receipts of a business's affiliates when determining eligibility—are also waived for: (1) businesses in the Accommodation and Food Service Industries that employ not more than 500 employees; (2) franchises; or (3) businesses that receive financial assistance from a small venture investment company licensed under the SBA. For example, if a restaurant owner owns 51% of another restaurant business, the general SBA rule that the employees or receipts of the second restaurant is/are counted in determining the business's eligibility is waived.

Loan Details

• Non-seasonal businesses (in existence between February 15, 2020, through June 30, 2020) may obtain loans for up to $10 million. However, the amount of the loan a non-seasonable business is eligible for would be the lesser of: (1) The average monthly payroll costs (as described above) during the year prior to making the loan x 2.5; or (2) $10 million. Note, however, that the outstanding amount of any loan made under the SBA's Disaster Loan Program between January 31, 2020, and the date upon which such loan may be refinanced as part of the Program will be added to the preceding sub-section (1), which could further increase the loan money available to a business.
• Standard fees for SBA Section 7(a) loans are waived for loans made under the Program. The SBA's "credit elsewhere" test (i.e., the requirement that a small business is unable to obtain credit elsewhere) is also waived for these loans.
• Loans are required to be without recourse, must be unsecured, and cannot require a personal guarantee. 
• No yearly or guarantee fees for the loan, and all prepayment penalties are waived.
• The SBA clarified in the Interim Final Rule that the interest rate for a loan is 1%.
• The SBA clarified in the Interim Final Rule that loan payments are deferred for six months. Interest will continue to accrue during the deferment period.
• The SBA clarified in the Interim Final Rule that least 75% of the loan amounts must be used for payroll costs.
• The SBA clarified in the Interim Final Rule that loan maturity is 2 years.
• Because payroll costs only include employee cash compensation and partnership draws up to $100,000/year, businesses should take care not to use loan proceeds to pay any portion of these items in excess of $100,000. For example, if an employee earns $120,000/year, the employer may use loan proceeds to pay $100,000 on a pro rata basis of the employee’s salary, but must pay the remaining $20,000 on a pro rata basis using other funds. For purposes of loan forgiveness, this means a maximum of $15,385 per individual of loan proceeds may be used during the eight-week covered period.
• Please note that if PPP funds are used for unauthorized purposes, the SBA will direct businesses to repay those amounts. Knowingly misusing these funds may subject the business, shareholders, partners, and/or members to additional liability, such as fraud charges.

Loan Forgiveness

• Loans used for eligible expenses incurred during the 8-week period following the date of origination may be forgiven. In addition to payroll costs, eligible expenses include mortgage and other secured-debt interest payments, rent, and utilities, so long as those expenses existed as of February 15, 2020. For non-seasonal employers, the amount eligible for forgiveness is reduced by the following formulas:
  1. For reductions in employees, the maximum amount eligible for forgiveness, multiplied by:
     1. The average number of full-time equivalent employees ("FTEs") per month, calculated by the average number of FTEs for each pay period within a month, for the period between February 15, 2020, through June 30, 2020, divided by either, at the election of the employer:
        • The average number of FTEs per month employed from February 15, 2019, to June 30, 2019; or
        • The average number of FTEs per month employed from January 1, 2020, to February 29, 2020.
  2. For reductions in wages, the amount of any reduction in total salary or wages of any employee for the period between February 15, 2020, through June 30, 2020, that exceeds 25% of the employee's salary or wages during the employee's most recent full quarter of employment before the period before February 15, 2020.
• Employers who have terminated employees or reduced employee wages may be relieved from these forgiveness reduction penalties if they rehire employees or make up for wage reductions by June 30, 2020. Specifically, the above calculations to reduce amounts eligible for forgiveness will not apply if an employer either:
  1. Reduces its number of employees between February 15, 2020, and April 26, 2020, but subsequently "eliminated the reduction in the number of full-time equivalent employees"; or
  2. Conducts a salary reduction between February 15, 2020, and April 26, 2020, but subsequently raises salaries to pre-February 15, 2020, levels by June 30, 2020.
• Loan funds used to pay additional wages to tipped employees are also eligible for forgiveness. The Act is unclear if this includes tips and base wages or just base wages.
• Any forgiven amounts will not be considered taxable gross income.
• The SBA is required to issue regulations on the specifics of loan forgiveness (and deferment) under the Program within 30 days of the Act's enactment (i.e., by April 26, 2020).
• The SBA clarified in the Interim Final Rule that forgiveness for non-payroll costs (e.g. mortgage interest, utilities) is limited to 25% of the total amount forgivable.

Loan Process

• To obtain a loan under the Program, eligible businesses should apply through participating lenders offering SBA loans. In applying, the business must make good faith certifications that:
  1. The uncertainty of current economic conditions makes the loan necessary;
  2. Acknowledge the funds will be used for the allowable expenses (i.e., applicable payroll costs, mortgage, and other secured loan interest, rent, and utilities);
  3. The eligible business does not have a duplicate SBA loan application pending; and
  4. The eligible business has not received any duplicative loan amounts under the Program at any time after February 15, 2020, through the date on which the business obtains a loan through the Program.
• A business may not obtain multiple loans through the Program for the same purpose (i.e., loans that are duplicative of other loans received under the Program).
• Self-employed individuals, sole proprietors, and independent contractors applying for loans under the Program are required to provide certain documentation to prove eligibility, such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship. Beyond the additional documentation requirements, the application process for these individuals is the same as for other businesses.

Expansion of SBA Disaster Loans

The Act also expands business access to economic injury disaster loans ("EIDL") through the SBA Economic Injury Disaster Loan Program. This expansion will be in effect between January 31, 2020, through December 31, 2020. These types of loans were previously available only for small business concerns, as defined by SBA, but are now temporarily available to business concerns with up to 500 employees.

Loan Eligibility

• Small business concerns, defined above; or
• Businesses with up to 500 employees.

Loan Details

• Unlike the Paycheck Protection Program, the Act does not provide for forgiveness of EIDLs.
• The amount available under an EIDL is based upon cash flow projections and demonstrated need, with a cap at $2,000,000.
• Loans may be used to pay expenses incurred in the ordinary course of business. Ordinary expenses include, but are not limited, to:
  1. Providing sick leave to employees unable to work because of the ongoing pandemic;
  2. Maintaining payroll;
  3. Meeting increased supply chain costs;
  4. Rent and mortgage payments; and
  5. Repaying debts that cannot be paid due to lost revenue.
• In general, existing rules applicable to the terms of EIDLs apply. However, two existing requirements are revised for EIDLs obtained through December 31, 2020. Specifically, for loans made during this period:
  1. Personal guarantees are not required for loans up to $200,000; and
  2. The SBA will not require that the business is unable to obtain credit elsewhere.
• Interest rates are subject to change, but currently set at 3.75%.
• Term lengths of EIDLs are either 15 or 30 years.

