Everything you need to know about the small business excemption.
As of August 28, 2020, there have been more than six million documented cases of COVID-19 in the United States. To put this into perspective, the United States has 4 percent of the world’s population, yet 25 percent of its coronavirus cases. No one was anticipating the weight of this virus, especially regarding the economy. Businesses across the nation have been dramatically impacted, as well as their employees. This is why the Families First Coronavirus Response Act (FFCRA) was created.
This act enforces mandated paid leave requirements for employers with less than 500 employees to support those dealing with the current pandemic. For employees, 2 weeks of Emergency Paid Sick Leave and 10 weeks of Expanded Family Leave will be provided to those affected by the COVID-19 outbreak — and to help employers, relief will be provided through tax credits.
With that being said, this act isn’t as straightforward as it seems, and due to two exceptions, millions of workers are being left out. This creates confusion among employers, as they aim to protect their employees, business, and themselves.
Small Business Exemption — What Does It Mean?
After the Emergency Family and Medical Leave Expansion Act took effect on April 1, 2020, the Department of Labor (DOL) stated that an exemption would be made for small businesses that employ fewer than 50 employees. An exemption was also made for health care providers, clarified further effective September 16th, 2020.
According to the regulations, as an employer, you can claim the small business exemption if you meet at least one of the following:
- If you were to provide paid sick leave, this would impact your finances and obligations in a way that would exceed available business revenues, causing the business to cease operating at a minimal capacity.
- If an employee or group of employees were absent, this would lead to significant financial risk and significantly impact operational capabilities based on their specialized skills, responsibilities, or knowledge.
- No other workers are willing or able to replace the employee or employees requesting paid sick leave, and their position is required to operate at a minimal capacity.
You must also be operating at a minimal capacity to claim this exemption. Meaning if you closed the doors to your dental practice before April 1, 2020, employees who are temporarily absent will not be eligible for the emergency leave benefits until you are operational once again.
Documentation Is Required for Reimbursement
You should consider your decision closely when seeking the small business exemption. It may be difficult for you to prove that this paid leave would jeopardize your business, especially because the wages provided will be reimbursed dollar-for-dollar in the form of a tax credit.
Remember, your dental practice may be exempt if the following are true:
- You have fewer than 50 employees
- Leave is requested because a child’s school or place of care is being closed, or the child care provider is unavailable due tor COVID-19 reasons
- An authorized officer of the business (in this case, you or an office manager) has determined that at least one of the three conditions listed above is satisfied
When using FFCRA’s small business exemption, it’s essential to weigh the associated risks. As discussed, most employers are eligible for refundable tax credits, covering the cost of paid leave. In that sense, the benefits of the exemption may not outweigh the potential risks (i.e. legal defense costs due to misapplication).
For example, if one of your team members files a claim with the U.S. Department of Labor (DOL) against you, and you claimed the exemption, costly consequences may result. The DOL may disagree with the basis of your exemption claim. In this case, you would potentially need to pay not only the amounts owed, but also liquidated damages, and your legal fees. There are also risks associated with disgruntled employees who are denied paid leave.
If you do decide that the small business exemption is best for your dental practice, you must document why your dental practice qualifies.
For example, veterinary practices that determine they cannot provide paid leave must be prepared to show why. You will not need to send any documentation to the DOL for exemption. However, you need to collect and keep all supporting documentation should an enforcement agency investigate an employee’s claim that they were denied paid leave.
Read the latest Q&A for more details.
HR for Health Can Help
We understand that HR is complex, which is why HR for Health, we provide you with the tools you need to simplify human resources. Whether you’re a dentist, physician, optometrist, chiropractor, physical therapist, or own/manage a related dental practice, we’re here to help you make the right decisions today to protect you tomorrow.
If you are a current HR for Health client and have additional questions, please reach out to our team by calling 877-779-4747. Please keep in mind that due to an influx in questions related to the COVID-19 outbreak, our response time may be slower than usual, but we will get back to you as soon as we can!
If you are not a current HR for Health client and have additional questions, please schedule an HR consultation with us by booking time here or calling us at 877-779-4747, option 1.
Learn more about the latest HR law updates with the experts at HR for Health. Contact us by phone at 877-779-4747 or by emailing [email protected] today.
HR for Health is one of the nation’s leading Human Resources Management Systems (HRMS) used by small to mid-sized practices.
Quick note: This is not to be taken as legal or HR advice. Since employment laws change over time and can vary by location and industry, consult a lawyer or HR expert for specific guidance. Learn about HR for Health’s HR services