The second wave of COVID-19 is here and Connecticut’s HR world has reacted for employers across the state by updating policies and procedures to keep businesses up-to-date and in compliance. The 2020 workplace, particularly in Connecticut, has experienced seemingly ever-changing state legislation on top of the federal legislative changes resulting from the coronavirus pandemic.
Keeping on top of all the changes can make your head spin, and if you’re not careful, make your business soon follow suit. Have no fear, our team of HR consulting experts are here to make things easier by helping you maintain compliance while taking advantage of state and federal government stimulus and support! Just relax and keep reading…
This article will guide you through state and federal changes with a high-level overview of what was warranted, or still requires, HR action or reaction from Connecticut employers during 2020 and into 2021.
Federal Paycheck Protection Program (PPP) Loans
Let’s start off by noting that if you are ever having trouble falling asleep at night, reading through the 2,900 pages of the Coronavirus Aid, Relief, and Economic Security (CARES) Act should help you drift right off. If you’re not suffering from insomnia, these next few sections can be your cliff notes.
One of the most prevalent (and most publicized) parts of the CARES Act was PPP Loans. This program, and the resulting loans, were designed to help businesses with 500 or fewer employees cover payroll and bridge the income gaps created from COVID-19 related challenges, closures, and lockdowns; like the one experienced in Connecticut earlier this year.
Initially, PPP loans could only be spent on payroll costs, but loans were expanded to include business rent payments, mortgage interest payments, and utility payments, as long as these items were in place prior to February 15th 2020.
As COVID-19 continues to spread throughout Connecticut and the rest of the United States, we may see legislation allowing for a second PPP Loan program geared towards companies impacted the most and hit hardest by the pandemic. In the meantime, many businesses are struggling with forgiveness for the PPP loan they already received.
PPP Loan Forgiveness Basics
For a PPP loan to be forgiven, payroll and other eligible expenses need to be monitored through a covered period:
- PPP Loans funded prior to June 5th, 2020 – an 8-week or 24-week covered period can be used
- PPP Loans funded after June 5th, 2020 – only a 24-week covered period is permitted
PPP Loan Documentation for Forgiveness
Businesses will need to submit the proper documentation to prove payroll expenses for PPP loan forgiveness, which can include bank statements, tax forms, payroll tax filings, cancelled checks, or account statements documenting employer contributions to health insurance and retirement plans, if any. For forgiveness of non-payroll expenses documentation may also include business mortgage interest payments, rent or lease payments or utility payments.
PPP Loan Forgiveness Application
Borrowers can submit the PPP loan forgiveness application before the end of the covered period if funds have been depleted. This may apply for PPP loan forgiveness any time up to the loan’s maturity date and no later than within 10 months after the last day of the covered period.
How to Apply for Loan Forgiveness
PPP loan forgiveness require one of the following signed forgiveness application forms from the Small Business Administration (SBA), which the lender should file on behalf of the business.
- SBA form 3508 – the most complex application, should only be used if the employer doesn’t qualify for 3508S or 3508EZ
- SBA form 3508S – the simplest application, which can only be used if the loan was $50,000 or less
- SBA 3508EZ form – newer, scaled back PPP forgiveness application
Easier PPP Forgiveness with the EZ Form
To take advantage of easier forgiveness with the SBA 3508EZ form you must meet the following eligibility guidelines:
- Self-employed, sole proprietors, and/or independent contractors who didn’t have any employees when they applied for their PPP loan
- Businesses that didn’t reduce salaries by more than 25% and also didn’t reduce the number of employees or the average number of paid hours
- Businesses that didn’t reduce salaries by more than 25% and also weren’t able to operate at the same level of activity due to COVID restrictions
To wrap up PPP loans, the most common PPP loan forgiveness question from Connecticut businesses we see is:
“Can employers participate in both the CT shared-work program take receive a PPP Loan?”
The Connecticut Department of Labor created the Shared Work Program which is intended to help business prevent layoffs by allowing them to temporarily reduce employee hours and use partial unemployment benefits to supplement lost wages. Connecticut employers may participate in both the CT Shared Work Program and the PPP loan program, however, it’s important to be aware that a reduction of pay by 25% disqualifies the PPP loan, so reduction of hours and how it affects pay should be tracked closely.