Loan Advance

• A business applying for an EIDL in response to COVID-19 may request an emergency advance from the SBA for up to $10,000. The advance must be paid by the SBA to the business within three days after receipt of the application.
• An advance received does not have to be repaid by the business, even if the SBA ultimately denies the business's application for an EIDL.

Direct Loans for Eligible Businesses

The Act also provides $500 billion for loans, loan guarantees, and investments in the Federal Reserve's lending facilities to support "eligible businesses" particularly distressed by the ongoing pandemic, which include air carriers and U.S. businesses that have not received "adequate economic relief" in the form of other loans or loan guarantees under the Act. Note that loans under this program are not generally available to businesses that may have been adversely affected by COVID-19. Rather, particular industries that are most affected (e.g., airlines) would be eligible. The $500 billion is allocated as follows: $25 billion in loans and loan guarantees for air carriers; $4 billion in loans and loan guarantees for cargo air carriers; $17 billion in loans and loan guarantees for businesses critical to maintaining national security; and $454 billion for loans, loan guarantees, and investments in support of facilities established by the Federal Reserve.

Loan Eligibility

The business must:

• Be created or organized in the U.S.; and
• Have significant operations in and a majority of its employees based in the U.S.

Loan Details

• The loan must be entered into directly by the eligible business as the borrower and cannot be forgiven.
• The interest rate of the loan must be based on the risk and the current average yield on outstanding marketable obligations of the United States of comparable maturity.
• Any business receiving a direct loan is prohibited for 12 months after the term of the loan, from:
  1. For any officer or employee whose total compensation exceeded $425,000 in calendar year 2019, providing:
     1. Compensation to such individual over such amount over any consecutive 12 months during the covered period; or
     2. Severance benefits exceeding more than two times such 2019 compensation amount.
  2. For any officer or employee whose total compensation exceeded $3,000,000 in calendar year 2019, providing compensation that exceeds the sum of:
     1. $3,000,000, plus
     2. 50% of the amount in excess over $3,000,000 that the officer or employee received in calendar year 2019.
• Air Carriers and related contractors (e.g., persons that perform catering functions or other functions at an airport directly related to the air transportation of persons, property, or mail) are subject to the same executive compensation limits outlined above, except that the limits apply to the two-year period ending on March 24, 2022, rather than the 12 months following the term of the loan.
• Businesses that receive a loan may not conduct a stock buyback beyond the term of the loan, and must maintain at least 90% of its employment levels as of March 24, 2020, until September 30, 2020.

Mid-Size Direct Lending Program (Pending)

The Act also directs the Treasury Secretary to create a program to provide financing to banks and other lenders who make direct loans to mid-size businesses. Additional guidance on this program will be issued by the Treasury Secretary, including guidance that may permit receiving warrants, stock options, common or preferred stock or other equity under the program without triggering an ownership change under Section 382 of the Internal Revenue Code of 1986 (i.e., allowing more favorable treatment and flexibility regarding net operating loss carryforwards).

Loan Eligibility

The business:

• Have between 500 to 10,000 employees;
• Be created or organized in the U.S.; and
• Have significant operations in and a majority of its employees based in the U.S.

Loan Details

• Loans made under the to-be created program are capped at a 2% (annualized) interest rate. During the first 6 months after a direct loan is made, or for such period set by the Treasury Secretary, no principal or interest will be due and payable.
• Loans may be used for employee retention purposes, and funds must be used to retain at least 90 percent of the business's workforce, at full compensation and benefits, until September 30, 2020.

Loan Process

• To apply for a loan under this program, an eligible business must make a good faith certification that:
  1. The uncertainty of economic conditions makes the loan necessary to support the ongoing operations;
  2. The funds received will be used to retain at least 90 percent of the business's workforce, at full compensation and benefits, until September 30, 2020;
  3. The business intends to restore not less than 90 percent of the workforce of the business that existed as of February 1, 2020, and to restore all compensation and benefits to the workers of the business no later than 4 months after the termination of the public health emergency declared on January 31, 2020;
  4. The business is domiciled in the United States with significant operations and employees located in the United States;
  5. The business is not a debtor in a bankruptcy proceeding;
  6. The business is created or organized in the United States or under the laws of the United States;
  7. The business will not pay dividends with respect to the common stock of the eligible business, or repurchase an equity security that is listed on a national securities exchange of the business while the direct loan is outstanding, except to the extent required under a contractual obligation that is in effect as of the date of the Act's enaction;
  8. The business will not outsource or offshore jobs for the term of the loan and 2 years after completing repayment of the loan;
  9. The business will not do away with existing collective bargaining agreements for the term of the loan and 2 years after completing repayment of the loan; and
  10. The business will remain neutral in any union organizing effort for the term of the loan.

Main Street Lending Program

On April 9, 2020, the Federal Reserve announced preliminary details of the Main Street Lending Program, a lending program established pursuant to Section 4003(C)(3)(d)(ii) of the CARES Act, which permits the Federal Reserve to make programs aimed at providing financing to small and mid-sized businesses affected by the COVID-19 pandemic. This program offers potential relief for businesses too large to take advantage of the Paycheck Protection Program ("PPP") (which is an SBA-based lending program for small companies). More details about this program can be found at: CARES Act: The Main Street Lending Program Offers Relief for Small and Mid-Sized Businesses.

Tax Credits

Employee Retention Tax Credits

The Act creates a tax credit each quarter to offset 50% of each employee's qualifying wages, including qualifying health care plan costs, on up to $10,000 of wages paid per employee (i.e., up to $5,000 in actual credit per employee). This employee retention tax credit is available for wages incurred from March 12, 2020 – December 31, 2020, but is unavailable for paid sick leave or expanded FMLA wages paid under the Families First Coronavirus Response Act (FFCRA). Notably, this credit is in addition to the payroll tax created under the FFCRA.

