In recent guidance, the IRS noted the “unprecedented public health emergency posed by COVID-19” (the disease that results from the 2019 Novel Coronavirus), and the need to remove potential administrative and financial barriers to COVID-19 testing and treatment under the health savings account (HSA) rules.

Issued on March 11, 2020, IRS Notice 2020-15 responds to employer uncertainty as to whether a health plan providing for reduced-cost COVID-19 testing—for individuals who have not yet met their annual deductibles—remains an HSA-compatible high-deductible health plan (HDHP).

That uncertainty arose from the recent wave of insurer and state announcements of the waiver of out-of-pocket costs for COVID-19 testing (and, in some cases, for treatment). Cost-sharing waivers apply, as of this writing, in at least 32 states, including for most, but not all, insurers in Wisconsin. Insurers have agreed to waive cost sharing due, variously, to voluntary agreements by major insurers, state mandates, or state-insurer agreements.

No-cost COVID-19 testing will be required by all private health plans now that President Trump has signed the Families First Coronavirus Response Act.

HSA-Compatible Coverage, Generally

As we described in a prior post, an HSA is a tax-favored account established to receive contributions from an employee, an employer, or both.

To be eligible to make (or receive) HSA contributions, an individual must be covered only under the HDHP and my not have any other coverage (including reduced-cost services), unless such other coverage is expressly permitted by the IRS.

Certain “preventive care” services are specifically permitted and are not considered to constitute “other” health coverage that would disqualify an individual from HSA eligibility. In July of 2019, the IRS expanded the list of “preventive care” to include fourteen additional items and services intended to prevent the worsening of certain chronic medical conditions.

HSA-Compatible Coverage Now Includes Coronavirus-related Services

The result of the newly-issued IRS Notice 2020-15 is that an individual who is covered by an HDHP will not lose eligibility to make (or receive) tax-favored HSA contributions merely because the HDHP permits pre-deductible COVID-19 testing and treatment with reduced (or no) employee cost-sharing. HSA-eligible individuals may continue to contribute to an HSA regardless of whether the HDHP offers, or the individual receives, a reduced-cost or no-cost COVID-19 test or treatment.

Be Aware That:

• As in the past, any vaccination costs continue to count as preventive care and can paid for by the plan at any time during the year, without regard to whether the deductible has been met.
• As recently confirmed by the Centers for Medicare and Medicaid, the costs of certain COVID-19 treatments and services, including testing, isolation, quarantine, and vaccination, are generally covered as essential healthcare benefits under Affordable Care Act rules for individual and small group health plans.
• Self-funded group health plans are not required to waive COVID-19 cost-sharing under the state mandates or insurer agreements (but are impacted under the federal Families First Coronavirus Response Act).

The text of the IRS Notice is available here.

The attorneys of the Labor and Employment Group of O’Neil, Cannon, Hollman, DeJong and Laing are actively monitoring COVID-19 developments and are available to assist employers with related employment law and employee benefit plan compliance matters.

The President signed the COVID-19 bill, H.R. 6201, into law late Wednesday night, not wasting any time during this national health emergency, after the Senate approved the bill by a vote of 90-8. Before the Senate took its vote, the House of Representatives made technical corrections to the bill from the version of the bill that the House passed early Saturday morning. The House’s technical corrections actually made substantial limitations to the scope of who qualifies for expanded Family and Medical Leave Act (FMLA) rights and made clarifying changes to the portion of the bill that provides employees with two weeks of emergency paid sick leave.

On Monday, we provided our readers with a summary of the House of Representatives’ version of H.R. 6201, which can be found here. The Senate’s version of H.R. 6201 limits the expanded FMLA leave entitlement to only those employees who are unable to work due to a need to care for their child under 18 years of age because the child’s school is closed or the child’s child care provider is unavailable due to the public health emergency caused by the coronavirus pandemic. The Senate’s version also capped the amount of paid sick time at $200 per day and $2,000 in the aggregate per employee for an employee who is: (i) taking care of an individual subject to a quarantine order or who has been advised by a health care provider to self-quarantine; (ii) caring for the employee’s child if the child’s school or place of care has been closed due to the coronavirus or if the child care provider for the child is unavailable; or (iii) experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.

The Senate’s version also made significant changes to the emergency paid sick leave portion of the bill. Most noteworthy being that there is now a cap on the amount of paid sick time in the amount of $511 per day and $5,110 in the aggregate for employees who are quarantined or isolated due to coronavirus or are experiencing symptoms of COVID-19 and seeking a medical diagnosis.

This article will describe what employers need to know about the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act which are now part of the Families First Coronavirus Response Act (the Act) which is now law. A copy of the Act can be found here.

Emergency Family and Medical Leave Expansion Act

Effective April 1, 2020, employers with 500 or fewer employees will be required to provide employees, who have worked for their employer at least 30 calendar days (forget about the 1,250 hours service requirement during the preceding 12-month period for other types of FMLA leave), with up to 12 weeks of FMLA leave. These expanded FMLA leave rights extend through December 31, 2020.

Employees entitled to these expanded FMLA leave rights are limited only to those employees who are unable to work (or telework) due to a need for leave to care for their son or daughter under 18 years of age if the school or place of care has been closed, or if the child care provider of such child is unavailable because of the public health emergency caused by the coronavirus. The first 10 days for this FMLA leave will be unpaid. If the FMLA leave extends beyond 10 days for this purpose, then the employer will be required to provide up to 10 weeks of paid leave for this expanded leave.