Federal Social Security Withholding for Employees
On August 8, President Trump signed an order to defer employee Social Security taxes from September 1 - December 31, 2020. Only employees who make less than $4,000 bi-weekly in wages, or the equivalent according to their pay schedule, are eligible. The deferred taxes are postponed until January - April of 2021, and they will start accruing interest and penalties on May 1, 2021.
Businesses may decide whether they will participate or not in the program, but it is not a requirement. Although it’s a potential benefit for employees it can also be a risk for the employer. For example, if an employee leaves or is terminated after a tax deferment has been made, the company may be on the hook when the taxes are due in 2021.
Federal Tax Credits and The CARES Act
Employee Retention Tax Credits
Eligible employers can claim the employee retention credit, a refundable tax credit equal to 50 percent of up to $10,000 in qualified wages for each employee (including health plan expenses), paid after March 12, 2020 and before January 1, 2021. Eligible employers are those businesses:
- With operations that have been partially or fully suspended due to governmental orders due to COVID-19,
- That have experienced a significant decline (50% less of it’s gross receipts) when compared to the same calendar quarter in 2019.
This refundable credit cap of $5,000 per employee applies against certain employment taxes on wages paid to every employee, which include federal income tax withholding, employee Social Security and Medicare taxes, and employer Social Security and Medicare taxes for all employees. Eligible employers can retain federal employment tax deposits in anticipation of the credit. They can also request an advance of the employee retention credit for any amounts not covered by the reduction in deposits. The advanced payments will be issued by paper check to employers.
One important note to consider here are reductions for deposits in anticipation of the paid sick and family leave tax credit.
Emergency Paid Sick Leave Tax Credits
Another one of the great parts of the CARES Act for businesses is that they are eligible for tax credits equal to the amount of emergency paid sick leave employees use and the employee retention credit... dollar for dollar! This is covered under the Families First Coronavirus Response Act, FFCRA.
With the FFCRA, employers with less than 500 employees can provide sick leave that’s reimbursed to the employer in the form of tax credits. An employee who is unable to work (including telework) because of coronavirus quarantine or self-quarantine or has coronavirus symptoms and is seeking a medical diagnosis, is entitled to paid sick leave for up to ten days (up to 80 hours) at the employee’s regular rate of pay, or, if higher, the Federal minimum wage or any applicable State or local minimum wage, up to $511 per day, but no more than $5,110 in total.
Emergency Paid Sick Leave Eligibility and Pay Rates
For employees who take emergency paid sick leave for the eligible reasons below, they will be paid their regular rate of pay:
- The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
- The employee has been advised by a healthcare provider to self-quarantine because of COVID-19 concerns; or,
- The employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis.
In these circumstances, employees are entitled to a maximum payment of $511.00 per day, or $5,110 total over the entire sick leave period.
For employees who take emergency paid sick leave for the eligible reasons below, they will be paid two-thirds their regular rate of pay;
- The employee is caring for an individual who is subject to a federal, state, or local quarantine or isolation order related to COVID-19, or who has been advised by a healthcare provider to self-quarantine because of COVID-19 concerns;
- The employee is caring for the employee’s child because the child’s school or place of childcare has been closed, or the child’s childcare provider is unavailable, due to COVID-19 precautions; or,
- The employee is experiencing any other substantially similar condition as may be specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and Secretary of Labor.
In these circumstances, employees are entitled to a maximum payment of $200.00 per day, or $2,000 total over the entire sick leave period.
Employers must post FFCRA information or posters to alert employees about their rights and requirements under the program, so don’t forget to put up your poster!
Federal Employee Rights Under EFMLA
The existing Family & Medical Leave Act has also been extended on an emergency basis, under the EFMLA. Employees are eligible for the EFMLA if they worked for the company for at least 30 days, but there are no hours-worked requirements like the current FMLA.