Employer Eligibility

• The credit is available to employers, who do not receive a loan under the Paycheck Protection Program discussed above, whose (1) operations were shut-down or partially suspended due to a COVID-19 related shut down order, or (2) gross receipts fell more than 50% when compared to the same quarter in the previous year.
• For employers eligible for the credit due to a decline in gross receipts, eligibility ends with the calendar quarter in which the gross receipts exceed 80 percent of the calendar quarter in the previous year.
• Private employers of all sizes may apply for the credit; however, employers with more than 100 full-time employees, may only receive the tax credit for employee wages where the employee was not providing services due to one of the reasons listed above. Employers with 100 or fewer employees qualify for the credit, regardless of whether the business is shut down pursuant to a shut-down order.

Claiming Credit

• The tax credit only offsets employment taxes owed by an employer. To the extent 50% of the qualifying wages exceed the employer's employment tax liability, the employer will be refunded the difference. The Treasury Secretary is expected to issue further guidance, forms, and regulations for these tax credits, including provisions allowing businesses to receive advance payment of the credit.
• The CARES Act also facilitates reimbursement for employee wages paid pursuant to the Families First Coronavirus Response Act ("FFCRA").
• Employers can claim the credit each quarter they are eligible through December 31, 2020.

Delay of Payment of Employer Payroll Taxes

To provide further assistance to employers, the CARES Act authorizes deferral of 2020 payroll taxes to 2021 and 2022. Half of the deferred 2020 employment taxes must be paid by December 31, 2021. Any remaining amount owed for 2020 employment taxes is due to the IRS by December 31, 2022. Like the employee retention tax credits, this deferral is unavailable to employers who receive a small business "paycheck protection" loan. Note, there is also no provision in the Act that the IRS "trust fund recovery penalty" (which is equal to 100% of unpaid employment taxes) is being altered in any way. This penalty may be assessed against any person (including officers, employees, members, and directors) who is responsible for managing and paying employment taxes on behalf of the employer and who willfully fails to collect or pay such taxes. Accordingly, if a business is unable to pay the deferred taxes after the deferral period (e.g., due to insolvency and bankruptcy), key officers and employees may remain liable for payroll taxes.

Net Operating Losses

The Act also suspends certain deduction limits previously imposed by the Tax Cuts and Jobs Act (TCJA), including:

• Allowing Net Operating Losses (NOLs)—which occur when a businesses's allowable deductions exceed its taxable income within a tax period—arising in 2018, 2019, and 2020 to be carried back for up to five years (under the TCJA, no carrybacks were permitted);
• Suspending the TCJA's 80 percent cap on NOL carryovers for three years (cap would not apply to taxable years beginning in 2018, 2019, and 2020); and
• Suspending certain rules relevant to farming losses for NOLs arising in taxable years beginning in 2018, 2019, and 2020.

Additional Provisions

The Act includes a number of additional provisions for the benefit of unemployed workers, financial institutions, community banks, the health care industry (including medical device companies), and borrowers of federally backed mortgage loans. For more information about these and other provisions, reach out to Maslon's Corporate & Securities Group.

We Can Help

Please contact Maslon's Corporate & Securities Group and Labor & Employment Group if you have questions or need assistance taking advantage of the relief provided under the CARES Act.

The lengthy regulations can be viewed in full at Paid Leave Under the Families First Coronavirus Response Act. For your convenience, a summary of key points including guidance for leave requests and IRS Documentation is provided below:

THE DOL AND IRS CLARIFY KEY DOCUMENTATION AND RECORDKEEPING REQUIREMENTS

Employees Must Make Requests for Leave in Writing. To make sure an employer has appropriate documentation to support its claim for tax credits, an employer should require an employee requesting Paid Sick Leave or expanded FMLA leave to submit a written request including the following information:

1. The employee's name.
2. The date(s) for which leave is requested.
3. A statement of the COVID-19 qualifying reason for leave.
4. A statement that the employee is unable to work or telework because of the COVID-19 qualifying reason. The DOL regulations provide that this statement may be oral. However, to support an employer's receipt of tax credits, the IRS requires this statement to be included in an employee's written request. To the extent possible, an employer should obtain this statement in writing, but this does not need to occur before the leave begins.     

In addition, employees must provide the following information depending upon the qualifying reason for leave in the employee's written request for leave:

1. If an employee takes leave due to an order to isolate or quarantine, the employee must include the name of the government entity that issued the order.  
    
2. If an employee takes leave due to advice by a health care provider to self-quarantine, the employee must include the name of the health care provider.
   • If the person subject to quarantine or self-quarantine is not the employee and the employee is seeking leave to care for that person, the employee must also include the person's name and the person’s relationship to the employee.
      
3. If an employee is seeking leave to care for a child whose school or childcare has been closed or is unavailable, the employee must provide: (a) the name and age of the child; (b) the name of the school, place of care, or child care provider that closed or became unavailable; and (c) a statement representing that no other suitable person is available to care for the child during the period of the requested leave.  
   • If an employee is unable to work or telework during daylight hours due to a need to provide care for a child older than fourteen years old, the employee must also provide a statement that special circumstances exist requiring the employee to provide the care. 

Employer Recordkeeping of Employee Leave Requests. Employers are required to retain all documentation provided by employees in support of their leave requests for four years, regardless of whether the leave was granted or denied. If an employee provided oral statements to support a request for leave, the employer needs to document and maintain that information in its records as well for four years.

IRS Documentation. The IRS issued guidance that details the information and documentation that an employer needs to claim its tax credits: IRS COVID-19 Related Tax Credits: Q&A. The IRS has issued a new Form 7200 for employers to use when seeking an advance payment of the tax credits.

Recordkeeping to Support IRS Tax Credits. In addition to the relevant tax forms (Form 7200 and Form 941), Employers should keep, for four years, documentation to show how the employer:

• Determined the amount of leave paid to each eligible employee; and
• Calculated the amount of qualified health plan expenses allocated to wages.

NEW REGULATIONS FURTHER CLARIFY LEAVE REQUIREMENTS

The new DOL regulations provide additional information about other aspects of the new leave requirements, and the DOL has supplemented their guidance on the FFCRA, available at U.S. DOL FFCRA: Q&A. Key areas that the DOL has clarified in its new regulations and guidance are summarized below:

• Furloughed and Laid Off Employees Do Not Count. For purposes of determining whether an employer has 500 or fewer employees, employers do not count employees who have been furloughed or laid off.
   
