Category Archives: Employer’s Guide – COVID-19

THE YEAR THAT (SORT OF) WASN’T: Five Lessons Employers Learned During the COVID-19 Pandemic and What They Mean for the Future

Coronavirus, COVID-19, Employer's Guide - COVID-19 March 15, 2021 Leave a comment

As a labor and employment lawyer, over the past year, I had both a front row view of the ways the COVID-19 pandemic shaped workplaces in a broad array of industries and the privilege of working with employers to tackle truly unprecedented issues.  With the milestone anniversary of the pandemic at hand, it is time to reflect on some of the lessons we can learn from this transformational experience.

Lesson 1: The Value of the Mission-Driven Employee

A common thread that ran through many of the often unique challenges businesses faced this past year is that the value individual employees contribute to an organization is both inestimable and not necessarily tied to salary grade.  Some of the lowest paid employees risked their wellbeing to remain on the frontlines, and their dedication and hard work opened employers’ eyes to the value these employees provide.  We have seen that dedicated employees can often find creative ways to solve problems.  We have also seen other employees struggle in this new environment for innumerable reasons, including more limited supervision, fewer support resources when working from home, limited adaptability and flexibility of the employee, and the challenges of balancing work and parenting responsibilities (which are more pronounced when children are attending school from home).

The one thing that has been universal is that mission-driven employees find a way to succeed, while employees who view work as a job often come up short.  From entry level to the c-suite, this dichotomy in attitude reinforces that employees who buy into the mission of the organization find ways to accomplish that mission.  Going forward, employers can learn from this equation and use it in all phases of employee relations, including recruitment, promotion, employee benefits and incentives, and workforce management to identify and develop employees who are mission-driven.  At the same time, employers can foster dedication and loyalty by treating employees fairly, showing them appreciation and respect, and fostering unity behind the organization’s mission. 

An interrelated factor is the importance of mental health.  We saw once valuable employees so overwhelmed by fear and anxiety that they became unable to focus on their jobs. This sobering experience gives employers a new perspective on and appreciation for the importance of paying attention to their employees’ mental health as much as their physical health. Employers who formerly recognized the need to provide their employees with health insurance benefits but who disclaimed responsibility for tending to their employees’ mental health have awakened to the truth that mental health issues can be one of the most serious drains on employee productivity and company morale.

Lesson 2: The Office is not the Only Place Employees can Work

While the steady rise of technological advances already made it possible for employees to work from home efficiently, many employers have been resistant to allowing work remote, fearing loss in productivity and dilution of corporate cohesion and culture.  When the pandemic forced many office workers to work from home on a prolonged basis, employers learned their fears were, in many instances, overstated.  Dedicated and loyal employees (see Lesson 1) have worked as efficiently, if not more efficiently, outside of the office, finding new and creative ways to get the job done. 

An important takeaway from the new prevalence of remote work is that, even within the same position, employers have witnessed varying degrees of success from employee to employee working remotely.  Although some employees cannot concentrate at home, others can focus much better without the distraction of co-workers and the fatigue of commuting.  Employers should take note of this fact and look for ways to allow employees to work in the environment where they are most productive and successful.  Employers who are overly rigid about where workers perform their jobs risk impairing productivity, morale, dedication, and, ultimately, retention and recruitment.

Lesson 3: Reports of the Death of the Office are Premature

Although employees are working productively outside of the office, on-site work still holds an important place in successful businesses.  From training new employees to setting a corporate culture, working in an office creates important synergies within an organization.  When employees are together, their ideas cross-pollinate, producing better ideas. Employees can work better as a team, and motivate and inspire one another when they interact with each other face-to-face in an office setting.  Remote work has taken a toll on these beneficial activities that we have not replaced despite all the technology at our fingertips. Although a Zoom call can be a valuable tool and is often a necessity in today’s forced remote work arrangements, it is sometimes a poor substitute for a face-to-face meeting and is seldom as effective in building teamwork and creating and enhancing a business’s culture as a live social event.