The paid leave amount for eligible employees for the available 10-week period is based on an amount equal to not less than two-thirds of the employee’s regular rate of pay multiplied by the number of hours the employee would otherwise be scheduled to work. As mentioned above, the paid portion of the leave is now capped at $200 per day and $10,000 in the aggregate for each employee. This portion of the Act represents one of the corrections made to the House’s first version of the bill so that the amount of the employer’s liability for paid leave now matches the amount of tax credit available to the employer for providing such paid FMLA leave.

Currently, the Act covers all employers with 500 or fewer employees, including small employers who employ fewer than 50 employees. However, the Department of Labor is authorized to issue regulations that would exempt small employers with fewer than 50 employees from the paid leave requirements of the bill if such payment obligation would jeopardize the viability of the employer’s business as a going concern. This means that if a small employer chooses not to provide the paid leave benefit for expanded FMLA leave, it does so at its own peril subject to its ability to defend itself on the basis that any such paid leave jeopardizes the employer’s existence as a going concern. That burden could be high for small employers to meet.

Qualifying Need Related to a Public Health Emergency

Obviously, employees who have been diagnosed with the coronavirus and otherwise meet the definition of having a serious health condition will qualify for regular unpaid FMLA leave like any other employee with a serious health condition. Now, however, employees who have worked for an employer for a period of at least 30 days and have a “qualifying need related to a public health emergency” will qualify for expanded FMLA leave with the opportunity to have 10 out of their 12 week FMLA leave allotment to be paid. The Act defines a “qualifying need related to a public health emergency”  as an employee who is unable to work (or telework) due to a need for leave to care for their child under 18 years of age if the school or place of care for such child has been closed, or if the child care provider of such child is unavailable, due the public health emergency cause by the coronavirus pandemic.

Expanded FMLA Provides for Both Unpaid and Paid Leave

The first 10 days of leave under the expanded FMLA would be unpaid. However, employees may elect, but employers cannot require employees, to substitute any accrued vacation leave, personal leave, or medical or sick leave for the unpaid portion of the leave.

After expiration of the 10 days of leave for a qualifying need related to a public health emergency, employers will be required to provide employees with paid leave. The paid leave provision of the Act will require employers to pay employees an amount equal to at least two-thirds of each employee’s regular rate of pay multiplied by the number of hours the employee would otherwise be normally scheduled to work. If the employee works a varying number of hours each workweek, then the employer must base the amount of paid leave on the average number of hours that the employee was scheduled to work per day over the previous 6-month period preceding the need for the leave. The amount of paid leave is capped at $200 per day or $10,000 in the aggregate.

Restoration Rights

Like with other types of leave provided under the FMLA, employers will be required to restore employees to their position after expiration of their leave. However, employers with fewer than 25 employees are relieved of the obligation to restore an employee to his or her position if all the following four conditions are met:

• The employee took leave for a “qualifying need related to a public emergency”;
• The position that the employee held no longer exists due to economic conditions or other changes of the employer caused by the public health emergency;
• The employer makes reasonable efforts to restore the employee to an equivalent position with equivalent benefits, pay, and other terms and conditions of employment; and
• If the employer is unable to restore the employee’s employment to an equivalent position, then the employer must contact the employee within a 1-year period beginning on the date the FMLA leave concludes if an equivalent position eventually becomes available within that 1-year time period.

Emergency Paid Sick Leave Act

Effective April 1, 2020, employers with 500 or fewer employees, through December 31, 2020, will be required to provide up to 80 hours of paid sick leave to an employee, regardless of how long the employee has been employed by the employer, if the employee is:

• Subject to a federal, state, or local quarantine or isolation order related to COVID-19;
• Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
• Experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
• Caring for an individual who is subject to an order to quarantine or isolate by a public order or self-quarantine as advised by a health care provider;
• Caring for the employee’s son or daughter if the school or place of care for such child has been closed, or if the child care provider of such child is unavailable due to COVID-19 precautions; or
• Experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Employers will be required to post and keep posted, in conspicuous places on the employer’s premises, a notice to employees describing the requirements of the paid sick leave portion of the Act. The Department of Labor will make a model notice available no later than 7 days after enactment of the Act.

Full-time employees will be entitled to up to 80 hours of paid leave based on their normal wage. Part-time employees will be entitled to paid leave equal to the number of hours worked, on average, over a two-week period. Paid sick leave is capped at $511 per day and $5,110 in the aggregate for employees who are quarantined or isolated due to coronavirus or are experiencing symptoms of COVID-19 and seeking a medical diagnosis. The amount of paid sick time is also capped at $200 per day and $2,000 in the aggregate per employee for an employee who is: (i) taking care of an individual subject to a quarantine order or who has been advised by a health care provider to self-quarantine; (ii) caring for the employee’s child if the child’s school or place of care has been closed due to the coronavirus or if the child care provider for the child is unavailable; or (iii) experiencing any other substantially similar condition specified by the Secretary of Health and Human Services. However, both full-time and part-time employees will be entitled only to two-thirds of their wages, as calculated under the Act, when the paid sick leave is used for those reasons where the amount of paid leave is capped at $200 per day. Small employers employing fewer than 50 employees may be able to claim an exemption to the requirements of the paid sick leave portion of the Act if the employer can show that compliance would jeopardize the viability of its business as a going concern.

The paid sick time provided under the Act would be in addition to any other paid leave made available to the employee by the employer. Employers also cannot require an employee to use other paid time, like vacation or PTO, before using paid sick time provided under the Act. In addition, the paid sick leave can’t be carried over from year to year, and the employer is not required to pay any unused paid sick leave to the employee at the time of the employee’s separation of employment if the employee has not used such sick leave prior to separation.

