Families First Coronavirus Response Act: What Employers Need to Know
March 20, 2020
Executive Summary: As a result of the Families First Coronavirus Response Act, a landmark federal law enacted this week, private employers in the United States with fewer than 500 employees will be required to provide 12 weeks of family and medical leave in certain situations tied to the current 2019 coronavirus (“COVID-19”) public health emergency. The first two weeks of the leave will be unpaid (but the employee may qualify for the emergency paid sick leave provided under another provision of the law during this time) and the remaining 10 weeks of leave are paid by the employer. Employees need only be employed for at least 30 calendar days to be eligible for the leave. The regular Family and Medical Leave Act (“FMLA”) eligibility requirements (to be employed 12 months, have worked 1,250 hours in the 12 months prior to the leave, and be employed at a worksite where there are 50 or more employees of the employer within 75 miles) are not applicable to this COVID-19 public health emergency leave. While federal tax credits, as part of this law, are intended to help employers pay for these programs, it is uncertain when these tax credits or any other financial assistance will find its way to employers subject to this new law. Accordingly, private employers with fewer than 500 employees must think strategically to plan for how they will comply with this law and conduct business for the immediate future.
Overview of Families First Act: In a move that would have been highly improbable just two weeks ago, a notably bipartisan Congress, with the approval of President Trump, took the extraordinary step of enacting into law the Families First Coronavirus Response Act (“Families First Act” or the “Act”) on March 18, 2020. In addition to providing for free coronavirus testing and an expansion of food assistance, the Act takes the following steps that are of particular significance to employers:
- expands the FMLA to provide leave for employees who need time off work to care for children impacted by school closures due to the coronavirus outbreak, 12 weeks total, 10 of which must be paid according to a statutory formula (“COVID-19 public health emergency leave”);
- provides for a new federal program that requires employers to provide paid sick leave to employees in specified situations related to the COVID-19 pandemic;
- provides tax credits to employers to assist with the cost of these new paid leave benefits and paid sick leave;
- expands unemployment benefits and provides grants to states for processing and paying claims; and
- directs the Occupational Safety and Health Administration to issue an emergency temporary standard that requires certain employers to develop and implement a comprehensive infectious disease exposure control plan to protect healthcare workers.
Below we focus on three key aspects of the Families First Act: the FMLA expansion for COVID-19 public health emergency leave; the federal Paid Sick Leave program; and the tax credit program. We also touch on the expansion of unemployment benefits.
COVID-19 Public Health Emergency Leave
In amending the FMLA, the Families First Act adds a new category of leave for a “public health emergency.” Eligible employees, meaning any employee employed by an employer for at least 30 calendar days, will be able to request up to 12 weeks of FMLA leave to care for the employee’s child in the event the child’s school or care provider is closed or unavailable due to a public health emergency (“COVID-19 public health emergency leave”).
COVID-19 public health emergency leave applies only to private employers with fewer than 500 employees. Larger private employers are exempt. Most public employers are not subject to the 500 employee rule and will be covered in the same manner as in existing FMLA provisions. The Secretary of Labor has the authority to exempt certain healthcare providers, emergency responders, and certain employers with fewer than 50 employees if imposing these requirements would jeopardize the employer’s business. At present, the process for an employer to obtain such an exemption is not yet clear.
Notably, the law does contain a special enforcement rule for those employers who are outside the regular employer coverage threshold of the FMLA (i.e., do not employ at least 50 employees for each working day during 20 or more calendar workweeks in the immediate or preceding calendar year), excusing them from the civil enforcement provisions of the FMLA. Accordingly, employees of smaller employers may not be able to sue their employer for violations of the COVID-19 public health emergency leave provisions of the Act. However, the Secretary of Labor will still maintain the ability to pursue an administrative action.
As noted above, the COVID-19 public health emergency leave contains significantly relaxed eligibility criteria for employees. To be eligible, employees need only be employed for at least 30 calendar days, which is a considerable departure from the existing FMLA eligibility criteria. To be eligible for FMLA for all other purposes, the employee must be employed at least 12 months, worked 1,250 hours in the 12 months prior to the beginning of leave, and work at or report to a worksite where there are 50 or more employees of the employer within a 75-mile radius. As a result of these relaxed requirements, private employers with fewer than 500 employees, even those who may not otherwise qualify as employers under the FMLA, will now be required to consider granting COVID-19 public health emergency leave to employees who qualify.
As with the other FMLA purposes, COVID-19 public health emergency leave is available for up to 12 workweeks of total leave time. The first 10 days of the leave are unpaid and during this time employees may substitute accrued vacation, personal, or sick leave, but an employer may not require an employee to do so. Emergency paid sick leave, discussed below, may be available to cover this two week unpaid period. After the first 10 days, employers must provide paid leave to employees using COVID-19 public health emergency leave (generally at two-thirds of the employee’s regular rate of pay) for the hours the employee would otherwise be scheduled to work. This pay is limited to no more than $200/day and $10,000 in the aggregate.