Successful businesses will look for a balance between isolated workplaces where some employees thrive and the cohesion that comes from working in an office.  Organizations suffer without collaboration and, when their employees work only in silos, they seldom develop the unity of mission that leads to success.  In addition, employees often find job satisfaction and inspiration in their interactions with their colleagues. It is usually easier to walk next door to ask your colleague a question or chat with her about an issue than to make a phone call or exchange emails or text messages. What’s more, the results of the face-to-face meeting are usually more productive, not to mention, more satisfying than the remote conversation. Each organization will have to strike the right balance of office and remote work, but we have learned that technology alone is not a substitute for in-person interactions.

Lesson 4: Travel is Less Essential than we Thought

Although there is no substitute for meeting in person with a customer, there is also no doubt that corporate travel is a significant expense and disrupter of productivity.  Corporate travel can be invaluable in promoting in-person interactions that help build key relationships both within and outside the organization, but all too often in the past it was done without even thinking about whether there was a cheaper, less time-consuming, but just as effective alternative.  The era of corporate travel is far from dead, but the pandemic taught us that it is not as vital as we once thought.  We can use technology to train, gather information, work collaboratively, and develop relationships.  Again, technology is not a substitute for in-person interactions, but we now know there are viable alternatives to planes, trains, and automobiles that may help increase employee efficiency and boost employee morale. 

Additionally, for certain positions, finding talented employees who are willing to travel extensively can be a real challenge.  Employers who can find ways to minimize the personal sacrifices employees make to travel will find themselves rewarded with loyal employees who are satisfied with their jobs.   

Lesson 5: Adapt or Die

Perhaps one of the most important lessons from the pandemic is that employers must be prepared to adapt.  Those who are unable or unwilling to do so will suffer the adverse consequences. Employees who have found a new work-life balance working remotely will not want to give it up, just as clients who have grown comfortable with video meetings will not want to pay for travel that does not provide sufficient value.  We are in a transitional period and employees are becoming more assertive and clear-headed about what they do and do not want out of their employment.  That trend started when the millennial generation entered the workforce, but it has become more pronounced across all generations due to the pandemic.

Employers looking to recruit and retain top talent will need to meet the expectations of these employees or risk losing them to competitors who offer more flexibility.

Questions? Let me know.

Guest Blog: Potential Taxation Without Representation – The Implications of State Taxation on Teleworking

COVID-19, Employer's Guide - COVID-19 February 9, 2021 Leave a comment

Beginning in March 2020, millions of Americans were forced to work from home as a result of the COVID-19 pandemic.  While the absence of a commute and the option of wearing sweatpants rather than slacks during meetings were initially welcome changes to the workday, it did not seem likely that we would still be “Zooming” to work from our kitchen tables in 2021. With the pandemic still surging, many Americans have not returned to the office and will have to reckon with possible tax implications stemming from their forced exile.  

Physically commuting from home in one state to work in another, such as from New Jersey to Philadelphia or New York City, is not new. Likewise, the tax implications for employees who commute are not surprising. Generally, the employee is taxed in both her home state (residence-based tax) and the state where she works through what is often referred to as a commuter tax (source-based tax), with the home state giving a credit or other accommodation to mitigate the duplicate tax cost.

Telecommuting, however, is not commuting. Employees who telecommute work from their home states.  Thus, it would be reasonable for those employees to expect to only be taxed in their home state because they’re not physically crossing state lines, right? Not so fast! If Pennsylvania, New York or Delaware are involved, both employees and employers might find surprising tax results from telecommuting, even when they are simply complying with mandatory work–from-home orders.  For employees of employers in these states this means that dutifully working from home across state lines in accordance with the law, they may still be subject to tax in a state they have not set foot in for nearly a year as if they were physically commuting. In turn, this may create an unintended connection between the employer and the state where the employee lives, thereby subjecting the employer to taxation there. This conundrum also underscores the internecine struggle between the states over tax dollars derived from wages earned while telecommuting.