• Eligibility for Leave Depends Upon Being Unable to Work. An employee is only eligible for Paid Sick Leave or expanded FMLA leave if the employee is unable to work or telework. In other words, but for the COVID-19 qualifying event, the employee could perform work or telework that the employer has available.
   
• Subject to a Quarantine or Isolation Order Related to COVID-19.  The DOL regulations interpret Federal, State, and local quarantine or isolation orders broadly. However, to be entitled to Paid Sick Leave, the government order must be the reason the employee is unable to work or telework even though the employer has work that the employee could do. An employee is not eligible for Paid Sick Leave if the employer temporarily closes down and does not have work for the employee, even if the closure was due to the government order.
   
• Paid Sick Leave While Seeking Medical Diagnosis is Limited. If an employee requests Paid Sick Leave on the grounds the employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis, leave is limited to the time the employee is unable to work because the employee is taking affirmative steps to obtain a medical diagnosis, such as making, waiting for, or attending an appointment for a test for COVID-19.
   
• Self-Diagnosis is Not Sufficient. An employee who decides to self-quarantine without seeking a medical diagnosis is not eligible for Paid Sick Leave.
   
• Accrued PTO May Supplement Pay for Expanded FMLA Leave. An employee and employer may agree to use accrued PTO to supplement paid expanded FMLA leave so the employee receives 100% of the employee's regular pay, instead of the 2/3 amount provided under the FFCRA. 
   
• Self-Determination of Limited Small Business Exemption. The DOL regulations make clear that an employer need not apply for the small business exemption but can make a determination on its own that it satisfies the regulatory criteria for this exemption. Businesses must document each denial of leave and maintain the required documentation for a period of four years.

We Can Help

Contact Maslon's Labor and Employment Group with further questions or for assistance with the FFCRA. 

Frequently Asked Questions and Answers:

1.  What key resources have been provided by governmental agencies and Congress for further guidance to understand requirements of the Act?

• The Department of Labor supplemented their original guidance on the FFCRA this week, available at U.S. DOL FFCRA: Q&A.
• The Treasury Department and IRS also weighed in regarding the tax credit reimbursements under the Act (forms and additional guidance are expected soon).
• Congress included provisions in the newly enacted CARES Act which clarify eligibility of rehired employees and facilitates reimbursement for leave paid under the FFCRA.

2.  What is the interplay between the two types of leave under the FFCRA?

Under the FFCRA, employees are eligible for:

• up to 80 hours of Paid Sick Leave, and
• up to 12 weeks of job-protected expanded FMLA leave – up to 10 weeks of which is paid.

The first 10 days of leave under the Emergency Family and Medical Leave Expansion Act are unpaid, but employees may use their Paid Sick Leave or any accrued vacation or paid time off (PTO) under their employer's policy. One additional difference between the two types of leaves relates to length of employment: employees are eligible for Paid Sick Leave on day one, while employees must be employed for at least 30 days to qualify for expanded FMLA leave.

If an employee does not use their Paid Sick Leave for the first ten days of expanded FMLA leave, the employee may use the Paid Sick Leave at any time prior to December 31, 2020.

3.  If an employee has already exhausted leave under the FMLA, are they eligible for twelve additional weeks of expanded FMLA leave?

No. An employee may only take a total of 12 weeks of leave during a 12-month period under the FMLA, including the Emergency Family and Medical Leave Expansion Act. If an employee has already used some or all of their 12 weeks of FMLA leave entitlement during the preceding 12-month period, their eligibility for additional expanded FMLA will be reduced by the amount of leave they have already used.

Similarly, any leave taken as expanded FMLA leave counts against the employee's entitlement to 12 weeks of preexisting FMLA leave in a 12-month period. For instance, if an employee takes 2 weeks of expanded FMLA leave because they are unable to work and need to care for a child whose school is closed due to COVID-19 and then later becomes eligible for traditional FMLA leave, the employee is only entitled to take the latter FMLA leave for 10 weeks. Note that if an employee is not eligible for traditional FMLA because the employer is not subject to regular FMLA leave or because the employee has not been with the employer for 12 months, this analysis does not apply–the FFCRA does not expand eligibility for traditional FMLA.

An employee is entitled to Paid Sick Leave regardless of the amount of leave previously taken under the FMLA. The Department of Labor guidance makes clear that Paid Sick Leave is not a form of FMLA leave. If an employee elects to use Paid Sick Leave for the first two weeks of expanded FMLA leave, which would otherwise be unpaid (see Question 1), then the first two weeks would count against the employee's entitlement to 12 weeks of expanded FMLA and FMLA leave in a 12-month period.

4.  Can an employee take Paid Sick Leave or expanded FMLA leave intermittently?

Employees may use Paid Sick Leave or expanded FMLA leave intermittently in some circumstances–the key factors are whether the employer agrees to the use of intermittent leave and whether permitting intermittent leave would increase COVID-19 exposure risk. The Department of Labor encourages employers and employees to be flexible and work together to establish a voluntary arrangement that may incorporate use of leave intermittently.

Employees not working from home: An employer may permit an employee who is working at their usual worksite to take their leave intermittently ONLY if the qualifying reason for their leave is to take care of a child whose school or place of care is closed due to COVID-19. This is likely to come up in situations where the employee shares child care duties with another adult, and the employee needs to miss some but not all work as a result of the school or daycare closure. An employee working at their usual worksite cannot take intermittent leave for reasons related to illness or exposure to COVID-19. Allowing intermittent leave in those circumstances would defeat the purpose of providing the leave as it would increase exposure risks for other employees.

Employees working from home: An employer may permit an employee who is working from home to take their leave on an intermittent basis for any qualifying reason. For example, an employee who has COVID-19, with only minor symptoms, may be able to telework for partial days but may need to work fewer hours due to the symptoms. Expanded FMLA leave may also be offered intermittently for employees to the extent the employee is unable to work their normal schedule of hours because they are caring for a child whose school is closed or for whom care is unavailable due to COVID-19.

An employer can determine the increment (e.g., no less than half-day increments) for intermittent leave. However, the Department of Labor encourages employers to be flexible when setting increments and setting intermittent leave schedules of employees. For instance, employers that have the flexibility could create solutions for parents who are able to telework but not full-time due to taking care of children. It may be feasible for parents to each take leave intermittently from their employers, allowing them to split childcare duties throughout the week.

