HR & Payroll Services in Greater Glendale & Newport Beach Area

Considerations for California Employers While Preparing to Bring Employees Back to Work

This is not an exhaustive list. It is an addendum to the Paychex Return to Work Checklist. Employers should consult with their HR professionals, legal counsel where appropriate, and California’s Labor and Workforce Development Agency and COVID-19 websites.

☑ Guidance on re-opening businesses

This impacts employers seeking loan forgiveness for their Paycheck Protection Program loan.

☑ What date should employees be recalled or rehired?

This impacts employers seeking loan forgiveness for their Paycheck Protection Program loan.

☑ Know how to address any changes that have been made to federal, state, or local paid leave laws

Familiarize yourself with the Families First Coronavirus Response Act to be prepared if employees are unable to return or need to take time off after returning.

☑ Understand the obligations under a collective bargaining agreement (CBA) if you have unionized employees

Check CBA for rehire/recall language, including agreed upon factors in order to bring employees back. Most changes will need to be negotiated with the union.

☑ If an employee was terminated and signed a separation agreement, check the language to see if the rehire requires an amendment to the separation agreement

☑ Consider providing letter offering return to work or re-hire to employees

☑ Review and adhere to internal policies on rehiring to determine any reinstatement of accrued PTO or vacation time

☑ Provide a new Form W-4 in case the employee wants to make changes upon returning to work

☑ Ensure “new hire” employee documents (i.e. employee handbook, arbitration agreement, etc.) are updated and properly executed

☑ Does the employee need to update an existing Form I-9 or complete a new Form I-9?

Review and compliance requirements for Form I-9.

☑ Did employee elect COBRA, State Continuation, or other health insurance conversion rights?

☑ Determine status of health plans, cafeteria plans, and other fringe benefit plans, such as vision and dental insurance

☑ Determine implications for 401(k), 403(b), and pension plans

Of note, California businesses with more than 100 employees need to implement a retirement plan by Sept. 30, 2020 to be compliant with the state-mandated program, CalSavers.

☑ Evaluate executive compensation and severance arrangements

☑ Consider appropriate actions related to COVID-19 health pandemic

Learn what new supplemental policies on safety are recommended or required to be followed and documented. For example, what measures to promote social distancing in the workplace and safety equipment such as masks and gloves will be provided.

Additional considerations as you prepare to return employees to work include applicable wage and hour laws, especially if employees have different work schedules, pay, and classification under state and federal laws.

Additional state guidance for California businesses can be viewed on our COVID-19 state resources tool.

A bill making its way through the California Senate would require certain types of businesses in the state to provide employees with multi-week work schedules at least seven calendar days in advance of the first shift on that schedule. Supporters of the bill, including several workers' rights groups, say the legislation will help curb abusive scheduling practices by restaurants, retailers, and grocery stores.

SB 878 cleared the Senate Labor and Industrial Relations Committee on April 13 after a 4-1 vote, and is before the Senate Appropriations Committee as of this writing.

The bill as currently written would require restaurants, retailers, and grocery stores to provide a work schedule of at least 21 consecutive calendar days to each of their workers, and to provide the schedules at least 7 calendar days before the first shift on that schedule. In other words, a store clerk, restaurant server, or coffee barista would have knowledge of their scheduled work hours over the next 28 days—a big difference in industries known for calling workers in or sending them home on short notice.

Employers who change the published schedules on short notice would have to pay "modification pay" at the employee’s regular rate of pay.  This would apply if a change is made fewer than seven days but more than 24 hours before the scheduled shift.  The modification pay would increase to an amount equal to or greater than half of the employee’s scheduled hours for the modified shift, where the change is made less than 24 hours before the start of the shift.

If a worker is on-call but not called in, employers must also pay modification pay equal to or greater than half of the employee’s scheduled hours for the on-call shift, at the employee’s regular rate of pay.

However, modification pay is not required where the change is made due to special circumstances  , including power or water issues, natural disasters, or even another employee calling in sick on short notice.

Employers are also required to display a poster that will be developed by the labor commissioner or face a $100 fine for every willful violation of this notice requirement.

The California Senate is considering this proposal about a year and a half after the San Francisco Board of Supervisors passed a "Retail Workers 'Bill of Rights." The rules, which went into effect in October 2015, generally require two weeks’ notice of work schedules and also modification pay for changes made within seven days of the scheduled shift or on-call shifts in which there was no work available.

Scheduling legislation has also been proposed in nearly a dozen other states in recent years, according to the National Women's Law Center. And Democrats in Congress have been pushing for a Schedules that Work Act; a proposal that could get some traction if Democrats take back control of the Senate, or perhaps even the House after the 2016 election.

