As we have discussed in prior advisories (found here, here, and here), employers are entitled to a tax credit to cover 100 percent of the expense of providing paid leave under the Families First Coronavirus Response Act (FFCRA). Both the FFCRA regulations and the IRS guidance are clear that to utilize this credit, FFCRA eligibility must be properly documented. Employers are required to maintain the following records for each FFCRA leave:
- A. The name of the employee taking leave;
- B. The date(s) for which leave is requested and provided;
- C. A statement from the employee of the FFCRA eligible reason for which leave is taken, with the following information:
- If the employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19, the employee must provide the name of the government entity that issued the order.
- If the employee has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19, the employee must provide the name of the healthcare provider who advised the employee to self-quarantine.
- If the employee is experiencing symptoms of COVID-19 and seeking medical diagnosis, then that statement is sufficient (no other documentation needed).
- If the employee is caring for an individual who is subject to (1) or (2) above, the employee must provide the name of the individual for whom the employee is caring,the employee’s relationship to that individual, and the name of the government entity or healthcare provider that required the quarantine.
- If the employee is caring for a son or daughter due to a COVID-19-related school or care center closure, or care provider unavailability, the employee must provide the name and ages of their children; the name of the school, care center, or care provider that is unavailable for COVID-19 related reasons; and a representation that no other person will be providing care for the child during the period for which the employee is receiving EFMLEA. To the extent the children for whom the employee is caring for are over the age of 14, the employee must also state that special circumstances exist requiring the employee to provide care.
- If the employee is experiencing a “substantially similar condition” as specifically defined by the Secretary of Health and Human Services (HHS), but as of publication, the HHS Secretary has not defined any “substantially similar conditions,” and thus this reason for leave is not (yet) applicable.
- D. A statement that the employee is unable to work (or telework) because of the FFCRA eligible reason.
We recommend that employers provide employees seeking FFCRA leave with a certification form that clearly details all above identified information for employees to complete and sign. To the extent employees have questions about the meaning of any requested information – for example, what “government entity” issued the quarantine order – employers are encouraged to work with their employees to help them identify the necessary information to provide.
Employers should limit their inquiry into the employee’s reasons for FFCRA leave to the above documentation. The FFCRA regulations make clear that employers cannot require additional documentation of an employee’s reason for leave, aside from what is listed above and any further guidance issued by the IRS or DOL.
In addition to the above information from employees, employers must collect and retain the following information from their own records, for each provided FFCRA leave:
- A. Documentation showing how the employer determined the amount of qualified sick and family leave wages paid to employees, including records of work, telework, and qualified sick leave and qualified family leave. This will include:
- Documents used to determine the employee’s regular hours per week; and
- Documents used to determine the employee’s regular rate.
- B. Documentation showing how the employer determined the amount of qualified health plan expenses that the employer allocated to wages.
If possible, employers are advised to establish separate pay codes for FFCRA leave entitlements, to assist in the clear tracking of leave and ensure tax credit calculations are correct. Employers should then retain this information, along with the employee’s completed certification form, in a leave file specific to the individual employee. Employers do not need to provide this documentation to the IRS when seeking the tax credit, but must maintain it in their records for at least four years following the date when the tax becomes due or is paid, whichever is later.
The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.
DWT will continue to provide up-to-date insights and virtual events regarding COVID-19 concerns. Our most recent insights, as well as information about recorded and upcoming virtual events, are available at www.dwt.com/COVID-19.