Tax Credits for Paid Sick Leave and Paid Family and Medical Leave

To assist employers in paying employees either paid FMLA leave or paid sick leave, employers will be entitled to tax credits on their employer’s portion of payroll taxes for wages paid to employees.

For paid FMLA leave, an employer will be entitled to a tax credit for qualified family leave wages in an amount up to $200 per day or $10,000 in the aggregate (5 days x 10 weeks x $200/day cap). If any tax `credit exceeds the amount of payroll taxes due by the employer, then such excess would be treated as an overpayment entitling the employer to a refund.

For paid sick leave, the available tax credit for each employee would be for wages capped at $511 per day while the employee is receiving paid sick leave because: (i) the employee is subject to a quarantine or isolation order by a public official; (ii) the employee has been advised by a health care provider to self-quarantine; or (iii) the employee is seeking a medical diagnosis because the employee is experiencing symptoms of coronavirus. The available tax credit to an employer who pays paid sick leave to an employee is $200 per day if the leave: (i) is taken to care for an individual subject to a quarantine order or who has been advised by a health care provider to self-quarantine; (ii) is taken to care for the employee’s child if the child’s school or place of care has been closed due to the coronavirus or if the child care provider for the child is unavailable; or (iii) is taken by the employee who is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.

If you have questions regarding compliance with these new legal requirements for either expanded FMLA rights or paid sick leave, please contact one of our employment lawyers, Joseph Gumina or Erica Reib, at (414) 276-5000.

Recently, Wisconsin Courts have handed down several key decisions concerning title litigation that deal with the issues of restrictive covenants, anticipated private nuisance, the statute of limitations applicable to foreclosure actions, and stipulated dismissal of prior foreclosures.

Below is a brief summary of the most important of these court decisions.

Restrictive Covenants

The Wisconsin Supreme Court faced the question of whether the short-term rental of a residential property constitutes “commercial activity” under a restrictive covenant. In Forshee v. Nueschwander, a 4-3 majority of the court held that because the term “commercial activity” was ambiguous, the restrictive covenant in place did not prohibit the Nueschwanders from using their property for short-term rentals.

Lee and Mary Jo Nueschwander bought the property in question on Hayward Lake in Hayward, Wisconsin in 2014, renovated it, and began renting it out for short-term rentals to vacationers through the popular VRBO (Vacation Rental By Owner) website. The Nueschwanders’ neighbors sued in Sawyer County Circuit Court to enforce the covenant, contending that the short-term rentals were “commercial activity” under a restrictive covenant that provided, “There shall be no commercial activity allowed on any of the lots.”

The circuit court agreed with the neighbors and granted an injunction to stop the Nueschwanders’ rental activity; the Court of Appeals reversed the circuit court’s decision and lifted the injunction.

On appeal, writing for the majority, Chief Justice Patience Drake Roggensack reasoned that public policy favors the free and unrestricted use of property. Moreover, wrote Justice Roggensack, deed restrictions “must be expressed in clear, unambiguous, and preemptory terms” and strictly construed to favor free use.

Turning to the covenant at hand, the court found that “commercial activity” was undefined and ambiguous as written. Accordingly, the court ruled that the term should be construed in favor of free use and affirmed the appellate court’s decision to lift the injunction.

Justice Shirley Abrahamson concurred, writing that the term “commercial activity” was unambiguous and that it meant activity undertaken for profit. Justice Abrahamson focused on the occupants’ activities on the property and concluded that no “commercial activity” was conducted on the property.

Justice Daniel Kelly’s concurrence, which was joined by Justice Rebecca Bradley, also focused on the occupants’ activities on the property but found that the renters were not engaging in “commercial activity” on the property. Justice Kelly also wrote that the covenant does not preclude renting out the property.

In dissent, Justice Ann Walsh Bradley found that the term “commercial activity” was not ambiguous and that it means “of or relating to commerce.” Justice Bradley noted that the Nueschwanders made $56,000 renting out the property in 2015, which made it a lucrative enterprise and, therefore, a “commercial activity.” She openly questioned whether the numerous covenants that use the same term or a similar term will be enforceable in the burgeoning short-term rental industry.

Also in restrictive covenant news, the Wisconsin Court of Appeals held that a treehouse was a “structure” covered by a restrictive covenant that provided, “All structures to be place or constructed upon lots . . . shall, prior to construction, be approved in writing, by C&B Investments.”

In C and B Investments v. Murphy, James Murphy and Rebecca Richards-Bria were homeowners in a subdivision developed by C and B Investments. In June 2015, without the approval of C and B, Murphy began building a treehouse that would be 10 feet long by 8 feet wide by 7 feet high at its completion. C and B filed suit to enforce the covenant requiring its consent to construct “structures” on its property.

The Circuit Court of Juneau County ruled that the treehouse was not a “structure,” and C and B appealed the decision. The Court of Appeals, in a per curiam opinion, reversed the circuit court, finding that the term “structure” was unambiguous and means something that is built or constructed. As the covenant applied to “all structures,” it covered a treehouse, according to the appellate court.

Anticipated Private Nuisance

In Krueger v. AllEnergy Hilton, LLC, the Court of Appeals addressed whether Wisconsin recognizes a cause of action for anticipated private nuisance. The appellate court held that the state does recognize such a claim but that the complaint in the case before it was deficient.