5.  What costs are covered by the tax credits under the FFCRA?

Covered employers are eligible for dollar-for-dollar tax-credit reimbursement for all wages paid to an employee who takes leave under the FFCRA for a qualifying reason on or after April 1, 2020, subject to the per-day and aggregate caps. For a comprehensive breakdown of the qualifying reasons for Paid Sick Leave and expanded FMLA leave and their respective caps, view Maslon's March 19, 2020, Legal Alert. In addition, pursuant to guidance from the Treasury Department and IRS, additional tax credits will be available to cover costs paid or incurred by employers to maintain health insurance coverage for the eligible employee during the leave period.

6.  How do employers obtain the tax credit reimbursement?

The IRS will provide applicable forms, instructions and information for the procedures that should be followed to be reimbursed.

Under the newly-enacted CARES Act, employers seeking tax credits for paid leave provided under the FFCRA can retain amounts equal to qualifying sick and child care leave otherwise owed to the IRS in payroll taxes (withheld federal income taxes, Social Security, and Medicare taxes) each calendar quarter, without penalty. This means that instead of paying payroll taxes to the government and waiting for a reimbursement, employers can immediately offset their taxes that would otherwise be due.

To the extent payroll taxes are insufficient to cover the cost of qualifying leave under the FFCRA, employers can request an accelerated refund payment from the IRS. The IRS will provide application forms for accelerated payments, which the IRS hopes to refund within 2 weeks.

7.  Can employers be refunded for leaves beginning before April 1, 2020?

No. Any paid leave provided prior to the FFCRA's effective date of April 1, 2020, does not qualify for tax credit reimbursement. Along those lines, an employee may not request paid leave under the FFCRA for any unpaid leave taken prior to the FFCRA's effective date.

8.  What documentation can employers require for employees requesting Paid Sick Leave and expanded FMLA leave?

According to Department of Labor guidance, employers seeking tax credit reimbursement for leave under the FFCRA should maintain records documenting employee eligibility for leave. Employers should consult the applicable IRS forms and require employees to submit information the employer will need to claim its tax credit.

The employer should also collect supporting documentation for either type of paid leave. For Paid Sick Leave, this could be a copy of a governmental isolation order or a qualified health care provider's advice to self-quarantine. Health care providers, whose advice may be relied upon as a qualifying reason for Paid Sick Leave, include: licensed doctor of medicine, nurse practitioner, or other health care provider permitted to issue a certification for purposes of the FMLA. Note, however, that the CDC has advised that health care providers have limited capacity to provide standard medical documentation for absences. Employers may want to consider alternatives to this type of standard documentation.

Where leave is qualified due to school closure or lack of child care due to COVID-19, an employee should also provide a copy of the closure notice that was posted by the government, school, or daycare online or published in a newspaper. Employees could also provide an email announcing the closure from an employee of the school, childcare provider, or other place of care.

To the extent an employee fails to make a request with sufficient information, an employer is not required to provide leave. However, there are no "magic words" required to request the leave.

Employers should take a flexible approach regarding documentation, including accepting documentation by email and giving employees sufficient time to gather and provide all pertinent information. Consider advising employees that the company "reserves the right" to request documentation at a later date, especially in the case of documentation from health care providers.

9.  Is an employer responsible for continuing an employee's health insurance coverage while on leave?

Yes. An employee taking expanded FMLA leave is entitled to continuation of their elected group health coverage on the same terms as if they continued to work. This includes coverage for enrolled family members. However, an employee must generally continue to make normal contributions to the cost of their health coverage, unless the employer has offered alternative arrangements.

Employees receiving Paid Sick Leave are also entitled to continued health coverage. Also, Paid Sick Leave days taken by employees currently completing a waiting period for health plan eligibility count towards their waiting period.

10.  Are employees who are rehired following a layoff eligible for Paid Sick Leave or expanded FMLA leave?

Because all employees are eligible for Paid Sick Leave, regardless of how long they have been employed, employees are automatically eligible for Paid Sick Leave upon rehire.

Conversely, to be eligible for expanded FMLA leave, employees must have been on the employer's payroll for at least 30 calendar days prior to requesting the leave. Under the CARES Act provisions, an employee who is rehired after being laid off on or after March 1, 2020, can satisfy the requirement that they be "employed for at least 30 calendar days" if they were on the employer's payroll for at least 30 of the last 60 days before their layoff.

11.  Can employees who are on furlough qualify for this leave?

No. If an employer furloughs an employee because it does not have enough work or business for the employee, the employee is not entitled to then take Paid Sick Leave or expanded FMLA leave. This is true for employees furloughed before or after the effective date of the statute, April 1, 2020.

12.  Can I furlough or layoff an employee while they are on Paid Sick Leave or Expanded FMLA leave?

Employees may be selected for furlough or layoff while they are using Paid Sick Leave or expanded FMLA leave so long as their use of either leave is not a reason they were selected. The employee is entitled to Paid Sick Leave or expanded FMLA used prior to the furlough. After the furlough, the employee is no longer entitled to Paid Sick Leave or expanded FMLA leave.

13.  Which employees fall within the "health care provider" exemption, meaning an employer is not required to provide them Paid Sick Leave and/or expanded FMLA leave?

A "health care provider" is anyone employed at any doctor's office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, employer, or entity. This definition encompasses these types of employees at any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions.

Additionally, a "health care provider" includes any individual employed by a business that contracts with any institutions, employers, or entities to provide services or to maintain the operation of the facility. This definition also includes anyone employed by any entity that provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, or treatments.

Further, the highest official of a state or territory, including Washington D.C., may include any individual in this definition that it determines is necessary for that jurisdiction's response to COVID-19.

14.  When is an employer eligible for a small business exemption?

A small business is exempt from providing Paid Sick Leave and expanded FMLA if (1) the business employs fewer than 50 employees; (2) the qualifying reason for leave is care of a child whose place of care or school is closed due to COVID-19; and (3) providing Paid Sick Leave or expanded FMLA leave would jeopardize the viability of the business as an ongoing concern, based upon the determination by an authorized business official that:

The provision of Paid Sick Leave or expanded FMLA leave would result in the small business's expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;

The absence of the employee or employees requesting Paid Sick Leave or expanded FMLA leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or

There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting Paid Sick Leave or expanded FMLA leave, and such labor or services are needed for the small business to operate at a minimal capacity.

We Can Help

Contact Maslon's Labor and Employment Group with further questions or for assistance drafting FFCRA leave policies and leave request forms.

