COVID-19 Employee Waivers and Retention Credits
By Dave Clifton
Content Strategy Specialist
Today’s workplaces are a lot like the Wild West. Between telecommuting policies, return-to-work programs, and changes to how and where people work, no one really knows what to expect. The introduction of government stimuli via the CARES Act provided some stability and relief for businesses…but without a lot of guidance. It all adds up to uncertainty and a lot of lingering questions.
Is a business eligible for employee retention credits if their staff chooses to work from home? Can you compel them to sign a COVID-19 employee waiver? These are big questions that need answers. Without clear-cut guidance, employers need to seriously consider their approach. There’s no way to tell what tomorrow’s guidance will bring. It’s smart to prepare for anything and make good decisions today.
What is a COVID-19 employee waiver?
A COVID-19 employee waiver is a simple concept. Employers ask their employees to sign a waiver of liability before returning to the workplace so that the employer isn’t at fault if they become ill. While conceptually simple, there’s one major problem with these types of waivers.
Employees are not permitted to preemptively waive their rights under state workers’ compensation laws. Moreover, even if they did sign a waiver, it wouldn’t be enforceable. Even more problematic for employers, by asking employees to sign such a waiver they’re inadvertently conceding that the workplace is unsafe.
While every employer has an interest in protecting itself from liability, a COVID-19 employee waiver isn’t the right approach. Not only is it unenforceable, it’s actually more of a liability for employers.
The better solution is to make changes to the workplace and policies that create a safer environment. Social distancing, a reimagined workplace, new policies on workplace cleaning plan and sanitization, and health checks do more to safeguard employees against coronavirus than a liability waiver. Follow recommendations and guidance from the CDC, OSHA, WHO, and the EEOC on how to create a workplace that’s safe for employees and reduces employer liability.
What is the employee retention credit?
Like the Paycheck Protection Program (PPP), the Employee Retention Credit (ERC) is the product of the CARES Act. According to current IRS guidance:
The Employee Retention Credit under the CARES Act encourages businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.
Employers that maintain the same payroll figures through the coronavirus pandemic can claim a valuable tax credit. While the guidance is straightforward enough, many employers have valid questions about claiming the ERC. Here are some of the most common:
Can I claim the ERC if my employees continue to work?
If your business has fewer than 100 employees, then yes. Current guidance for the ERC is based on wages paid to all employees, regardless of whether they performed services. This means that as long as you kept them on payroll during the coronavirus pandemic, they still count for the purposes of the credit.
For businesses with greater than 100 employees, only those employees furloughed count toward the ERC. Employees working from home are not eligible.
Can I claim the ERC if my employees use FMLA or FFCRA time off?
No. If your business accepts credits for paid and family sick leave, you are not able to count those employees as part of an ERC claim. The same goes for companies that received PPP funding.
The IRS continues to issue new guidance on who qualifies for the ERC, as well as how to claim it. Employers, their accountants, and their HR department need to stay on top of timely guidance and maintain good accounting records to ensure compliance. Get more information about the ERC and the rules surrounding it here.
Stay apprised of changing guidance
With a full-scale return to work imminent for many employers, now’s the time to seek answers to some of the more complex questions you may face. What standards can you reasonably expect employees to conform to? What are your obligations as an employer to avoid liability? What standards must you meet to qualify for government relief programs like the PPP or ERC?
While it may all seem like a tangled web of information with little clarity or certainty, there is good news. New guidance from congress, the IRS, state governments, and employment organizations comes down virtually every week. There’s a lot to keep up with, but we’re trending in a direction that offers more clarity. Hard and fast rules aren’t far off. For now, simple answers to important questions give employers the information they need to act accordingly.
Keep reading: COVID-19 Workplace Resources