In This Issue
April 2020 - July 2020 | Volume 7 Issue 2
- Back to Business Resources for Employers
- Supreme Court: Title VII Protects LGTBQ+ Employees
- Navigating PPP, Employer Tax Deferral, and Tax Credits Under the FFCRA and CARES Act
- EEOC Provides Return-to-Work and COVID-19 Antibody Testing Guidance Under Federal Civil Right Laws
- California Presumes Most Employees with COVID-19 Can Receive Workers' Compensation Benefits
- New Model COBRA Notices and Emergency Extensions to COBRA Deadlines Require Employers to Take Action
- I-9 Compliance Flexibility Extended to July 19th
More and more businesses are resuming operations and facing big challenges ahead. Throughout this process AlphaStaff has remained committed to providing you with timely information and expert advice to navigate this stressful time. In addition to our AlphaStaff's Back to Business Checklist, please see the below resources provided by some of our trusted legal partners to help you navigate the novel employment-related issues you face when resuming operations.
The U.S. Supreme Court has held that LGTBQ+ employees are protected from workplace discrimination under Title VII of the Civil Rights Act of 1964.
The Court issued its decision in three consolidated cases: Bostock v. Clayton County, Georgia, No. 17-1618; Altitude Express Inc. v. Zarda, No. 17-1623; and R.G. & G.R. Harris Funeral Homes Inc. v. EEOC, No. 18-107. (For background on the three cases, see our article, U.S. Supreme Court to Hear Arguments on LGBTQ+ Workplace Protections under Title VII.)
Justice Neil Gorsuch wrote the majority decision finding Title VII’s protection extends to sexual orientation and gender identity. He was joined in the majority by Chief Justice John Roberts, and Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan. Justices Clarence Thomas, Samuel Alito, and Brett Kavanaugh dissented.
While the scope of the Court’s decision will be debated, its implications for workplaces across the country likely will be significant. The decision provides consistency and may require reversal of many measures that effectively allow discrimination based on sexual orientation or gender identity.
Supreme Court Decision
The Court ruled Title VII’s ban on “sex”-based discrimination prohibits discrimination based on sexual orientation. It also ruled Title VII prohibits discrimination against transgender claimants based on their transgender status. Justice Gorsuch wrote, “When an employer fires an employee for being homosexual or transgender, it necessarily intentionally discriminates against that individual in part because of sex [in violation of Title VII].”
Further, the decision stated that “the plaintiff’s sex need not be the sole or primary cause of the employer’s adverse action” for Title VII to apply.
The dissenting justices’ opinions largely relied on a “strict constructionist” interpretation of Title VII, finding the law’s prohibition against “sex”-based discrimination was not intended in 1964 to extend to sexual orientation or gender identity. Justice Gorsuch characterized that view as improperly holding that, where any “new [statutory] application is both unexpected and important, even if it is clearly commanded by existing law, the Court should merely point out the question, refer the subject back to Congress, and decline to enforce the law’s plain terms in the meantime.”
Justice Gorsuch wrote, “This Court has long rejected that sort of reasoning.” Instead, he stated, “The statute’s message for our cases is equally simple and momentous: An individual’s homosexuality or transgender status is not relevant to employment decisions. That’s because it is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual based on sex.”
By finding Title VII bars workplace discrimination on the basis of sexual orientation and gender identity, the Court’s decision effectively extends that prohibition to state and local jurisdictions that were silent on the topic or explicitly allowed such discrimination.
However, it is unclear how cases where employers claim religious liberty objections will be affected. The Court’s decision does not resolve the tension between workplace “religious freedom” laws and Title VII as the litigants in Bostock, Zarda, and R.G. & G.R. Harris did not raise religious freedom objections on appeal. As the Court stated, “[H]ow these doctrines protecting religious liberty interact with Title VII are questions for future cases ….”
The Court’s decision will significantly affect other court cases, federal and state legislation, and even elections.
The Court’s decision largely aligns with the Equal Employment Opportunity Commission’s (EEOC) position that discrimination based on sexual orientation and gender identity is prohibited under Title VII. While Circuit Courts, the U.S. Department of Justice, and many district courts had reached contrary decisions, the Court’s decision likely invalidates many of those.
The Court’s decision makes it more likely that adverse employment actions against LGBTQ+ workers would be found unlawful. As the federal agency that handles investigations into workplace discrimination, the EEOC already was receiving an increasing number of claims and pursuing increasing monetary awards in sexual orientation and gender identity discrimination cases. The agency likely will be emboldened to commence many more such lawsuits against employers in federal court.
