Update from feds: DOL releases opinion letters regarding FMLA, FLSA

DOL

It was a busy week for the DOL — not only did the agency release a new set of FMLA forms for employers, but it wrote four opinion letters addressing several FMLA and FLSA concerns. 

As far as the forms go, the only thing that changed is the expiration date. The updated FMLA forms are exactly the same as the previous set.

The opinion letters will be of more interest to employers, as they address tricky scenarios managers may run into when dealing with the FMLA or FLSA.

Here’s a rundown of the situations the DOL addressed in the letters:

1. Organ donation is covered under the FMLA

In FMLA 2018-2-A, an employer asked whether an employee could use FMLA leave for undergoing organ donation surgery. The DOL says yes. Even if the employee was in good health before the surgery, organ donation still qualifies as a “serious health condition,” and therefore is covered under the FMLA.

A serious health condition is defined as an illness or physical condition that requires inpatient care at a hospital. Since the typical hospital stay after organ donation surgery is four to seven days, this certainly qualifies as a serious health condition.

2. FMLA leave “freezes” no-fault attendance policies.

In FMLA 2018-1-A, an employer detailed its attendance policy. Employees would accrue points for absences, and if those absences added up to a certain number in a year, they’d be terminated. But employees could also shave some points off with consistent good attendance. The employer’s question? If an employee takes FMLA leave, does that mean they cannot accrue or lose any absence points?

The DOL said yes, employers are permitted to “freeze” the absence points of employees on FMLA leave. It’d be an FMLA violation to give employees absence points while on leave, but it’d also be an unfair benefit to remove points while employees were not working.

Note: This freezing policy must apply equally to all types of leave, such as vacation and worker’s comp.

3. Voluntary health and wellness events can be unpaid.

In FLSA 2018-20, an employer asked if employees needed to be paid for attending voluntary biometric screenings during the work day. The DOL says no. Since the event is voluntary, and is primarily for the benefit of the employee, it isn’t compensable. When an employee is attending a wellness event, they are relieved of their job duties.

4. Clarification on retail or service establishment exemption

In FLSA 2018-21, an employer wanted to know if the “retail or service establishment” exemption applied to sales reps at their business. The company sold a unique technology platform to a variety of clients, and not in large quantities. The DOL decided this type of business qualified for the exemption.

The retail or service establishment exemption says employees don’t receive overtime pay if they meet the following requirements:

  • they work at a retail or service establishment
  • their regular rate of pay exceeds one and a half times the minimum wage, and
  • more than half their earnings consist of commissions.

 

Marijan Pavisic MS SPHR

IRS’ first FAQ on paid-leave credit answers some key questions

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Employers finally have federal guidance regarding the paid-leave tax credit created under the Tax Cuts and Jobs Act (TCJA), but that guidance is likely to fall short of what many firms were expecting.

In fact, in the initial FAQ on the tax-credit, the IRS even said it will eventually offer more comprehensive guidance for employers. But until that additional guidance comes, employers will have to make do with what the feds just rolled out.

12.5% to 25% credit

What employers already knew about the credit: It was established for employers that provide paid family and medical leave, as described under the FMLA, to employees for wages paid between Jan. 1, 2018, and Dec. 31, 2019 and will sunset unless Congress decides to extend it. Employees on leave must be paid at least 50% of their normal wages while on leave.

The tax credit ranges from 12.5-25% of the amount of wages paid to a worker during leave, depending on exactly how much of their normal wages are actually paid out. The credit only applies to those who earn below $72,000 and doesn’t apply if by paid leave is mandated by their state or local law.

While the FAQ essentially reiterated a lot of what was in the TCJA, it did clarify what constitutes “paid family and medical leave” under the credit:

  • Birth of an employee’s child and to care for the child.
  • Placement of a child with the employee for adoption or foster care.
  • To care for the employee’s spouse, child, or parent who has a serious health condition.
  • A serious health condition that makes the employee unable to perform the functions of his or her position.
  • Any qualifying exigency due to an employee’s spouse, child, or parent being on covered active duty (or having been notified of an impending call or order to covered active duty) in the Armed Forces.
  • To care for a service member who is the employee’s spouse, child, parent, or next of kin.

In addition, if employers provide paid vacation, personal, medical or sick leave that isn’t specifically for one of those reasons, it will not be considered family and medical leave for the purposes of the tax credit.

The FAQ also clarified how employers must calculate the credit. For example, companies must reduce their deductions for wages paid by the amount of any tax credit for paid leave.

The attorneys over at Winston & Strawn LLP offered a specific example of how the calculation would apply to an employee earning $50,000 that included $5,000 of paid FMLA leave. In this example, the employer received a $1,250 credit for the leave it provided. Therefore, it could only deduct $48,750 of the employee’s wage expense ($50,000-$1,250).

What the feds didn’t include

Despite the clarifications, the IRS said IT has a lot more guidance coming on the finer points of the credit. Specifically, the agency said it will address (“eventually”) the following in future guidance:

  • When the written policy [on paid FMLA for purposes of tax-credit calculation] must be in place;
  • How paid “family and medical leave” relates to an employer’s other paid leave;
  • How to determine whether an employee has been employed for “one year or more”;
  • The impact of state and local leave requirements; and
  • Whether members of a controlled group of corporations and businesses under common control are treated as a single taxpayer in determining the credit.