Workers’ rights advocates have been increasingly complaining about unpredictable scheduling.

About 17 percent of the U.S. workforce experiences unstable work shift schedule, according to the Economic Policy Institute. Low income workers are more likely to face such unpredictability, which raises the chances of work/family conflict.

In April, New York State Attorney General Eric T. Schneiderman joined attorney general offices from seven other states and the District of Columbia to complain to major retailers about their use of on-call shifts. Said their letter: "Unpredictable work schedules take a toll on employees. Without the security of a definite work schedule, workers who must be 'on call' have difficulty making reliable childcare and elder-care arrangements, encounter obstacles in pursuing an education, and in general experience higher incidences of adverse health effects, overall stress, and strain on family life than workers who enjoy the stability of knowing their schedules reasonably in advance."

Visit Paychex WORX for updates on California SB 878 and other legislation that could potentially affect your business.

A series of co-mingled laws dating back to the earliest days of the COVID-19 pandemic in March 2020 provided billions of dollars in aid that included funding to help finance the requirement for certain employers to offer emergency paid sick and emergency family and medical leave — and later credit for qualified employers who voluntarily offered this coverage.

The end of the National Public Health Emergency resulted in the end of these requirements for certain employers to offer the emergency leaves. What remains now for businesses still trying to recover from the negative financial impact of the pandemic is the potential to claim payroll tax credits if they were eligible but did not claim these credits previously or if they need to adjust the amounts they claimed.

Note: These tax credits need to be reconciled with other tax credits and government funding to ensure that no double-dipping takes place, which includes any tax credits/amounts already claimed and received for Paycheck Protection promise (PPP) loan forgiveness and the employee retention tax credit.

It’s important to understand the framework of leave and associated credit for any employer who needs to amend any prior quarter’s Form 941 in 2020 and 2021 to claim or adjust the credit, so it is done accurately. This requires the use of Form 941-x.

Tax Credits Under Family First Coronavirus Response Act

The Families First Coronavirus Response Act (FFCRA) originally offered payroll tax credits to American private employers with fewer than 500 employees to offset the costs of the requirement to provide employees with qualifying paid leave for specified reasons related to COVID-19. When that mandate sunset at the end of 2020, the American Rescue Plan Act (ARPA) extended and expanded the payroll tax credits, allowing covered employers to take the credits until Sept. 30, 2021, if they voluntarily provided employee paid leave under the FFCRA framework.

However, the credit could be impacted by state and local COVID-19 leave requirements and the interaction with the requirements under FFCRA. Plus, an employer could only qualify for the federal tax credit if the leave met the requirement of the original FFCRA mandate.

It should be noted that the credit cannot be claimed by private employers with 500-plus employers even if they offered comparable leave.

The following highlights the changes under ARPA and delineates by date because if you plan to claim the credit on payroll taxes paid through March 31, 2021, or after April 1, 2021, there are different requirements.

What is the Purpose of the Tax Credits?

Employers who provided employees with qualified paid leave related to COVID-19 that fell under the Emergency Paid Sick Leave Act (EPSLA) and/or the Emergency Family and Medical Leave Expansion Act (EFMLEA) can receive tax credits to reimburse 100 percent of leave wages paid.

April 1, 2020 through March 31, 2021

Generally, American private employers with fewer than 500 employees were eligible to claim the credits. Self-employed individuals could have claimed the family leave credit for up to 50 days.

April 1, 2021 through Sept. 30, 2021

In addition to private employers, healthcare providers and certain governmental and state/local employers became eligible to claim the credit under the same requirements. The limit on the family leave credit for self-employed individuals increased to 60 days.

Under ARPA, new non-discrimination rules also were established that apply to the credit for either leave, disallowing a credit for any employer who discriminates in favor of highly compensated employees, full-time employees or employees based on employment tenure.

Calculation of Maximum Hours

April 1, 2020 through March 31, 2021

• Full-time employees were entitled to 80 hours of leave under the EPSLA if they were normally scheduled to work at least 40 hours each workweek.
• Part-time employees who worked less than 40 hours per week were entitled to EPSL in the amount up to the number of hours that an employee works, on average, over a two-week period.

The U.S. DOL included additional guidance in its Temporary Final Rule for the calculation of maximum EPSL if a traditional weekly schedule does not exist or if a schedule varies.

Under the EFMLEA, calculate hours of leave based on the number of hours the employee is normally scheduled to work. If the normal hours scheduled are unknown, or if the part-time employee’s schedule varies, you may use a six-month average to calculate the average daily hours.