• Healthcare and public health, including workers supporting manufacturers and technicians, logistics, and warehouse operators.
• Food and agricultural, such as grocery workers, restaurant carry-out and delivery employees, and farm workers.
• Transportation and logistics, including truck drivers, dispatchers, warehouse workers, and roadway construction, maintenance, and utility project workers.
• Critical manufacturing, meaning workers manufacturing materials and products for medical supply chains and supply chains associated with transportation, energy, communications, food, and agriculture.
• Construction and critical trade, including skilled trade workers (i.e. electricians, plumbers, HVAC, and elevator technicians).

Verify Business Eligibility

Businesses can also determine eligibility by reviewing the MN Critical Businesses List. If an industry description is marked as YES in the "Critical Industry" column, then a worker in that industry is essential and is exempt from the Order to the extent the worker is going into the business's physical location for job functions that cannot be done from home.

Employee Verification Letters

Although not required under the Order, it is best practice for employers to provide a letter to their employees to keep on hand that verifies that the employee works for the employer, and the employee's work for the employer is in furtherance of the employer's business operations that fall within one of the Order's identified sectors. This is a particularly good idea as the Order provides criminal penalties for willful violators. Providing employees with an employee verification letter can help put the employee's mind at ease if they are stopped by law enforcement on the way to work.

We Can Help

Please contact attorneys in Maslon's Corporate & Securities and/or Labor & Employment Groups if you have questions or would like assistance drafting an employee verification letter.

• Effective Date. The DOL indicates that the effective date of FFRCA is April 1, 2020.
• Counting Employees. For the "500 or fewer employer" threshold, all full-time and part-time employees in the United States and its territories are counted, including employees on leave. The DOL also gives direction for counting temporary employees and day laborers.
• Part-Time Employee Hours. The DOL provides instructions for counting hours worked by part-time employees for purposes of paid sick leave or expanded FMLA leave.
• Calculating Wages for Paid Sick Leave and Expanded FMLA Leave. The regular rate of pay is determined by averaging pay over the six months preceding the leave, including overtime pay, commissions, and tips. The DOL gives two methods for calculating the regular rate of pay for employees who have been employed for less than six months.
• Prior Paid Sick Leave Does Not Count. The Emergency Paid Sick Leave Act imposes a new leave requirement on employers that is effective beginning on April 1, 2020.
• Grace Period. The DOL has also announced that there will be a 30-day non-enforcement period, giving employers, acting reasonably and in good faith, time to comply with the FFCRA.

The DOL Guidance can be found here: DOL FFCRA: Q&A.

The DOL has also released a workplace poster: DOL FFCRA: Employee Rights Workplace Poster. Directions for posting can be found here: Directions for Posting.

We expect additional guidance this week and will provide further updates as we learn more.

We Can Help

Please contact Maslon's Labor & Employment Group if you have questions or would like assistance reviewing your leave policies.

April 15th Income Tax Return Filing Deadline
Today, Treasury Secretary Steve Mnuchin stated the IRS will move the income tax filing deadline from April 15 to July 15. This will allow taxpayers additional time to file and make payments without the imposition of penalties or interest. Individual taxpayers and entities being taxed as S corporations, C Corporations, sole proprietorships, or single member limited liability companies, are subject to the April 15th deadline and will benefit from this extension.

Proposed Legislation: The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act")
On March 19, Senate Republicans unveiled proposed legislation seeking to provide individuals and businesses with a variety of benefits to combat the financial fall-out associated with the ongoing COVID-19 pandemic. Although the bill is likely to change as it moves through Congress, if passed into law in its current form, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") would potentially impact businesses. The Act is comprised of seven divisions, each divided into further titles and subdivisions. Those most applicable to business owners include:

Division A
Division A seeks to support small businesses by expanding the Small Business Administration ("SBA") Section 7(a) loan program through December 31, 2020. Under the expansion, certain businesses that employ less than 500 employees would be eligible to receive a loan, the proceeds of which could be used for payroll support (including paid sick, medical, or family leave), employee salaries, rent, utilities, or other debt obligations. Each loan would be capped at the price of covering the business's monthly operating costs (e.g. payroll, utilities, mortgage and other debt payments) for up to four (4) months—up to the maximum amount of $10,000,000. All loan amounts used for applicable payroll costs would be eligible for forgiveness.

Division B
Title II of Division B would provide several tax-related benefits to businesses to mitigate financial damage caused by the COVID-19 pandemic. Proposed benefits include:

• Delay of estimated tax payments for corporations. Allows corporations to postpone estimated tax payments due after the enactment of the bill until October 15, 2020.
• Delay of payment of employer payroll taxes. Allows deferring of payment of the business's share of the Social Security tax for which they are otherwise responsible, with deferred taxes being paid over the two years after enactment.
• Modifications for net operating losses. Relaxes limitations on the business's use of losses from prior years—particularly that a loss from 2018, 2019, or 2020 can be carried back five years—and temporarily removes the taxable income limitation to allow net operating losses to fully offset income.
• Modification of limitation on losses for taxpayers other than corporations. Modifies the loss limitation applicable to pass-through entities and sole proprietors so they can benefit from the net operating loss carryback rules described above.
• Modification of credit for prior year minimum tax liability of corporations. Accelerates a company's ability to recover Alternative Minimum Tax credits.
• Modifications of limitation on business interest. Temporarily increases the amount of interest expense businesses may deduct on their tax returns, by increasing the 30-percent limitation to 50 percent of the taxable income for 2019 and 2020.
• Technical amendment regarding qualified improvement property. Enables business—with particular attention to the hospitality industry—to immediately write off costs associated with improving facilities instead of having to depreciate those improvements over the 39-year life of the building.
• Installments not to prevent credit or refund of overpayments or increase estimated taxes. Corrects an error in the Tax Cuts and Jobs Act to allow businesses to recover any overpayment of taxes paid pursuant to the Section 965 one-time repatriation toll charge.
• Restoration of limitation on downward attribution of stock ownership in applying constructive ownership rules. Clarifies that certain foreign subsidiaries should not be subject to certain requirements of the Tax Cuts and Jobs Act, and will allow those companies to amend their 2018 tax return to reflect the clarification.