AllEnergy sought to construct a frac sand mine in the town of Hixton, but town landowners, including Greg Krueger the lead plaintiff, sought a permanent injunction to stop that from happening.

The group of landowners alleged that the proposed mine would operate 24 hours a day, 7 days a week, and would cause air, water, noise, and light pollution as well as vibration. Moreover, they alleged, the mine would deplete ground water, interfere with quiet, peaceful enjoyment, and also cause a drop in property values and an increase in traffic congestion and road damage.

The Circuit Court of Jackson County granted AllEnergy’s motion to dismiss the case, and the Court of Appeals affirmed. The court held that Wisconsin does, indeed, recognize a cause of action for anticipated nuisance, and laid out the elements:

(1) Defendant’s proposed conduct will “necessarily” or “certainly” create a nuisance; and

(2) The resulting nuisance will cause the claimant harm that is “inevitable and undoubted.”

Turning to the case at hand, the Court of Appeals affirmed the circuit court and ruled that the complaint failed to state a claim because the allegations contained within it were “too sparse” and did not support the conclusion that the mine would necessarily create a nuisance and inevitably result in harm.

Statute of Limitations Applicable to Foreclosure Actions

In 2018 in Bank of New York Mellon v. Klomsten, the Court of Appeals faced the question of whether Wisconsin’s six-year statute of limitations for contract actions bars a mortgage foreclosure action.

Gloria J. and Steven S. Klomsten executed a note and mortgage in 2003 and defaulted in 2005. A foreclosure action against them was not filed until 2016. The Klomstens moved to dismiss while the bank requested summary judgment. The Jefferson County Circuit Court sided with the bank, granted summary judgment, and denied the Klomstens’ motion to dismiss. The Klomstens appealed.

The Court of Appeals affirmed the circuit court. The appellate court ruled that while action on the note was barred by the six-year statute of limitations in Wis. Stat. § 893.43, the 30-year limitations period under Wis. Stat. § 893.33 applies, allowing foreclosure of the mortgage.

Stipulated Dismissal of Prior Foreclosure

In Deutsche Bank Nat’l Trust Co. v. Buboltz, the Court of Appeals  reversed the Milwaukee County Circuit Court and held that the stipulated dismissal of a prior foreclosure action did not bar a lender from filing a subsequent foreclosure action.

In 2006, Alexander Groysman purchased a residential property for which he secured a mortgage with Bank United, FSB. He then deeded the property to EAG Investments, LLC. Bank United assigned the note and mortgage to OneWest Bank, the predecessor of Deutsche Bank.

Payments on the mortgage stopped in 2008 and OneWest Bank filed a foreclosure action in June 2009. In April 2013, a foreclosure judgment was entered. Two years later, in April 2015, the foreclosure was reopened and dismissed without prejudice by stipulation, which stated that the stipulation and order was “due to payoff of the loan.”

The loan had not been paid off, however, and OneWest assigned the mortgage to Deutsche in June 2016. In April 2016, Groysman/EAG sold the property, and the title company discovered the unsatisfied mortgage and requested from Groysman the loan number and contact information for the bank. In response, Groysman provided an old letter from the bank that said the load was paid off “contingent” on final audit of Groysman’s check, but no payment had actually been made.

Deutsche filed a foreclosure action on May 12, 2017. The purchasers filed a summary judgment motion seeking dismissal of the action, arguing that the prior foreclosure was “dismissed due to payoff of loan,” and therefore Deutsche’s only option would have been to reopen the old dismissed case, but it was too late under Wis. Stat. § 806.07(2).

The bank countered that the prior case was dismissed without prejudice, allowing the bank to file a new case of its own.

Judge Rothstein in the circuit court dismissed the foreclosure action, and the bank appealed. The Court of Appeals reversed and remanded the case, concluding that a dismissal without prejudice is not final on the merits and “by definition” allows a plaintiff to sue again. The court therefore ruled that the bank was not barred by Wis. Stat. § 806.07 from filing a new foreclosure action.

If you have questions about these cases or title litigation in Wisconsin contact Steve Slawinski at 414-276-5000 or steve.slawinski@wilaw.com.

Each year, Super Lawyers surveys the State of Wisconsin’s 25,000 attorneys and judges, seeking the State’s top attorneys. Super Lawyers then selects the Top 10 Attorneys in Wisconsin, Top 50 Attorneys in Wisconsin, Top 25 Attorneys in Milwaukee, and Super Lawyers (consisting of the top 5% of attorneys in Wisconsin).

The 2019 lists were published by Super Lawyers in December 2019, and include the following attorneys from O’Neil Cannon:

• Dean P. Laing:
  • Top 10 Attorneys in Wisconsin (Ranked #2)
  • Top 50 Attorneys in Wisconsin
  • Top 25 Attorneys in Milwaukee
  • Super Lawyer
• Seth E. Dizard:
  • Top 50 Attorneys in Wisconsin
  • Top 25 Attorneys in Milwaukee
  • Super Lawyer
• Douglas P. Dehler: Super Lawyer
• James G. DeJong: Super Lawyer
• Peter J. Faust: Super Lawyer
• John G. Gehringer: Super Lawyer
• Joseph E. Gumina: Super Lawyer
• Gregory W. Lyons: Super Lawyer
• Patrick G. McBride: Super Lawyer
• Joseph D. Newbold: Super Lawyer
• Chad J. Richter: Super Lawyer
• John R. Schreiber: Super Lawyer
• Jason R. Scoby: Super Lawyer
• Steven J. Slawinski: Super Lawyer

In addition, Erica N. Reib was selected by Super Lawyers as Rising Stars (a Rising Star must be 40 years old or younger or in practice for 10 years or less).

