Before the Secretary of Labor issues new regulations (and the last portion of the coronavirus legislation is finalized), it is good to catch up with some corrections and updates to the Emergency Paid Sick Leave Laws along with executive orders that directly impact Arizona small business owners. Here is what you need to know.
The Department of Labor Released Guidance on the Emergency Paid Sick Leave Laws
This guidance includes both a general summary of the law as well as an FAQ. This FAQ provides guidance on information certain such as:
• The laws go into effect on April 1, 2020, not April 2, 2020.
• The term “regular rate of pay” as used in the legislation means a “six-month average” of the employee’s average rate of pay before the employee took leave. It cannot simply be changed now despite previous information that this was possible.
• When calculating the average hours for a part-time employee, employers may use a six-month average to calculate weekly averages.
• If an employee typically works overtime (i.e., 50 hours), then the first week of Emergency Paid Sick Leave requires that the standard type of payment include overtime (i.e., 50 hours) while the second week would only include whatever hours remain to reach a total of 80 hours (i.e., 30 hours).
• Any paid sick leave provided to an employee before April 1, 2020, does not count against the Emergency Paid Sick Leave or Emergency Family Medical Leave Expansion that the employee is entitled to receive once the Emergency Paid Sick Leave Laws go into effect.
IRS Guidance on Refund
The IRS issued guidance on how employers who pay employees under the Emergency Paid Sick Leave Laws can recoup that cost. Instead of going over it in detail, I will pull out a couple of excerpts that I found most helpful.
• Employers receive 100% reimbursement for paid leave pursuant to the Act. With this, health insurance costs are also included in the credit. Employers face no payroll tax liability, and self-employed individuals receive an equivalent credit.
• Examples of how the refund works:
1) If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
2) If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
Employer Rating For Unemployment Is Not Impacted By Coronavirus Related Unemployment Claims
Governor Doug Ducey recently issued an Executive Order (click here) relating to when an individual could obtain unemployment compensation. In that Executive Order, Governor Ducey also said, “In adjusting employer contribution rates for the unemployment compensation fund, the Arizona Department of Economic Security may not consider employment benefits granted pursuant to this Executive Order against an employer’s account.”
For your knowledge, an individual can currently qualify for unemployment compensation if the individual meets existing requirements regarding work history, earnings and residency and one of the following:
• The individual’s place of work has been temporarily or permanently closed or has had a drastic reduction in operations due to COVID-19 resulting in a reduction of wages.
• The individual must be quarantined and is unable to work and has no sick leave.
• The individual leaves employment due to risk of exposure or infection or to care for a family member with COVID-19.
• The individual is separated from work for any reason relating to COVID-19.
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