What The Emergency Family & Medical Leave Act Covers
EFMLA requires covered employers to provide up to 12 weeks of job-protected leave to eligible employees, with the first two weeks unpaid under EFMLA. However, for those first ten days of EFMLA, the employee may elect to use sick leave or Emergency Paid Sick Leave under the FFCRA. Employees can also use accrued / unused vacation time too, but employers can’t require it.
An eligible employee may take advantage of the EFMLA, if the employee is unable to work or telework, to care for a son or daughter (under 18 years of age) of an employee if the school or the childcare provider is unavailable, due to COVID-19 precautions. To the extent an eligible employee is able to care for his/her child, expanded FMLA is not available.
Leave can be taken intermittently, with employer approval. There is one exception; where schools are on a hybrid learning model, employees don’t need employer consent because the leave is not considered intermittent.
Emergency Family & Medical Leave Exemptions
For small business with fewer than 50 employees, if the business closed prior to April 1 and temporarily furloughed employees, those furloughed employees would not be eligible for the emergency leave benefits until the business is operational. Any employees who have continued to work or are working at a minimal part-time capacity on or after April 1 may be eligible under the qualifying circumstances as listed in the law. To clarify, employees can only take EFMLA when work is actually available.
Healthcare providers or emergency responders, including non-clinical employers, may elect to exclude an employee from EPSLA and EFMLA with the exception of dental offices.
Connecticut Paid Family and Medical Leave
The Connecticut Paid Family Medical Leave Act (CT PFMLA) allows employees access to paid leave for life events covered under the federal Family and Medical Leave Act of 1993 (FMLA), the Connecticut Family and Medical Leave Act (CT FMLA) and the Connecticut Family Violence Leave Act.
When the Connecticut PFMLA Begins
The CT-PFMLA will begin in January 2021 with eligible employee funding the program. Eligible employers, through payroll deduction of .05% remit those amounts as contribution to the Connecticut Paid Leave Authority Trust Fund. Individuals who are self-employed or are sole proprietors can begin making contributions to the CT Paid Leave Authority trust fund as well.
It’s funded by a maximum contribution of 0.5% percent of each employee’s wages. Employees can take paid leave starting in 2022.
CT PFMLA Employee Eligibility
Eligible employees are those who have earned at least $2,325 in the highest earning quarter within the five most recently completed quarters and are either currently employed by a Connecticut employer or were employed by a Connecticut employer during the 12 weeks immediately preceding the application for paid leave. In addition, eligible employee includes those who are self-employed or a sole proprietor or a member of a collective bargaining until that has negotiation inclusion in the program and have enrolled in the CT-PFMLA program. Excluded employees are employees of Federal government, State and Municipalities who are members of a union as well as local and regional members of Boards of Education.
Connecticut Stafford Act Relief Funds
In August, after Hurricane Isaias, Connecticut Governor Lamont submitted an application for Lost Wages Grant under The Stafford Act. The grant provides a $300 weekly wage supplement to existing unemployment benefits in response to the economic crisis caused by the COVID-19 pandemic. President Trump allowed FEMA to use up to $44 billion in Stafford Act disaster relief funds to help workers who have lost their income due to the emergency.
Connecticut Sexual Harassment Prevention Training Requirement
The Connecticut Time’s Up Act went into effect October 1, 2019, and expanded required sexual harassment training, posting obligations, time-to-file a claim for sexual harassment, and damages for violations.
Under the Time’s Up Act, covered employers, those with one employee or more, must provide sexual harassment training to their supervisors and employees, when the employer has three or more employees.
When an employer is found to have had a discriminatory employment practice, the prevailing plaintiffs may be awarded reasonable attorneys’ fees and punitive damages where the employer’s conduct is extraordinarily offensive.
Legislation Uncertainty in Connecticut and Beyond
While there are plenty of complicated moving parts in the HR world right now, keeping on top of changing legislation will be paramount in meeting compliance obligations, identifying your options early, and continuing to support employees in the best way possible.
Otherwise, stay tuned for more information and HR guidance - we’re here to keep Connecticut employers like you up to date along the way and informed of changes!