In total, 18 attorneys of O’Neil, Cannon, Hollman, DeJong and Laing were recognized by Super Lawyers, which has called the firm “the Milwaukee mid-sized powerhouse.”

Super Lawyers is a national rating service that rates attorneys in all 50 states. The selection process utilized by Super Lawyers is multi-phased and includes independent research, peer nominations, and peer evaluations.

Under the direction of Wisconsin Governor Tony Evers, the Wisconsin Department of Health Services  has ordered a ban on mass gathering of 10 or more people. Pursuant to Emergency Order #5 Prohibiting Mass Gatherings of 10 People or More, a “mass gathering” is “any planned or spontaneous, public or private event or convening that will bring together or is likely to bring together 10 or more people in a single room or single confined or enclosed space at the same time.” All gatherings that bring together fewer than 10 people in a single room or confined or enclosed space at the same time must preserve social distancing of six feet between people and follow all other public health recommendations issued by the Wisconsin Department of Health Services and Centers for Disease Control. Additionally, all bars and restaurants in the State of Wisconsin shall be closed, except that restaurants may remain open for take-out or delivery service only. No seating may be provided, and no food may be consumed at the restaurant. Restaurants are to preserve social distancing of six feet between customers during pick up. Under the order, all public and private schools and institutions of higher learning shall be closed for instructional and extracurricular activities.

This does not affect critical infrastructure and services such as grocery stores, food pantries, childcare centers, pharmacies, and hospitals. Retail food establishments, such as grocery stores, convenience stores, and farmer’s markets, are required to close all seating intended for consuming food, cease self-service operations of salad bars, beverage stations, and buffets, and prohibit customers from self-dispending all unpackaged food. Office spaces are also exempt from the Order, although they are required to implement social distancing, including teleworking, as much as practicable. Additionally, manufacturing, processing, distribution, and production facilities are exempt from this Order. This is intended to encourage social distancing and limit the spread of coronavirus. This Order goes into effect at 5:00 p.m. on Tuesday, March 17, 2020, and will remain in effect for the duration of the public health emergency declared in Governor Evers’s Executive Order #72 or until a superseding order is issued. At this time, there is no specific end date to Executive Order #72 or the Order Prohibiting Mass Gatherings of 50 People or More. Failure to comply with this directive could result in fines and imprisonment.

The full Order can be found here.

Earlier this afternoon, Wisconsin Governor Tony Evers directed Wisconsin Department of Health Services Secretary-designee, Andrea Palm, to order a ban on mass gathering of 50 or more people. Pursuant to the Order Prohibiting Mass Gatherings of 50 People or More, a “mass gathering” is “any planned or spontaneous, public or private event or convening that will bring together or is likely to bring together 50 or more people in a single room or single confined or enclosed space at the same time.” This does not affect critical infrastructure and services such as grocery stores, food pantries, childcare centers, pharmacies, and hospitals. Office spaces as well as manufacturing, processing, distribution, and production facilities are also exempt from the Order. Some affected Wisconsin businesses, including bars and restaurants, will be permitted to remain open provided that they operate at 50% of seating capacity or 50 total people, whichever is less; preserve social distancing of six feet between tables, booths, bar stools, and ordering counters; cease self-service operations of salad bars, beverage stations, and buffets; and prohibit customers from self-dispensing all unpackaged food and beverage. This is intended to encourage social distancing and limit the spread of coronavirus. This Order goes into effect at 12:01 a.m. on Tuesday, March 17, 2020, and will remain in effect for the duration of the public health emergency declared in Governor Evers’s Executive Order #72 or until a superseding order is issued. At this time, there is no specific end date to Executive Order #72 or the Order Prohibiting Mass Gatherings of 50 People or More. Failure to comply with this directive could result in fines and imprisonment.

The full Order can be found here.

On the heels of President Trump declaring a National Health Emergency, the U.S. House of Representatives passed a 110-page relief bill (HR 6201) during the early morning hours of Saturday, March 14th, to address the economic effects upon individuals negatively impacted by the coronavirus pandemic. H.R. 6201 is designed to provide affected workers expanded Family and Medical Leave Act (FMLA) protections, expansion of food assistance and unemployment insurance benefits, and up to 80 hours of paid sick leave, as well as other relief.

H.R. 6201 will be presented to the U.S. Senate this week for debate for a high-profile vote. President Trump has already indicated that he would sign the legislation in its current form. Employers should expect the U.S. Senate to act quickly so that a bill can be presented to President Trump for signature as soon as possible.

This article will describe what employers need to know about two significant provisions of H.R. 6201 as it moves forward to the Senate: The Emergency FMLA Expansion Act and the Emergency Paid Sick Leave Act.

Emergency FMLA Expansion Act – Small Employers Beware

Targeting that segment of the economy that will be hit the hardest by the impact of the coronavirus pandemic, employers with 500 or fewer employees will be required to provide employees, who have worked for their employer at least 30 calendar days (forget about the 1,250 hour service requirement during the preceding 12-month period for other FMLA leave), with up to 12-weeks of FMLA leave. The expanded FMLA leave rights extends through December 31, 2020. Employers may be required to provide up to 10 weeks of paid leave for their employees who qualify for this expanded leave.

