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As the sun rises on New Year’s Day 2021, California employment law will once again become more involved and challenging. For many employers, the following are the top five developments they most need to prepare for.
One Measure of Relief: COVID-19 Paid Sick Leave Requirements
Expire
For much of 2020, California law has required that employers of 500 or more employees provide eligible employees COVID-19 Supplemental Paid Sick Leave. Employees qualify for the supplemental paid sick leave if their health care provider advises they self-quarantine due to COVID-19, they are subject to a governmental isolation order related to COVID-19 or their employer bars them from working due to health concerns related to potential transmission. The law requires that covered employers provide qualified full-time employees, for example, up to 80 hours of supplemental paid sick leave.
Applies retroactively to effective date of CARES Act
Credit increased to 70% of qualified wages; cap on credit increased to $28,000. The CARES Act provided for a refundable payroll tax credit of 50% of certain “qualified wages”, capped at $5,000/employee (50% of up to $10,000 of qualified wages for all calendar quarters). The Act increases the credit cap from $5,000 for the year to $7,000 (70% of $10,000) for any calendar quarter.[3] Accordingly, the Act will increase the maximum amount of credit available in 2021 for each employee from $5,000 to $28,000.
PPP borrowers may receive the tax credit. The CARES Act denied the employee retention tax credit to any employer that receives a loan under PPP, and defined the term “employer” expansively, potentially causing acquiring corporations with employee retention tax credits to lose or recapture those tax credits if they acquired a target company that had received a PPP loan.[4] The Act permits an employer that receives a
Tuesday, December 29, 2020
Expenses Related to PPP Loan Forgiveness Are Deductible. The CARES Act included a loan forgiveness program under the Small Business Administration’s Paycheck Protection Program (the “PPP”). A PPP loan may be forgiven if its proceeds are used for “payroll costs” or certain other expenses. Under the CARES Act, the forgiveness of a PPP loan does not give rise to taxable cancellation of indebted income, or a loss of tax attributes. However, the IRS held that expenses that gave rise to PPP loan forgiveness were not deductible.
[1] The Act reverses this rule and permits taxpayers whose PPP loans are forgiven to deduct the expenses relating to their loans to the extent they would otherwise qualify as ordinary and necessary business expenses.
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On December 21, the House and Senate passed a $2.3 trillion omnibus appropriations and COVID-19 relief package, H.R. 133, the Consolidated Appropriations Act, 2021 (the “Act”). President Trump signed the Act into law on December 27 after initially criticizing the amount of direct payments to individuals and other aspects of the Act late last week.
The massive, 5,593 page document includes a $1.4 trillion appropriations package to fund the government through September 30, 2021, a long-debated $900 billion COVID-19 relief and stimulus package, funding for COVID-19 vaccines and testing, expanded food aid programs, emergency education relief, airline and transportation support, relief for farmers, broadband incentives, and extensions on eviction moratoriums.
Seyfarth Synopsis:
Earlier this month, Pittsburgh enacted “An Ordinance providing for special conditions for the operation and use of Paid Sick leave under the Paid Sick Days Act during and due to the crisis presented by COVID-19” (the “Ordinance”) by adding a new Chapter to the Pittsburgh Code of Ordinances: Temporary Emergency COVID-19 Paid Sick Leave (“COVID-19 Sick Time”). The Ordinance provides covered individuals with paid leave for certain COVID-19 related absences. While the covered absences under the Ordinance are similar to absences covered under the federal Families First Coronavirus Response Act (“FFCRA”), Pittsburgh’s COVID-19 Sick Time will remain available for use after the FFCRA’s current December 31, 2020 sunset date.