German Labor Law Consequences of COVID-19

In view of the coronavirus crisis, employers are faced with numerous questions of employment law, ranging from the question of compulsory employment and possible release of employees in the event of illness or closure of the business, through remuneration issues in the event of a lack of childcare, to the currently extended options for receiving short-time work allowance in the event of absence of work. We prepared an alert describing the most important answers to these questions.  An English version is available here.

Arbeitgeber stehen angesichts der Coronaviruskrise vor zahlreichen arbeitsrechtlichen Fragestellungen, die von der Frage der Beschäftigungspflicht und möglichen Freistellungen von Arbeitnehmern im Krankheitsfall oder bei Schließung des Betriebes über Vergütungsfragen bei fehlender Kinderbetreuung bis hin zu den aktuell erweiterten Möglichkeiten zum Bezug von Kurzarbeitergeld bei Arbeitsausfall reichen. Nachfolgend sind die wichtigsten Antworten auf diese Fragen zusammengestellt.

Five Ways to Avoid Redundancies During The Coronavirus Crisis

  • The speed and severity of the current crisis means UK employers face very difficult and pressing decisions.
  • Some intermediate steps can be taken to preserve workforces for a period and avoid immediate redundancies.
  • Some form of individual or even collective consultation with employees or their representatives may be necessary. This can be used as an opportunity to seek creative, collaborative solutions to preserve jobs in the short-term.
  • We set out a checklist of potential measures below.

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Impact of New Coronavirus Mandatory Leave and Testing Legislation Largely Limited to Smaller Employers

Last night (Wednesday, March 18, 2020) the President signed the Families First Coronavirus Response Act after it passed the Senate in the afternoon by a vote of 90-8.  The Act requires all private health plans to cover COVID-19 diagnostic testing—coverage that most insured and large self-insured health plans already are providing.  The Act also requires employers with fewer than 500 employees to provide up to ten weeks of paid FMLA leave and two weeks of paid sick leave to employees affected by COVID-19.  For small employers subject to these new leave mandates, the Act provides tax credits to help offset the cost of the mandates.  This means that the tax credits are not available to employers with 500 or more employees, even if they provide paid leave equal to or in excess of that required of smaller employers under the Act.  It is noteworthy that the Senate voted down amendments that would have expanded the bill’s paid FMLA leave or replaced the bill’s paid leave with state unemployment benefits.

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COVID-19 Emergency Declaration: Code § 139 Uncertain; Leave-Sharing Policies Permitted

On March 13, 2020, the President declared the COVID-19 pandemic to be an emergency under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the “Stafford Act”).  The decision to declare an emergency is addressed in a letter from the President to Administration officials in which he explained that his decision to issue an emergency declaration was “based on the fact that our entire country is now facing a significant public health emergency.”

Employers may be wondering whether this declaration provides an opportunity to offer “qualified disaster relief payments” under Internal Revenue Code § 139 to employees as a means of mitigating the pandemic’s effects.  It is not entirely clear.  Because the President declared an emergency—not a major disaster—it is not clear, until we get further guidance from the IRS that employers that they may rely on Code § 139 as a means of providing tax-free benefits to their employees.  Section 139 refers specifically to a declared disaster as do the regulations under section 165(i), which are cross-referenced in the section 139 rules.  Less formal IRS guidance in the form of revenue procedures have conflated the two types of declarations in the past, however, and the IRS has indicated that for purposes of section 165(i), “a disaster includes an event declared a major disaster or an emergency.”  However, in the interim, employers may still adopt other policies, such as leave-sharing, that will ease the pandemic’s toll on affected employees.