April 1, 2021 through Sept. 30, 2021

The maximum number of days for which qualified sick leave wages could be paid and the number allowed for an employer to get a credit would be reset to 10 days. Hours were calculated as noted above. However, employees couldn’t carry over unused hours. If an employer chose to provide leave under the EPSLA or EFMLEA, they would be eligible to claim the credit again.

What Are the Qualifying Reasons for Taking Leave?

April 1, 2020 through March 31, 2021

An employee qualified for EPSL if they were unable to work (including unable to telework) related to COVID-19 because the employee:

1. Was subject to a federal, state, or local quarantine or isolation order
2. Had been advised by a healthcare provider to self-quarantine
3. Was experiencing COVID-19 symptoms and is seeking a medical diagnosis
4. Was caring for an individual subject to an order (described in 1) or self-quarantine (described in 2)
5. Was caring for his or her child whose school or place of care is closed (or childcare provider is unavailable)
6. Was experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services

Part-time employees would generally have been eligible for Emergency Paid Sick Leave in an amount equivalent to their regularly schedule hours for a two-week period.

Under the EFMLEA, an employee would have only qualified for leave under No. 5 above.

April 1, 2021 through Sept. 30, 2021

The American Rescue Plan Act changed leave under the EFMLEA. Employees qualified for all six reasons to take leave that was available under the EPSLA, plus both leaves gained additional reasons under No. 3 (above), as follows:

• Employers could have claimed the credit for sick leave wages paid for employees taking leave while they awaited the results of a diagnostic test for COVID-19 after being exposed to the virus or because their employer requested the test.
• Leave taken for the employee to obtain a COVID-19 vaccine or to recover from any health issues resulting from the vaccine.

What Are the Wage Calculations for Paid Sick Leave?

Employees were to be paid based on:

• For reasons Nos. 1 to 3 above, the higher of the employee's regular rate of pay, or the applicable state or federal minimum wage, up to $511 per day
• For reasons Nos. 4 to 6 above, the higher of 2/3rds of the employee's regular rate of pay, or the applicable state or federal minimum wage, up to $200 per day

What Should Businesses Know About the EPSLA?

The American Rescue Plan Act of 2021 changed some of the provisions of the FFCRA, including the reallocation of which portion of the credit is non-refundable. The amount of the credit stayed the same.

April 1, 2020 through March 31, 2021

• If the credit exceeded the employer’s total liability of the portion of Social Security in any calendar quarter, the excess was refundable to the employer.

April 1, 2021 through Sept. 30, 2021

• If the credit exceeded the employer’s total liability of the portion of Medicare in any calendar quarter, the excess is refundable to the employer.

Additional changes included:

• The credit increased by the cost of the employer’s qualified health plan expenses and by the certain employer’s collectively bargained contributions to a defined benefit pension plan and certain amounts of collectively bargained apprenticeship program contributions.

Paid sick time provided under this Act was not preempted by other federal, state, or local laws. The IRS created FAQs that provide an overview of the tax credits.

What Should Businesses Know About the EFMLEA?

Under the EFMLEA:

Through March 31, 2021

An eligible employee qualifies for leave for caring for his or her child whose school or place of care is closed (or childcare provider is unavailable) would be paid by their employer after the first 10 days of leave at a rate of not less than two-thirds of their current rate of pay for the number of hours the employee would otherwise be scheduled to work, up to a maximum of $200 per day or an aggregate of $10,000, for up to 12 weeks in a 12-month period.

April 1, 2021 through Sept. 30, 2021

Other changes under ARPA are an increase in the maximum aggregate amount to $12,000 for up to 12 weeks in a 12-month period and the expansion of eligibility to include employers of healthcare workers and emergency responders

Recordkeeping

Employers must retain documents and information regarding leave for a period of four years, regardless of whether the decision was made to grant or deny the request for leave.

For tax credit purposes, the U.S. DOL requires employers to maintain the following for four years:

• Documentation to show how the employer determined how much paid leave the employee was eligible for (e.g., records of work performed, telework, and paid leave credits)
• Documentation to show how the employer determined the amount of qualified health plan expenses that were allocated to wages.
• Copies of any completed IRS Forms 7200 and 941 that the employer submitted to the IRS (or provided to a third-party payer to meet an employer’s employment tax obligations).

How Paychex Can Help

The passage of multiple laws created complexities for businesses owners who want to take advantage of the paid leave tax credits. However, employers must review their obligations under existing state and local COVID-19 leave laws, as well as any other federal, state or local laws related to an employee’s right to leave.

This is a good time to re-evaluate your HR needs. Consider how our HR Services, tax services and payroll solutions could save you time by helping alleviate extra work and the potential risk of non-compliance.