Employees: While most employees in the country are not currently impacted by this kind of law, a problem arises for employees of employers located in Pennsylvania, Delaware and New York because they have enacted the “convenience of the employer” rules. If an employee works remotely because her employer requires it, perhaps because that is where a customer is located, the employer’s state would not tax the employee on the income earned from that work. However, if the employee works outside of the employer’s state for any other reason, the employer’s state can tax that employee’s income regardless of where it was actually earned. The convenience of the employer rule in the current environment begs this question: is a mandatory work-from-home order a requirement or a convenience?  This is a question that has yet to be answered. Some states, such as New Jersey, have offered credits for its residents who are adversely impacted by this rule for the length of the pandemic.  

Employers: It is uncontested that states and municipalities can impose income taxes on businesses that have a physical location in the state or have employees who work in the state. These connections create tax nexus. The question that comes up when an employer has employees working from home in another state is whether telecommuting across state borders alone creates tax nexus to a state to which they were not otherwise connected. If nexus is created for the employer with the employee’s home state, the employer is subject to that state’s taxes. However, the universal nature of the COVID-19 pandemic has motivated some states to address this issue, at least in the short-term. New Jersey’s Division of Taxation has stated that nexus for corporate tax and sales and use tax purposes will not be imposed on out-of-state employers during the pandemic through telecommuting employees. Likewise, Pennsylvania’s Department of Revenue indicated it will not impose Corporate Net Income Tax nexus or Sales and Use Tax nexus on non-Pennsylvania businesses based solely on employees working from home in the state. The state of New York, on the other hand, has declined to issue guidance on this topic, meaning that non-New York employers of New York residents may find themselves unexpectedly exposed to New York State (and potentially City) tax.

WHAT’S COMING:

States without the convenience of the employer rule might become envious as out-of-state employees continue working from home even after the conclusion of the pandemic and the tax dollars associated with their wages remain home with them. Perhaps a harbinger of things to come, one state, Massachusetts, reacted to this tax conundrum created by the pandemic by enacting a temporary “convenience of the employer” policy. This new rule states that employees who work for Massachusetts-based employers and are working remotely outside the state because of a work-from-home order in a neighboring state are still required to pay income tax in Massachusetts. This arrangement is slated to remain in place until ninety days after the governor of Massachusetts ends the state of the emergency created by the pandemic.

Although this measure is temporary, Massachusetts has experienced backlash from other states and numerous tax organizations. In October 2020, New Hampshire petitioned the United States Supreme Court for relief, requesting that it strike down this law as an unconstitutional tax on its citizens who telecommute.  The lawsuit also raises questions as to whether such convenience of the employer rules violate the Dormant Commerce Clause, which bars states from unduly burdening interstate commerce, even in the absence of federal legislation regulating the activity.  This lawsuit has attracted a lot of attention in the tax community, with over a dozen amicus briefs filed in the matter, including those from Connecticut, Hawaii, Iowa, and New Jersey, as well as public policy groups such as the National Taxpayer Union, the Tax Foundation, the Cato Institute, and Americans for Tax Reform. The states joining New Hampshire did so because many of their citizens are directly impacted by “convenience of the employer” rules subjecting them to taxation in a state to which they have no physical connection and thereby draining tax revenue from the residence state.  The Court has not determined whether it will hear the case, but the controversy is generating interest as other states might follow suit.

With many employees likely to continue teleworking even after COVID-19 vaccinations permit safe return to the office, it is critical to fully appreciate the impact these decisions may have on where tax is owed by telecommuters and their employers.  

ABOUT THE AUTHORS:

Kelly Barry is a member of the firm’s Business and Corporate Department and Taxation Practice Group assisting clients in a wide range of corporate matters, including those involving transactional law, tax, and trusts and estates.  She can be reached at kelly.barry@flastergreenberg.com or 856.382.3305.

David S. Neufeld has practiced law for more than 35 years, advising individuals and businesses around the globe on sophisticated federal income and estate tax planning, state tax residency planning and audits, asset protection, and insurance and investment planning. In addition, he helps business clients engaged in both inbound and outbound transactions (most notably involving China and India) as well as the individual tax issues that arise from cross-border business transactions. He can be reached at david.neufeld@flastergreenberg.com or 856.382.2257.