It remains to be seen how courts will apply this prohibition where employers voice religious objections in decisions involving LGBTQ+ workers. Nonetheless, the EEOC likely will intensify its pursuit of awards for workers in such cases.
Employers should continue to promptly and thoroughly investigate all complaints of LGBTQ+ discrimination and take remedial action in response to discrimination. Gender identity and sexual orientation harassment should be prohibited under company anti-harassment policies and staff should be trained on the prevention of LGBTQ+ discrimination. It is equally important that managers are sensitized on how to respond to LGBTQ+ discrimination complaints, including the duty to report LGBTQ+ discrimination when placed on actual or constructive notice of discrimination and harassment.
Please contact a Jackson Lewis attorney with any questions about the Court’s decision, anti-harassment policies, workplace training for management and employees, and other preventive practices.
©2020 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.
Focused on labor and employment law since 1958, Jackson Lewis P.C.'s 950+ attorneys located in major cities nationwide consistently identify and respond to new ways workplace law intersects business. We help employers develop proactive strategies, strong policies and business-oriented solutions to cultivate high-functioning workforces that are engaged, stable and diverse, and share our clients' goals to emphasize inclusivity and respect for the contribution of every employee. For more information, visit https://www.jacksonlewis.com.
Employers have received an abundance of information and guidance regarding the application of the PPP and related tax credits. It is likely that such information and guidance will continue to be modified and supplemented over the coming weeks, so please be on the alert for updates from us.
This abundance of otherwise helpful information can be confusing in determining how the PPP and the various tax credits can be best utilized. We thought it would be helpful to explain the opportunities that may be available depending on specific circumstances, including the reporting of these matters on a business's federal employment tax returns beginning with the second quarter 2020 Form 941. Employers who were unable to take advantage of the PPP will particularly be interested in the application of the tax deferral and credits as well as the most interesting set of IRS notices that have been recently released.
FFCRA – Tax Credits
The Family First Coronavirus Response Act (the FFCRA), signed by President Trump on March 18, 2020, provides small and mid-size employers (businesses and tax-exempt organizations with fewer than 500 employees) refundable tax credits that reimburse employers, dollar for dollar, for the cost for providing paid sick and family leave wages to their employees, plus allocable qualified health plan expenses and the employer's share of Medicare tax imposed on such wages, which can be applied against payroll taxes, for leave related to COVID-19. The employer is not subject to the employer portion of Social Security tax imposed on those wages. If the federal employment taxes yet to be deposited are not sufficient to cover the employer's cost of qualified leave wages, plus the allocable qualified health plan expense and the amount of the employer's share of Medicare tax on such wages, the employer will be able to file a request for an advance payment from the IRS by filing IRS Form 7200. The IRS has issued FAQs providing guidance on the FFCRA tax credits. See more detailed discussion regarding the FFCRA.
CARES Act – PPP Loans
The President signed the Coronavirus, Aid, Relief, and Economic Security Act (the CARES Act) on March 27, 2020, which provided, among other things, forgivable loans made under the PPP to reimburse employers for payroll costs, rent and utilities incurred during the COVID-19 period. That period was originally eight weeks and is now extended under the Paycheck Protection Program Flexibility Act (PPPFA) signed by the President on June 5, 2020 (see article) for up to twenty-four weeks, or December 31, 2020, whichever occurs earlier. PPP loan forgiveness does not generate taxable income to the borrower. However, the IRS has issued guidance in Notice 2020-32 that the expenses for which forgiveness is received are not deductible. Congress is considering legislation to allow the borrowers a deduction for PPP-funded expenses but such legislation has not yet been enacted. This is one of the matters we are continuing to monitor and will provide an update as it becomes relevant. See previous discussions on the CARES Act and PPPFA.
CARES Act – Employer Payroll Tax Deferral
The CARES Act allows employers to defer the deposit and payment of the employer's share of Social Security tax (6.2 percent percent of wages up to $137,700 for 2020) and self-employed individuals to defer payment of certain self-employment taxes beginning on March 27, 2020 and ending on December 31, 2020, as follows:
- 50 percent percent until December 31, 2021; and
- remainder until December 31, 2022.