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Benefit Plan Record Retention – A Cautionary Tale from Louisiana

Consider a situation in which a former employee alleges that he or she did not receive a COBRA election notice. That’s the notice that must be provided to group health plan participants when they lose coverage as a result of certain events, including termination of employment, and that gives the participants information regarding their rights and obligations to elect COBRA continuation coverage. If a court finds that the employer failed to provide the notice, the court could (1) allow the employee to retroactively elect coverage after the election period otherwise would have ended, (2) award statutory penalties of up to $110 per day to the employee, or (3) provide other relief to the employee. There is also an excise tax for COBRA failures, including failure to provide a COBRA election notice, of $100 per day per failure. An employer must report the excise tax on Form 8928, and the statute of limitations generally would not start running unless and until the employer does so.

To prevail at the summary judgment stage and avoid a trial, some courts hold that the plan administrator has the burden of proving that the election notice was properly sent to the employee. So, what evidence does the plan administrator need to establish that the notice was sent? According to a recent decision, a declaration of the employer’s normal business practices may not be enough to win a motion for summary judgment.

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IRS Clears the Way for High Deductible Plans to Waive Cost Sharing for Coronavirus Testing

The Internal Revenue Service has issued guidance (Notice 2020-15) that allows sponsors of high deductible health plans (“HDHPs”) to reimburse up to the full cost of medical care services and items for testing and treatment of COVID-19 before plan participants meet the plan’s minimum statutory deductible.  Accordingly, participants in a HDHP that waives cost sharing or deductibles for medical expenses related to the testing and treatment of COVID-19 will continue to be eligible to receive favorable federal tax treatment for amounts contributed to their Health Savings Accounts.  The guidance also includes a reminder that any vaccination costs continue to be considered preventive care and can be reimbursed by HDHPs without cost sharing before the plan’s deductible is met.

Don’t Miss Your Window: Upcoming Deadlines for Determination Letter Applications

Under Revenue Procedure 2019-20, sponsors of individually designed statutory hybrid plans, including cash balance plans, have a short window of opportunity to file determination letter applications with the IRS by August 31, 2020.  In addition, sponsors of merged plans have an ongoing opportunity to file determination letter applications within certain periods of time after the corporate transaction and plan merger. Plan sponsors should strongly consider taking advantage of these opportunities, since other opportunities for filing determination letter applications are limited.  This post discusses key highlights of the expansion of the determination letter application program under this Revenue Procedure.

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NLRB Issues Final “Joint-Employer” Rule

In a positive development for businesses, the National Labor Relations Board (NLRB) has published a final rule setting a new, stricter standard for determining joint employer status under the National Labor Relations Act (NLRA). The new rule, which takes effect on April 27, 2020, comes on the heels of a recent rule published by the Department of Labor narrowing the scope of joint employment under the Fair Labor Standards Act.

The new NLRB rule specifies that a business will be deemed a joint employer of another entity’s employees only if the business has “substantial direct and immediate control” over one or more essential terms of employment. Essential terms of employment are wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.

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COVID-19: Your Health Plans and Your Business Response

Businesses are rapidly developing strategies to continue functioning and protect their workforces in the face of the growing Coronavirus COVID-19 outbreak. For obvious reasons, businesses may want to deploy health screening, testing, and professional medical advice services—including telemedicine—to their employees and dependents. It is critical that employers’ health plans support these efforts and not get in the way of them. For example, businesses may not want coverage, co-pay, and deductible issues to discourage employees from taking advantage of the services businesses are deploying. Making sure this is the case raises a number of technical issues for businesses to consider:

  • Can health plan deductibles and employee co-insurance obligations be waived for screenings and treatment of the coronavirus, including, among others, in a high deductible health plan with a health savings account?
  • Are health plans required to cover screenings and treatment of the coronavirus?
  • How much of the costs for screening and treating the coronavirus are health plans required to pay?
  • If a location needs to close or temporarily lay off employees:
    • Must the employer continue to offer health coverage to affected employees?
    • How do affected employees pay health insurance premiums while on unpaid leave?
    • What assistance can employers offer to affected employees?
  • What information do privacy laws permit employers and health plans to share about an employee’s coronavirus diagnosis?
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