An Employer’s Guide to the COVID-19 Coronavirus Outbreak & FAQs

Coronavirus, Employee Relations in the Workplace, Employer's Guide - COVID-19, New Jersey Family Leave Act March 17, 2020 Leave a comment

Coronavirus Virus Outbreak

This is an unprecedented time and employers face an evolving crisis and fast-moving changes to laws.  The team at Flaster Greenberg is prepared to help guide employers on compliance with existing and new laws, as well as best practices.  This is a summary of the most important things employers should keep in mind when it comes to adjusting policies to address this crisis.

On March 14, 2020, the U.S. House of Representatives passed the Families First Coronavirus Response Act, which, among other things, expands paid leave and Family Medical Leave Act (FMLA) benefits.  It also offers tax credits to help offset the burdens imposed by the expanded leave.  While this is not yet law, employers should account for its implications in formulating their workplace response.

Emergency Paid Leave and FMLA Expansion

The Act has provisions relating to nutrition, public health, insurance, and more, but the most relevant proposed changes for the workplace require employers with fewer than 500 employees to offer paid leave and expands FMLA rights for employees of those businesses.  Perhaps the most significant of the changes reflected in the Act is that they require covered employers to provide additional paid leave for parents if their child’s school is closed due to the coronavirus.

In summary, for employers with fewer than 500 employees, the paid leave provisions of the Act:

  • Require covered employers to provide each full-time employee with paid sick leave to:
    • Isolate because the employee has been diagnosed with coronavirus;
    • Obtain a diagnosis or care if the employee is suffering from symptoms of coronavirus;
    • Comply with recommendations of a public official or healthcare provider on the basis that employee’s presence at work will jeopardize the health of others due to exposure to coronavirus or exhibition of symptoms of coronavirus;
    • Care for a family member who is isolating because of a diagnosis, seeking care or diagnosis for symptoms, and/or must isolate to comply with recommendations of a public official or healthcare provider on the basis that family member’s presence in the community will jeopardize the health of others due to exposure to coronavirus or exhibition of symptoms of coronavirus;
    • Care for a child if his/her school has been closed or childcare is unavailable due to coronavirus;
  • Offer up to an additional 80 hours of paid sick leave for fulltime employees and two-weeks’ for part-time employees based on hours normally worked;
  • Prohibit an employer from applying sick leave or other paid time off otherwise available to meet this requirement;
  • Protect employees from being required to find a replacement co-worker to cover time the employee will miss;
  • Protect employees from discrimination and retaliation; and
  • Allow an employer to pay two-thirds of an employee’s compensation rate if the basis for the leave is to care for a child or family member (but not the illness of the employee).

In concert with the paid leave provisions of the Act, the FMLA expansion:

  • Applies the leave requirement to all employers with fewer than 500 employees, not just those with 50 or more employees, which has been the threshold for FMLA;
  • Exempts smaller employers with fewer than 50 employees only if complying “jeopardizes the viability of the business as a going concern”;
  • Allows coronavirus leave to be deemed FMLA, job-protected leave if taken at any time though December 31, 2020;
  • Makes emergency FMLA leave available to employees who have been employed for at least 30 calendar days, as opposed to the 12 months ordinarily required for FMLA leave;
  • Expands the definition of “parent” to include stepparents and others who act in loco parentis;
  • Expands the reasons employees may take FMLA leave to include:
    • To comply with a recommendation or order by a public official or healthcare provider on the basis that (i) the physical presence of the employee on the job would jeopardize the health of others because of the exposure of the employee to coronavirus or because the employee exhibits symptoms of the coronavirus; or (ii) the employee is unable to both perform the functions of the position of such employee and comply with such recommendation or order;
    • To care for a family member if a public official or healthcare provider recommended that the presence of the family member in the community would jeopardize the health of other individuals in the community; and
    • To care for a child under 18 years of age because the child’s school is closed;
  • Prohibits an employer from requiring an employee to use paid leave as part of FMLA leave, though the employee may opt to do so;
  • Requires an employer to provide paid leave after the first 14 days (which may be covered by the emergency leave law above), provided, however, such leave may be paid at no less than two-thirds of the employee’s pay; and
  • Provides certain exemptions for the requirement to restore an employee to his/her former position for employers with 25 or fewer employees.