Taking the FFCRA paid leave or the Employee Retention Credit does not disqualify an employer from the payroll tax deferral and there is no special election required to make the deferral. The IRS has issued FAQ guidance on the payroll tax deferral. See also the draft instructions and 2020 Form 941, Employment Tax Return IRS recently circulated by the IRS, for the second quarter 2020 time period and thereafter.
CARES Act – Employee Retention Credit (ERC)
The CARES Act allows a fully-refundable tax credit for eligible employers (eligible employers are those employers who had (i) a partial or full suspension of operations or (ii) greater than 50 percent reduction in gross receipts as a result of a COVID-19-related order) equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that eligible employers pay their employees after March 12, 2020 and before January 1, 2021. The ERC is available to all eligible employers regardless of size, including for-profit and not-for-profit organizations, tax-exempt organizations, but excluding state, local and federal governments and their agencies and instrumentalities. The maximum ERC credit is up to $5,000 (or up to 50 percent of the first $10,000) of qualified wages paid per employee. There are different rules applicable to businesses that have more than 100 full-time employees (based on the average number of the business's employees in 2019) that have been addressed in prior Tax Alerts, "Coronavirus: Significant Tax Provisions in the CARES Act for Businesses and Individuals" as the ERC is allowed only for qualified wages paid to employers for time they are not performing services. See also FAQs. See further discussion regarding the ERC below as well as the draft instructions and 2020 Form 941, Employment Tax Return IRS recently circulated by the IRS for the second quarter 2020 time period and thereafter.
Employers Receiving PPP Loans are Eligible for the Employer Tax Deferral Through December 31, 2020
Unlike the ERC, the payroll tax deferral provided under the CARES Act is available to employers who have received a PPP loan. Originally the CARES Act restricted borrowers from continuing to receive a payroll tax deferral after forgiveness. However, under the PPPFA, employers are now able to continue to defer the deposit and payment of the employer's share of the Social Security tax and self-employment tax until December 31, 2020, even if the employer has received loan forgiveness under the CARES Act.
An Employer May Recieve both the Tax Credits for Qualified Leave Wages under the FFCRA and the CARES Act
If an eligible employer also meets the requirements for the ERC and the FFCRA qualified leave wages, it may receive both credits – but not for the same wage payment.
An Eligible Employer May Recieve the Tax Credits for Qualified Leave Wages under the FFCRA and Receive a PPP Loan under the CARES Act
However, if an eligible employer receives tax credits for qualified leave wages, those wages will not be eligible as "payroll costs" for purposes of receiving loan forgiveness under the CARES Act.
Employers Who Receive a PPP Loan are not Eligible for ERC
An eligible employer may not receive the ERC if the eligible employer receives a PPP loan that is authorized under the CARES Act. Consequently, an eligible employer that receives a PPP loan should not claim ERC benefits, regardless of forgiveness. The only exception would be an employer who repaid the PPP loan by May 14, 2020. Under IRS guidance, if the loan was repaid by May 14, 2020, the employer will be treated as though it had not received a covered loan under the PPP for purposes of the ERC.
ERC – FAQS Issued by the IRS
The IRS has recently released 94 FAQs interpreting Section 2301 of the CARES Act (which is the ERC). While the FAQs do not have the force of the law, they are instructive on how the IRS will address various issues. We have listed a number, but certainly not all, of those issues addressed by the IRS below:
- An employer that operates an essential business is generally not considered to have a full or partial suspension of operations if the government order allows the employer to remain open, even though an order requiring non-essential businesses to close has an effect on the employer's operations, thus disqualifying use of ERC; however as noted below, some exceptions may apply.
- An essential business may be considered to have a full or partial suspension if the business's suppliers are unable to make deliveries of critical goods and materials due to a government order that causes the supplier to suspend operations, thus possibly qualifying for ERC; however, some exceptions may apply.
- An essential business is not considered to have a suspension of operations for the sole reason that its customers are subject to a government order requiring them to stay at home, thus being a factor adverse to ERC qualification.
- If an employer's workplace is closed by government order for certain purposes but the employer's workplace may remain open for other purposes, the employer's operation will be considered to be partially suspended, thus assisting with ERC qualification.
- Employers that operate in multiple locations that are subject to a government order limiting operations in some, but not all locations, are considered to have a partial suspension. This FAQ may present an interesting, hopefully positive, opportunity for certain businesses that are deemed to provide "essential services."
- All members of an aggregated group are treated as a single employer. Consequently, if the operations of one member are suspended by government order, then all members of the aggregated group are considered to have their operations partially suspended, thus assisting with ERC qualification.