Currently, the proposed legislation would cover all employers with 500 or fewer employees, including small employers who employ less than 50 employees. However, the Department of Labor would be authorized to issue regulations that would exempt small employers with fewer than 50 employees from the paid leave requirements of the bill if such payment obligation would jeopardize the viability of the employer’s business as a going concern. This means that if a small employer chooses not to provide the paid leave benefit for expanded FMLA leave, it does so at its own peril subject to its ability to defend itself on the basis that any such paid leave jeopardizes the employer’s existence as a going concern. That burden could be high for small employers to meet.

Qualifying Need Related to a Public Health Emergency

Forget about the concept of an employee having a “serious health condition” in order to be entitled to this expanded FMLA leave. Now, because of the public health emergency caused by the coronavirus, employees will be entitled to expanded FMLA rights if they have a “qualifying need related to a public health emergency.” Under this standard, employees who have been employed by the same employer for at least 30 calendar days, regardless of the number of hours previously worked, will be entitled up to 12 weeks of leave if the employees are:

• Complying with the recommendation of a public health official or a health care provider who recommends that the employee be quarantined because of their exposure to coronavirus or because they exhibit the symptoms of coronavirus;
• Providing care for a family member who has been quarantined because of their exposure to coronavirus or because the family member exhibits the symptoms of coronavirus;
• Providing care for their son or daughter under the 18 years of age if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to the public health emergency.

Expanded FMLA Provides for Both Unpaid and Paid Leave

The first 14 days of leave under the expanded FMLA would be unpaid. However, employees may elect, but employers cannot require employees, to substitute any accrued vacation leave, personal leave, or medical or sick leave for the unpaid portion of the leave.

After expiration of the 14 days of leave for a qualifying need related to a public health emergency, employers will be required to provide employees with paid leave. The paid leave provision of the bill would require employers to pay employees an amount equal to at least two-thirds of each employee’s regular rate of pay multiplied by the number of hours the employee would otherwise be normally scheduled to work. If the employee works a varying number of hours each workweek, then the employer must base the amount of paid leave on the average number of hours that the employee was scheduled to work per day over the previous 6-month period preceding the need for the leave.

Restoration Rights

Like with other types of leave provided under the FMLA, employers will be required to restore employees to their position after expiration of their leave. However, employers with fewer than 25 employees are relieved of the obligation to restore an employee to his or her position if all the following four conditions are met:

• The employee took leave for a qualifying need related to a public emergency;
• The position that the employee held no longer exist due to economic conditions or other changes of the employer caused by the public health emergency;
• The employer makes reasonable efforts to restore the employee to an equivalent position with equivalent benefits, pay, and other terms and conditions of employment; and
• If the employer is not able to restore the employee’s employment to an equivalent position, then the employer must contact the employee within a 1-year period beginning on the date the FMLA leave concludes if an equivalent position does eventually become available within that 1-year time period.

Emergency Paid Sick Leave Act

H.R. 6201 will require employers with 500 or fewer employees, through December 31, 2020, to provide up to 80 hours paid sick leave to employees who:

• Are required to self-isolate because they are diagnosed with coronavirus;
• Seek medical diagnosis or care if they are experiencing the symptoms of coronavirus;
• Are required to comply with the recommendations or orders by a public health official or a health care provider because their physical presence on the job would jeopardize the health of others because of the employee’s exposure to coronavirus;
• Are required to care for or assist a family member who is either self-isolating because the family member has been diagnosed with coronavirus or is experiencing symptoms of coronavirus; or
• Are required to care for their child because the child’s school or place of care has been closed, or the child’s care provider is unavailable due to coronavirus.

Full-time employees will be entitled up to 80 hours of paid leave based on their normal wage. Part-time employees will be entitled to paid leave equal to the number of hours worked, on average, over a two-week period. However, both full-time and part-time employees will be entitled only to two-thirds of their wages when the sick leave is used to either provide care for a family member with coronavirus or to take care of a child whose school is closed or the child care provider is unavailable because of the coronavirus.

The paid sick leave provided under H.R. 6201 would be in addition to any other paid leave made available to the employee by the employer. Employers cannot require an employee to use other paid time, like vacation or PTO, before using paid sick time provided under H.R. 6201. In addition, the paid sick leave can’t be carried over from year to year, and the employer is not required to pay any unused paid sick leave to the employee at time of the employee’s separation of employment if the employee has not used such sick leave prior to separation.

Tax Credits for Paid Sick Leave and Paid Family and Medical Leave

Employers would be entitled to tax credits for their employer’s portion of payroll taxes for wages paid to employees taking either paid sick leave or paid FMLA leave. The sick leave credit for each employee would be for wages as much as $511 per day while the employee is receiving paid sick leave to care for themselves, or $200 if the sick leave is to care for a family member or child if the child’s school is closed. The amount of tax credit for qualified family leave wages for each employee is $200 per day or $10,000 in the aggregate. If any credit exceeds the amount of payroll taxes due by the employer, then such excess would be treated as an overpayment entitling the employer to a refund.

We will keep you posted on the developments of H.R. 6201 as it moves to the Senate for consideration. Stay tuned!

With all the tax changes taking effect in recent years, entities taxed as partnerships may have overlooked an important change from a few years ago—the new partnership audit rules. The changes to the partnership audit rules were unrelated to the highly publicized Tax Cuts and Jobs Act of 2017, and instead were introduced in the Bipartisan Budget Act of 2015 (BBA), effective as of January 1, 2018. The BBA dramatically overhauled the former rules for partnership audits, repealing and replacing the Tax Equity and Fiscal Responsibility Act (TEFRA) partnership rules.