Available Tax Credits for Employers and Self-Employed Individuals

To help offset the burdens of compliance, the bill offers certain payroll tax credits to those employers who must pay wages to employees pursuant to the expanded paid leave and FMLA benefits under the Act.  However, these tax credits under the Act will not be available to employers already receiving a credit for paying FMLA amounts pursuant to the Tax Cuts and Jobs Act of 2017 (Public Law 115-97).

In general, employee wages are subject to a total 12.4% Social Security payroll tax, which is paid equally by employers and employees.  Under the Act, employers will receive certain refundable tax credits through December 31, 2020 to offset the portion of the Social Security tax that they are required to pay. The refundable tax credits will be provided for Social Security taxes otherwise imposed on:

  • Qualified sick leave wages of up to $511 per day paid to employees who are on sick leave to care for themselves, or if the employee is on qualified sick leave to care for a family member or child if  the child’s school is closed, then the employer will receive tax credit for Social Security tax imposed on qualified sick leave wages of up to $200 per day. Qualified sick leave pay under the Act is limited to the excess of 10 days over the aggregate number of days taken into account for all preceding calendar quarters.
  • Qualified FMLA wages of up to $200 per day (capped at a total of $10,000 for the same employee for all calendar quarters) paid to employees who are on qualified FMLA leave.

Refundable tax credits will also similarly be available to self-employed individuals who receive “qualified sick leave equivalent pay” or “qualified FMLA equivalent pay”.  Specifically, the self-employed pay tax credits will be provided for income tax assessed on:

  • 100% of an eligible self-employed individual’s pay that constitutes “qualified sick-leave equivalent pay”, or 67% of the same if the individual is taking care of a family member or a child following the child’s school closing.  For these purposes “qualified sick-leave equivalent pay” is pay that equals the lesser of the individual’s average daily self-employment income, or $511 per day if the sick leave is for the care of the self-employed individual.  The $511 limit is reduced to $200 per day if “qualified sick-leave equivalent pay” is being paid to care for a sick family member or child following a school closing.  It would be available for 10 days over the number of days taken into account in preceding years.
  • 100% of an eligible self-employed individual’s pay that constitutes “qualified FMLA equivalent pay”.  An “eligible” self-employed individual for these purposes is an individual that would be entitled to receive paid leave under the Act if he was an employee of an employer.  “Qualified FMLA equivalent pay” may only be paid for up to as many as 50 days, and may equal the lesser of $200 per day or the individual’s average daily self-employment income for the taxable year.

Technical corrections and future guidance are expected to clarify and how long these tax credits may be available to small employers and self-employed individuals.

These refundable tax credits will reduce taxes owed by employers and self-employed individuals dollar-for-dollar .  Additionally, as a “refundable” tax credit, an employer or self-employed individual will receive the full-amount of the tax credit even if the credit exceeds the employer’s entire tax bill. Therefore, employers and individuals will continue to withhold applicable taxes in the same manner as taxes are withheld for wages for qualified sick leave and qualified FMLA leave, but expect to benefit from the tax credits when they complete applicable quarterly and/or annual tax returns.

While the Act is important because it imposes new and unfamiliar obligations on employers, existing laws also provide rights and are significant to navigating the impact of this pandemic on the workplace.  To better understand how all of these laws fit together, we compiled the following answers to frequently asked questions.  Employers should understand that this situation and the law are changing in ways we cannot necessarily anticipate.  Employers should consult with counsel to review and discuss how they respond to these issues.

Q&A

Q:    I have an employee who has tested positive for coronavirus or is exhibiting potential symptoms, what do I do?