- Health plan expenses paid for furloughed workers are eligible for the ERC regardless of whether the furloughed workers received other wages, which can certainly assist ERC qualification. Further, if an employer that averaged more than 100 full-time employees pays wages to its employees for hours that the employees are not providing services, the employer may treat the portion of the health plan expenses allocable to the time that the employees are being paid, but not providing services, as qualified wages.
- Eligible employers will report their total qualified wages for purposes of the ERC for each calendar quarter on their federal employment tax returns, usually IRS Form 941, and may claim the credit as discussed below in a manner similar to the sick and family leave credit. As mentioned above, the IRS has issued a draft release of the revised Form 941 and related instructions to claim the ERC and sick and family leave credits.
- Employers also report any qualified sick leave and qualified family leave wages for which they are entitled to a credit on IRS Form 941. In anticipation of receiving the credit, employers can fund qualified wages by accessing federal employment taxes, including withheld taxes that are required to be deposited with the IRS and requesting an advance of the credit from the IRS for the amount of the credit that is not funded by accessing the federal employment taxes by filing IRS Form 7200.
ERC questions certainly may remain, such as to what extent an employer providing essential services can otherwise take advantage of the ERC. For example, financial institutions have been able to remain open during the coronavirus pandemic; however, their operations have been impacted as a result of complying with applicable CDC and state guidelines related to social distancing and limiting gatherings to small numbers. Many banks have closed their branches to customers or limited the ability of customers to access the branch lobbies, while keeping their drive-through operational to comply with social distancing and related CDC guidelines. Does this constitute a partial suspension?
Further guidance is also needed on how to calculate the qualified wages of employees who are available to work full-time but are working substantially reduced hours (although they are being paid full-time wages) as a result of the business interruption caused by COVID-19.
Separate and apart from the FAQs recently issued, IRS Notice 2020-22 and IRS Notice 2020-35 assure employers that subsequent adjustments to the claimed credit amounts would not trigger Federal Tax Deposit penalties nor interest on an inadvertent overstatement of the credit which is also an important factor for employers to consider. Of course, it is understood that any such positions taken on a tax return need to be attested to under Penalties of Perjury for which there must be a reasonable basis.
In the alternative, and separate and apart from claiming the credit on the respective Form 941, there also is the ability to separately claim a refund of a possible overpayment by virtue of the ERC, which also may help in defending an employer's analysis.
Baker Donelson's tax attorneys are highly experienced in all facets of IRS matters and are actively monitoring new directives from the IRS and analyzing ways to assist its clients with their tax issues during these unprecedented and trying times. If you need help with any tax matters or wish to discuss various tax opportunities during this time, please contact David P. Webb, Stuart M. Schabes, and Carl E. Hartley. For more information and general guidance on how to address other legal issues related to COVID-19, please visit the Coronavirus (COVID-19): Navigating the Path Ahead information page on our Firm's website.
New Model COBRA Notices and Emergency Extensions to COBRA Deadlines Require Employers to Take Action
By: Jackson Lewis, with
The Department of Homeland Security (DHS) once again is extending its flexibility regarding the physical presence requirements for I-9 inspection for another 30 days until July 19, 2020, due to the ongoing precautions related to the COVID-19 pandemic.
Eligible employers may continue to inspect Section 2 documents remotely (e.g., over video link, fax, or email) and must provide written documentation of their remote onboarding and telework policy for each covered employee.
The eligibility requirements are unchanged, applicable to employers and workplaces that are operating remotely. If there are employees physically present at a work location, no flexibility is implemented. ICE has said, however, that DHS will evaluate on a case-by-case basis situations where existing or newly hired employees are subject to COVID-19 quarantine or lockdown protocols. If employers are not eligible for the flexibility, they may continue to designate authorized representatives to act on their behalf to review documents in person.
All employees who were onboarded remotely must report to their employer within three business days for in-person verification once the employer’s normal operations resume. This date may be different (earlier or later) than the date the government policy ends.
Previously, employers that were served notices of inspection (NOIs) during the month of March 2020 (and had not yet responded) were granted an automatic 60-day extension from the effective date to respond. ICE is now granting an additional 30-day extension, but notes that this will be the final extension.
DHS will continue to monitor the COVID-19 national emergency and provide updates as needed. Employers should monitor the DHS and ICE websites for updates regarding extensions and the termination of those extension.
Jackson Lewis attorneys will provide updates as they become available.