Division C
Division C, which is titled "Coronavirus Economic Stabilization Act of 2020," seeks to provide loans to eligible, severely distressed businesses impacted by COVID-19 (up to $208,000,000,000 in the aggregate). This includes up to $50,000,000,000 to passenger air carriers, $8,000,000,000 to cargo air carriers, and $150,000,000,000 to other eligible businesses. Executives at companies receiving money may not make more than $425,000 in total annual compensation for two years, or receive severance pay or other termination benefits which exceed twice the maximum total compensation the executive received in 2019.

Division D
Title III of Division D provides various provisions relating to paid leave. This includes providing guidance on the applicability of the Emergency Family Medical Leave Expansion Act ("EFMLEA") eligibility for rehired employees after a layoff. Currently, rehired employees would not be EFMLEA eligible until employed for at least 30 days. The bill would change that, providing that employees who were laid off after March 1, 2020, and were rehired would be immediately eligible for EFMLEA protections, provided the employee had worked for that employer for at least 30 of the last 60 calendar days prior to the layoff. Further, the bill provides that if an employer fails to make an employment tax deposit with the IRS due to the anticipation of EFMLEA payroll credits, any tax penalties will be waived.

Division E
Division E provides that Section 131 of the Emergency Economic Stabilization Act of 2008, which relates to certain restrictions on guaranteeing money market mutual funds, would not apply during the national emergency period for COVID-19.

We Can Help
Maslon is closely monitoring this bill as it moves through Congress and will continue to provide updates on policies that will affect your businesses. In the meantime, Maslon's Corporate & Securities and Labor & Employment attorneys are here to answer any questions you may have relating to new and proposed laws addressing the COVID-19 pandemic.

Emergency Paid Sick Leave Act

The new law provides two weeks of paid sick leave to all employees, regardless of how long they have been employed. Full-time employees are entitled to 80 hours of paid leave, and part-time employees are entitled to the average number of hours worked in a two-week period. The law also provides a method for calculating the amount of leave for employees with fluctuating work schedules.

Under the new law, sick leave must be paid at an employee's regular rate when the employee:

1. has been ordered to quarantine or isolate by the government;
2. has been advised by a health official to self-quarantine; or
3. the employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis.

The law caps sick leave paid at $511 per day—up to $5,110 total for each employee.

In addition to the permitted uses above, an employee may use paid sick leave, with payment at two-thirds of the employee's regular rate of pay, if the employee:

1. is caring for an individual under a quarantine or isolation order or to self-quarantine by a healthcare provider;
2. is caring for a child whose school or childcare has been closed or is unavailable; or
3. is experiencing any other substantially similar condition identified by the Secretary of Health and Human Services.

Under these circumstances, sick leave pay is capped at $200 per day—up to $2,000 total for each employee.

Employers cannot require employees to exhaust other forms of paid leave before using this COVID-19-related sick leave. The law also does not allow employers to require employees to use the COVID-19-related sick leave concurrently with any existing paid sick leave already offered by the employer.

The Secretary of Labor has been given the authority to (a) exempt employers with less than 50 employees if the required leave would jeopardize the viability of their business; and (b) exclude certain health care providers and emergency responders from the definition of employees entitled to take this paid sick leave.

Emergency Family and Medical Leave Expansion Act

In addition to providing paid sick leave, the new law extends FMLA protections and grants paid FMLA leave for the first time. If an employee is unable to work or telework because the employee needs to care for a child whose school or daycare has been closed, or whose childcare provider is unavailable due to COVID-19, the employer must provide:

• 10 days of unpaid leave to the employee; and
• up to 10 weeks of paid leave at two-thirds the employee's regular rate of pay.

However, the employer is not required to pay more than $200 a day—up to $10,000 total.

During the first ten days of unpaid FMLA leave an employee may elect to use accrued vacation, personal, or other sick leave (including paid time newly available under the Emergency Paid Sick Leave Act). However, the employer cannot require the employee to use any of their accrued paid time off prior to taking this leave.

To qualify for this FMLA paid leave, the employee must have been on the employer's payroll for 30 days (as opposed to the normal FMLA requirement of 12 months).

Again, the Secretary of Labor has been given the authority to exempt businesses with fewer than 50 employees from these requirements and to exclude certain health care providers and emergency responders from the definition of employees entitled to take this paid FMLA leave. Under certain circumstances, employers with fewer than 25 employees are not required to reinstate an employee who uses the Emergency FMLA leave.

Tax Credits for Emergency Paid Sick and Family and Medical Leave

Employers providing paid sick leave or paid family leave under the new law are eligible for tax credits against the employer portion of Social Security taxes. Employers are entitled to a refundable tax credit equal to 100% of the qualified paid sick leave wages paid by the employer each quarter. Likewise, employers are entitled to a refundable tax credit equal to 100% of the qualified FMLA wages paid by the employer each quarter.

We Can Help

This new law goes into effect on April 2, 2020. In the meantime, Congress has indicated that it will be working on another phase of emergency COVID-19 legislation. Mason's Labor & Employment group is here to answer any questions you may have relating to new laws passed to address the COVID-19 pandemic.

If passed as currently written, the bill has several requirements relating to paid leave for employees. Importantly, the leave provisions would only apply to employers with less than 500 employees. Here is a summary of the most pertinent provisions that would apply to these employers.

1. Emergency Family and Medical Leave Expansion Act

Under the House bill, employees will have the right to take up to 12 weeks of job-protected leave under the FMLA. The employee will need to be on the employer's payroll for 30 days to qualify (as opposed to 12 months, which the FMLA requires).

The first two weeks of leave may be unpaid, or an employee may choose to use accrued vacation, personal, or other sick leave. However, an employer may not require the employee to do so. After the two weeks of unpaid leave, an employer would pay the remaining FMLA leave (up to 10 weeks) at a rate of no less than two-thirds (2/3) of the employee's usual rate of pay.

The emergency FMLA leave may be used so an employee can:

• Adhere to a requirement or recommendation to quarantine due to exposure to or symptoms of COVID-19;
• Care for an at-risk family member who is adhering to a requirement or recommendation to quarantine due to exposure to or symptoms of COVID-19; or
• Care for a child, if the child's school or place of care has been closed, or the childcare provider is unavailable, due to COVID-19.

The law will go into effect 15 days after it is enacted, and expire on December 31, 2020.

2. Emergency Paid Sick Leave Act

Separate from the emergency FMLA, under the House bill, employers will be required to provide employees with two weeks of paid sick leave, at their regular rate of pay, if they need to be quarantined or seek a diagnosis or preventative care for COVID-19. This bill applies to all employees, regardless of how long they have worked for their employer. In addition to providing two weeks of paid leave to all employees, the bill would provide pay for the first two unpaid weeks of leave that eligible employees have under the Emergency FMLA Expansion Act (discussed above) before being entitled to pay.