A:    Send that employee home.  You have the right to send such an employee home even involuntarily.  Under the Act, if passed, such employees would be entitled to an additional two weeks of paid leave (in addition to any other vacation, sick time, or other paid time off otherwise available) and FMLA job-protected leave.

Q:    I have an employee who has been in close contact with an exposed individual or is otherwise in a high risk situation, may I prevent the employee from working or coming to the office?

A:    Yes.  If the employee is not working remotely, he or she  will be eligible for paid leave.

Q:    May I require employees to work remotely?

A:    Yes.  Employees may be required to work remotely, however, they should be provided with necessary tools to work remotely if they do not otherwise have them and if the tools are required for work; e.g., computers, printers, etc.  Employers should keep in mind, if they require a non-exempt employee (i.e., an employee who is entitled to overtime pay) to work from home, they may not require the non-exempt employee to pay for business expenses, where doing so reduces the non-exempt employee’s earnings below the required minimum wage or overtime compensation.  This provision would only apply to the additional cost of working from home.

Q:    May I require an employee use paid time off if he or she is quarantined?

A:    Ordinarily, an employer could impose such a requirement, however, under the Act, an employee must be permitted to use mandated leave first if applicable.

Q:    May I prohibit employees from using accrued paid time off if they are quarantined?

A:    If your employees work in New Jersey, the New Jersey Earned Sick Leave law permits use of statutorily-required sick leave (up to 40 hours) for public health emergencies if their workplace or child’s school or day care is closed or a public health authority determines the need for a quarantine.  Employees can also use this time to care for themselves or a family member who is ill.

Q:    Are advancing vacation time and exempting coronavirus-related absences an option to ease the burden on my workforce?

A:    Yes.  Employers can be more flexible with leave, however, employers should consider putting appropriate safeguards into place, such as requiring employees to repay advanced leave payments if they voluntarily leave employment within a set period of time.

Q:    If we close temporarily, do we have to pay employees?

A:    It depends.  You are required to pay non-exempt/hourly employees only for hours worked. This means, if you close your business temporarily due to coronavirus issues, you are not required to pay non-exempt/hourly employees, provided, however, you do give them required paid leave. However, employers also must account for applicable state wage and hour laws.  Salaried, exempt employees, must be paid for any work week in which they perform service.

Q:    If my employees cannot work a full schedule due to office closings, do I still have to pay them?

A:    For exempt, salaried employees, if they work at all during a week, they must be paid their pro-rated salary for that week.  For hourly employees, you need only pay them for hours worked.  Of course, all leave benefits, including those available under the Act, if it passes, apply, so paid leave may be available even if an office is closed.  In addition, an employer’s policies, procedures, or collective bargaining agreements may impose additional obligations.

Q:    My employees are scared to come to work, can I discipline them?

A:    It depends.  Employees who have disabilities should be given reasonable accommodations.  This means employees whose anxiety or other conditions are triggered by the coronavirus pandemic are due reasonable accommodations.  Additionally, the National Labor Relations Act protects nonsupervisory employees, whether they are unionized or not, who refuse to work in conditions they reasonably and objectively believe to be unsafe.  Likewise, OSHA protects employees who refuse to work in conditions they deem to be an imminent danger.

Q:    Is an employer liable if it requires employees to come to work?

A:    It could be.  As noted above, the National Labor Relations Act protects nonsupervisory employees, whether they are unionized or not, who refuse to work in conditions they reasonably and objectively believe to be unsafe.  OSHA also protects employees, both supervisory and non-supervisory, who refuse to work in conditions they deem to be an imminent danger.

Q:    Should we close our offices?

A:    Employers, absent those under governmental order to do so, are not required to close their offices.  If it is feasible, employers should do everything they can to permit remote work and limit visitors to the office and avoid large scale meetings.  This is an evolving situation and employers should follow the advice of public health officials.

Q:    Someone in my office tested positive for coronavirus, can we tell the other employees?

A:    Employers should inform employees of their risk of exposure but, if possible, should not disclose the name or any protected health information of the individual(s) infected.

Questions? Let me know.

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