By Attorney Brian Hatch
The Families First CoronaVirus Response Act (FFCRA) requires that businesses pay for child care or caregiver leave (2/3RDs pay up to $200/day for 12 weeks) if an employee can certify that his or her absence is needed to provide child care or other care of someone for COVID-19 related reasons. Many small businesses are wondering how they are going to keep up to date on other expenses to keep their businesses afloat if they continue to have to pay salaries and wages for absent employees. Congress did think of that quandary, however, and instituted a specific small business exemption from the expanded caregiver requirement for businesses with under 50 employees. Whether a small business should take advantage of it requires a multi-faceted analysis.
In order to take advantage of the exemption, an authorized officer has to certify that it provided the paid leave it 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”
- “entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized sills, 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, and these labor or services are needed for the business to operate at minimal capacity,”
Since all small business employers receive a refundable tax credit for any money paid out, the question appears to be one of a cash flow problem, and the Department of Labor encourages collaboration of employers and employees to reach the best possible solution. If the employer can’t wait until the 2020 tax year’s tax forms are filed to claim the credit, perhaps partial payments or some other program or compromise is possible. The formal certification to the government doesn’t have to be made until applying for the credit, but the employer should prepare the certification for the employee’s benefit before then if necessary.
Small businesses can apply for the exemption, but do they want to? Not all businesses can wait to file for the tax credits or don’t have accountants able to ensure they get all the credit they need to make up for the payouts. But leaving qualified, and important, employees out in the cold without fashioning some sort of compromise to tide both employer and employee through the crisis is often not a good decision. The Paycheck Protection Program has received a new boost from Congress that can be applied for to keep payments flowing to employees, as long as 75% of the money is used for payroll purposes. Or there is the possibility of a Small Business Administration disaster relief loan or grant (up to $10,000). Using a combination of these tools to gain extra money is restricted, and it is suggested an accountant be consulted to find the best way to get the best possible financial benefit from any of the federal relief (or state relief as that becomes available through legislation). Finally, good old fashioned negotiation between employer and employee to see how they can create a solution to help both parties cope with cash flow problems that are present for families and businesses alike during this unique crisis.