Full-time employees are entitled to 80 hours of paid leave, while part-time employees are entitled to the average number of hours that they work in a typical two-week period.

Further, the bill provides that:

• This two weeks of paid leave may also be taken to care for (1) a family member who is quarantined or seeking a diagnosis or preventative care for COVID-19, or (2) to care for a child whose school has closed or if a childcare provider is unavailable, due to COVID-19, but in these instances, the required pay is two-thirds (2/3) of the employee's regular rate of pay, not full pay;
• Employers post a notice informing employees of their right to paid leave; and  
• Employers comply with existing state or local paid leave entitlements. (See discussion below regarding Minneapolis, St. Paul, and Duluth's Sick and Safe Time Leave Ordinances).

This paid sick leave will go into effect 15 days after enactment, and will expire on December 31, 2020.

3. Emergency Unemployment Insurance Stabilization and Access Act

Another provision of the House bill would provide $1 billion in 2020 for emergency grants to states for processing and paying unemployment benefits. States would have immediate access to $500 million for administrative costs if they meet certain requirements, including requiring employers to provide employees notification of the availability of unemployment compensation at the time of an employee's separation.

4. Tax Credits for Emergency Paid Sick Leave and Family and Medical Leave

Finally, the House bill provides refundable tax credits for employers who provide paid emergency sick leave or paid FMLA to employees:  

• A refundable tax credit equal to 100 percent of qualified paid sick leave under the Emergency Paid Sick Leave Act.
• A tax credit equal to 100% of qualified family leave paid under the Emergency FMLA Expansion Act. However, the amount of family leave paid per employee is capped at $200 per day and $10,000 in total.

MINNESOTA LAWS TO KEEP IN MIND IN THE MIDST OF THE COVID-19 PANDEMIC

1. Minneapolis, St. Paul, and Duluth Sick and Safe Leave

Employees covered by the Minneapolis, St. Paul, and Duluth Sick and Safe Time Ordinances will be able to use their sick time for certain COVID-19-related absences. These ordinances cover absences caused by emergency closure of schools or place of care, or the need to care for a family member whose school or place of care has been closed by order of a public official to limit exposure to a public health emergency. The official order issued by Governor Walz on March 15 to close the schools will likely be considered the type of emergency closure triggering the obligation to pay sick leave in these cities.

2. Minnesota Law on the Isolation and Quarantine of Persons

Minn. Stat. § 144.4196 provides protection to employees in the event they are required to be isolated or quarantined. Under this law, an employer may not discharge, discipline, threaten, or penalize a qualified employee, or otherwise discriminate against the employee, because the employee has been in isolation or quarantine. Employers are cautioned not to treat employees who have been quarantined differently than other employees.

On February 19, 2020, new legislation was introduced in the Minnesota House relating to employees who are isolated or quarantined. The new legislation, if passed, would apply when a quarantine has been ordered by the commissioner of health, state, or federal government. If a quarantine is issued, an employee would need to be allowed to work from home, following an interactive process with the employer and if the arrangements are reasonable. This bill is not final, and has not moved forward since its introduction in February.

We Can Help

Please contact Maslon's Labor & Employment Group if you have questions or would like assistance reviewing your leave policies.

To receive future COVID-19-related legal alerts, please email us.

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• December 28, 2020 — Coronavirus Relief Under the Consolidated Appropriations Act, 2021
• June 5, 2020 — CARES Act PPP Reform: Paycheck Protection Program Flexibility Act of 2020
• April 27, 2020 — New SBA Guidance Released: PPP Loan Certification Requirements for Good Faith
• April 16, 2020 — CARES Act: Paycheck Protection Program Loan Forgiveness
• April 10, 2020 — CARES Act: The Main Street Lending Program Offers Relief for Small and Mid-Sized Businesses
• April 2, 2020 — CARES Act: Paycheck Protection Program - Proactive Steps to Apply
• March 30, 2020 — COVID-19: Key Business Resources Under the CARES Act
• March 26, 2020 — COVID-19: Key Business Considerations for Minnesota Emergency Executive Order 20-20
• March 20, 2020 — COVID-19 Business Update: Tax Deadline and Proposed CARES Act
• March 16, 2020 — COVID-19: Force Majeure Contract Clauses
   

Mergers & Acquisitions:

• April 18, 2020 — Video: COVID-19 Business Owner's Survival Guide—M&A After COVID-19 (29:00), Presented by Terri Krivosha
   

Labor & Employment:

• February 16, 2022 — Can You Spot a Liar? Key Factors for Determining Credibility in Internal Investigations
• January 14, 2022 — Supreme Court Halts OSHA's COVID-19 Vaccine and Testing Mandate
• December 20, 2021 — OSHA's COVID-19 Vaccine and Testing Mandate Is Back in Business After Sixth Circuit Court of Appeals Lifts Stay
• November 8, 2021  — Fifth Circuit Court of Appeals Stays OSHA's COVID-19 Vaccine and Testing Mandate: Next Steps for Employers
• November 5, 2021 — What Employers Need to Know About OSHA's New Vaccine and Testing Requirements
• November 1, 2021 — 5 New Legal Risks for Product Manufacturers During COVID-19
• September 10, 2021 — Path Out of the Pandemic: Biden Administration Will Require Employers with 100+ Employees to Mandate COVID-19 Vaccination or Weekly Testing
• August 24, 2021 — Updated COVID-19 Guidance from OSHA and the CDC: What It Means for Your Business
• May 24, 2021 — What Employers Need to Know Now That the CDC Has Relaxed Mask Recommendations for Those Who Are Fully Vaccinated
• March 24, 2021 — The American Rescue Plan Act of 2021—Key Implications for Employers
• December 30, 2020 — New Year, New Rules: Employer Implications of the New COVID-19 Relief Legislation
• December 22, 2020 — Employers: EEOC Releases New Vaccine Guidelines to Address Five Key Concerns
• September 14, 2020 — FFCRA Update: Department of Labor Revises Regulations, Largely Rejects SDNY Court Ruling
• August 5, 2020 — Key FFCRA Regulations Vacated by Federal Court, Dramatically Expand FFCRA Leave Eligibility
• July 24, 2020 — #MaskUpMN: Key Employer Re