Although the new rules are very complex, the biggest changes are that (1) partnerships rather than partners will now be liable for any tax deficiencies resulting from an IRS audit unless the partnership elects out of the new rules, and (2) the new position of “Partnership Representative” gives that person much greater power to make binding decisions than the traditional “Tax Matters Partner.” Accordingly, it is important for members and partners to familiarize themselves with some of these changes and ensure that protections and plans are built into the partnership or operating agreements.

New Rule Changes

Prior to 2018 under TEFRA, if the IRS wanted to conduct an audit on the activity of a partnership, it was required to audit and collect tax from its partners. Thus, the IRS could audit the partnership as long as the IRS assessed and collected any understatement of partnership tax, interest, and penalties at the partner level. The amount of tax due from the partner depended on the partner’s other tax attributes (i.e., the partner’s other items of income, gain, loss, deduction, and credit), and the IRS collected the resulting tax from each partner. Over time, the application of TEFRA caused huge headaches for the IRS due to the administrative burden of matching and tracking each partner, collecting from or refunding each partner, and navigating tiered partnership complexities.

To combat these issues, the IRS created a streamlined audit approach under the BBA, called the Centralized Partnership Audit Regime (CPAR). CPAR provides that the IRS can still audit the activity of the partnership, however, the IRS can now access and collect any resulting understatement of tax, interest, and penalties (which under the new rules is referred to as the “imputed underpayment”) directly from the partnership, rather than from the partners.

While the IRS can audit (within the statute of limitations) the partnership’s items of income, gain, loss, deduction, credit, and partners’ distributive shares for any particular year of the partnership (the “reviewed year”), any imputed underpayment due from the partnership will be assessed in the year that the audit or any judicial review is completed (the “adjustment year”). By collecting the tax payable in the adjustment year rather than the reviewed year, ownership changes may produce what some partners consider unfair results. For instance, a new partner in an existing partnership may find it unfair to bear the tax burden for adjustments to the prior year’s tax returns.

Additionally, under the new audit regime, instead of a tax assessment calculation based on the other tax attributes of each partner, the imputed underpayment assessed against the partnership is calculated by multiplying the total netted partnership audit adjustment for the reviewed year against a single tax rate. The tax rate will be the higher of (1) the highest income tax rate in effect for individuals (currently 37%) and (2) the tax rate applicable to corporations (currently 21%). Depending on a partner’s individual tax situation this is an undesirable outcome if the partner falls into a lower tax bracket. However, following the rules published in the regulations, the partnership may modify the underpayment amount if the partnership can show the IRS that a partner’s share of an adjusted item is subject to a lower tax rate, or if the partnership can establish that a partner has agreed to an adjustment and paid the resulting tax through an amended return. These potential modifications must be timely submitted and approved by the IRS.

Electing Out of New Partnership Audit Rules

The IRS does allow a partnership to elect out of the new audit regime under certain circumstances. In order to elect out of the new audit rules, the partnership must meet two requirements: (1) the partnership must have 100 or fewer partners during the tax year, and (2) all partners must be “eligible partners” at all times during the tax year. Eligible partners include individuals, C corporations, S corporations, or estates of deceased partners. The list of eligible partners does not include partnerships, trusts, disregarded entities, nominees or other similar persons that hold an interest on behalf of another person, and estates that are not estates of a deceased partner. If there is even one ineligible partner, the partnership cannot elect out of the new audit regime. Further, if the partnership has an S corporation as a partner, the shareholders of the S corporation will count toward the 100-partner rule.

An election to opt out must be made annually on a timely filed tax return and the partnership must notify partners of the election within 30 days of making the election. The partnership must also disclose the names and taxpayer identification numbers of all partners on its tax return. The result of this election moves the adjustment and assessment of tax to the partner level.

“Push-Out” Election

The new rules also provide that a partnership can make a “push-out” election, which allows a partnership to shift or “push-out” any tax liability due upon audit to the partners that were actually partners during the reviewed year (which eliminates the partnership’s responsibility to pay the tax). Unlike the election to opt out of the new audit rules, this election is available to all partnerships; however, this election can be made only by the Partnership Representative (as detailed below).

This election must be made within 45 days after the IRS issues the final adjustment and the partnership must then furnish statements to the reviewed year partners within 60 days of the final adjustment showing the partner’s share of the adjustment. Based on statements, each reviewed year partner will calculate the partner’s tax for the reviewed year and any interim years after the reviewed year and preceding the adjustment year. The partners then pay the aggregate tax plus interest (an additional 2% interest is charged using this election) and penalties with their income tax return for the adjustment year (i.e., the current year’s tax return).

Goodbye Tax Matters Partner, Hello Partnership Representative

Under the new regime, a Partnership Representative replaces the familiar Tax Matters Partner. With TEFRA, a Tax Matters Partner would simply act as a go-between with the partnership and the IRS. In contrast, with the CPAR changes, the Partnership Representative has full authority to act on behalf of the partnership and take any necessary actions that are binding on the partnership and all its partners. Additionally, the Partnership Representative is not bound by a fiduciary duty to act in the best interest of the partnership.

Another departure from the old rules is that the Partnership Representative is not required to be a partner, unlike the Tax Matters Partner. It can be anyone that the partnership feels is capable and knowledgeable enough to make decisions on IRS assessments. The partnership must designate a Partnership Representative on its tax return filing each year. It is important to note that the old Tax Matters Partner does not automatically become the new Partnership Representative and if no Partnership Representative is appointed, the IRS will appoint one. A partnership can remove its Partnership Representative, but only after a Notice of Administration Proceeding is issued by the IRS.

Considerations for Partnership and Operating Agreement Amendments

As a result of the new audit rules, entities taxed as partnerships should begin preparing for the effect of the new regime and consider addressing potential issues with their existing partnership or operating agreements. For example, if the partnership is eligible and plans to opt out of the rules altogether, the operating agreement should require the Partnership Representative to make the election annually. Partners may even want to prohibit any transfer of a partnership interest to an ineligible partner that could prevent an opt-out election.

If the partnership is unable to opt-out or chooses not to, the operating agreement should specify how the partnership will pay an imputed underpayment and how the imputed underpayment will be allocated amongst the partners, old and new. The operating agreement should also stipulate whether or not the partnership will make a push-out election.

Moreover, at the very least, given the broad discretion a Partnership Representative is allowed under the new regime, a partnership should appoint or designate a process for appointing a Partnership Representative in its operating agreement. The operating agreement should also address when/if the Partnership Representative will be liable to the partners for failure to make an election or making an election that was not in the best interests of the partnership. A partnership may also consider amending or adding indemnification provisions for the Partnership Representative.

A partnership may also want to consider including language that requires the Partnership Representative to notify partners upon certain stages in an audit or require the Partnership Representative to consult with or obtain consent of the partners before taking a position, agreeing to a settlement, or making an election. All of the foregoing issues can and should be addressed in amendments to operating agreements, and there is still time to do so before the IRS begins audits in earnest under the new regime.

If you are interested in learning more about the new partnership audit rules, please contact attorney Britany E. Morrison at O’Neil Cannon

Wisconsin has now joined a growing group of more than 20 states that allow electronic Remote Online Notarization (RON) of documents. On March 3, 2020, Wisconsin enacted 2019 Wisconsin Act 125, Wisconsin’s New RON law. The Act takes effect on May 1, 2020 and requires the Wisconsin Department of Financial Institutions to promulgate new rules regarding the performance of a RON notarial act.

Under prior law, all documents that required notarized signatures had to be executed while in the physical presence of a notary public, who would witness or attest the signature. The new RON law updates document notarization requirements to meet the demands of modern 21^st century business practices and technology.

With RON, a signatory no longer needs to be in the physical presence of the notary when the document is executed. In fact, a signatory can be in another city, state, or even another country. The notary may use approved online tools to perform the notarial act while the signatory executes the document at a remote location. The RON law requires the notary and the signatory to have an online audio and visual connection allowing them to communicate with each other in real time, and the notary must make an audio and visual recording of the notarial act.

The use of RON has its limits, however. It cannot be used to notarize certain types of documents, including wills and testamentary trusts, living trusts, powers of attorney, marital property agreements, authorizations for disclosure of health care information, and health care powers of attorney and living trusts. But the new RON law will help to simplify and facilitate the closing of real estate transactions and other business deals.

Many companies are currently wondering what to do if they know an employee or their family member is sick with coronavirus or the flu or if someone seems to be sick with the coronavirus or the flu. The CDC has issued Interim Guidance for Businesses and Employers to Plan and Respond to Coronavirus Disease 2019 (COVID-19). The CDC has issued the following recommendations, along with other tips and guidance:

• Actively encourage sick employees to stay at home. This means that employees who have symptoms of respiratory illness  (e.g., cough, fever over 100.4˚) should not come to work until they are free of all such symptoms for at least 24 hours, without the use of medicine. Employees who are caring for someone who is sick may also refer to CDC guidance on how to conduct a risk assessment of their potential exposure and should also stay home if they are at risk of contracting a contagious illness. This may require employers to be more flexible with their sick leave policies and use of time off. If sick employees are encouraged or required to come to work for fear of losing their jobs, it could have a larger impact on your company by making more employees sick and further limiting the company’s ability to conduct normal operations.
• Separate sick employees. Employees who show signs of respiratory illness while at work should be separated from other employees and sent home immediately.
• Emphasize staying home when sick, respiratory etiquette, and hand hygiene. Companies should emphasize that sick employees should stay home. Additionally, while at work, employees need to cover their noses and mouths while coughing and sneezing, use tissue, wash their hands, and use hand sanitizer frequently. Companies may consider putting up posters with reminders of these actions and providing tissues and hand sanitizer.  The CDC has sample posters (here) that employers can post at their workplace that encourage employees who are sick to stay at home.
• Perform routine cleaning. Companies need to ensure that frequently touched surfaces – workstations, countertops, doorknobs – are cleaned and disinfected regularly. Companies may also consider providing disposable wipes for employees to use.

There are certain legal obligations regarding how companies treat sick employees. All Wisconsin companies with one or more employees are subject to the Wisconsin Fair Employment Act (“WFEA”), and all companies with fifteen or more employees are subject to the Americans with Disabilities Act (“ADA”). Both of these laws protect employees with disabilities and perceived disabilities, as well as employees who are associated with people with disabilities, from discrimination. However, these laws still allow companies to send an employee who has or appears to have a contagious disease such as coronavirus or the flu home because that employee poses a direct threat of making other employees sick.

In conclusion, yes, sick employees who pose a risk of spreading a contagious illness to your other employees can be sent home from work and should be encouraged to stay home from work until they no longer pose such risk. In this instance, businesses may need to consider one-time, situation-based modifications to their sick leave and absenteeism policies that would allow employees to miss work and not be penalized for it. Employers should not make their decisions about sending an ill employee home based on fear but, rather, on rational, objective, and observable facts designed to protect the interests of all employees and to ensure that your company’s continued operations are not placed at risk.