The COVID-19 public health emergency leave contains special job restoration provisions for employers with fewer than 25 employees. Such employers may not be required to comply with the job restoration requirements (requiring employers to restore employees to their prior positions or an equivalent position upon the expiration of the need for COVID-19 public health emergency leave) provided (1) an employee takes public health emergency leave; (2) the employee’s position when they began leave no longer exists due to economic conditions or other changes in the employer’s operating conditions that (a) affect employment, and (b) are caused by a public health emergency during the leave period; and (3) the employer makes reasonable efforts to restore the employee to a position equivalent to the one they held when the leave began (i.e., equivalent benefits, pay, and terms and conditions of employment).
If reinstatement is not required because the above conditions are met, an employer with fewer than 25 employees will still be required to make reasonable efforts to contact the employee if an equivalent position becomes available during a one-year period. This one-year contact period begins on the earlier of the date on which the qualifying need related to the public health emergency concludes or the date that is 12 weeks after the date on which the employee’s COVID-19 public health emergency leave began.
Aside from these special restoration provisions in the amendment for implementing COVID-19 public health emergency leave, the Act does not appear to alter the applicability of the general FMLA restoration rules. Consequently, it appears employers may continue to rely on the principle that an employee who requests or is granted FMLA leave is only entitled to the rights, benefits, and position to which he or she would otherwise be entitled had the employee not taken FMLA leave.
Currently, the COVID-19 public health emergency leave is set to take effect by April 2, 2020—15 days after the Act’s March 18, 2020, enactment date—and last through December 31, 2020.
The FMLA is a complex law with many traps for the unwary. Until there is further guidance and clarification about the new COVID-19 public health emergency leave amendment, employers are encouraged to work with experienced employment counsel when administering a COVID-19 public health emergency or any other FMLA leave.
Emergency Paid Sick Leave
The Emergency Paid Sick Leave provision of the Families First Act requires private employers with fewer than 500 employees to provide paid sick leave to an employee who is unable to work or telework in six very specific circumstances, namely because: (1) the employee is subject to a federal, state, or local quarantine or isolation order related to coronavirus; (2) the employee has been advised by a healthcare provider to self-quarantine because of coronavirus; (3) the employee is experiencing symptoms of coronavirus and is seeking a medical diagnosis; (4) the employee is caring for an individual who is subject to or advised to quarantine or isolate; (5) the employee is caring for a son or daughter whose school or place of care is closed or child care provider is unavailable due to coronavirus precautions; or (6) the employee is experiencing substantially similar conditions, as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.
Pending further guidance as to what is meant by “substantially similar conditions,” the Emergency Paid Sick Leave law does not appear to apply to employees who cannot work due to a shelter in place order. It also does not appear to apply if the employer does not have sufficient work for employees due to a downturn in business. Instead, the Emergency Paid Sick Leave law only applies to those situations where work is available but the employee cannot work due to the six specific circumstances enumerated in the law.
If an employee satisfies the criteria for receiving emergency paid sick leave, employers must provide full-time employees with up to 80 hours of paid sick leave and part-time employees with the number of hours of paid sick leave equal to the number of hours the employee would work, on average, over a 2-week period.
The law allows employees to use the leave immediately regardless of how long they have been employed with the employer.
The amount of pay depends on the reason for leave. If employees use emergency paid sick leave to (1) self-isolate due to a coronavirus diagnosis, (2) obtain medical care for coronavirus symptoms, or (3) comply with a recommendation or order to quarantine due to exposure to, or symptoms of, the coronavirus, employers must pay the employee their full pay (subject to the limits described below) during the period of leave, based on their regular rate of pay (as defined under the FLSA). If employees use emergency paid sick leave (1) to care for a family member who has or is experiencing coronavirus-related symptoms or who is under quarantine by a public health official or health care provider, or (2) to care for their child whose school or child care provider is closed or unavailable due to coronavirus, employers must provide at least two-thirds of the employee’s pay during such leave period up to a certain maximum. The law limits an employer’s requirement of paid leave to $511 per day ($5,110 in the aggregate) where leave is taken for reasons (1), (2), and (3) noted above (relating to an employee’s own illness or quarantine); and $200 per day ($2,000 in the aggregate) where leave is taken for reasons (4), (5), or (6) (relating to care for others or school closures).
Paid sick time provided by the Emergency Paid Sick Leave Act would be made available in addition to an employer’s own paid leave policy (or the paid leave policy in a collective bargaining agreement). Employers are prohibited from changing their existing leave policy to avoid this new requirement and will also be required to post a notice regarding employees’ rights under the law (a model notice will be made available for this purpose).
There are other notable provisions of the law. For example, employers cannot require employees to find a replacement before using the paid sick leave or require an employee to use other paid leave before using paid sick time under this law. The law also includes anti-retaliation protections and for the failure to provide paid sick time, the employer will be subject to the same penalties as for minimum wage violations under the Fair Labor Standards Act.
The law directs the Secretary of Labor to (1) make a model notice publicly available not later than 7 days after the date of enactment; and (2) issue guidelines to assist employers in calculating the amount of paid sick leave not later than 15 days after the date of enactment.
The Emergency Paid Sick Leave provisions will also become effective no later than 15 days after the Act’s enactment and will remain in effect until December 31, 2020.
Tax Credits for Emergency Paid Sick Leave and Paid COVID-19 Public Health Emergency Leave
The Families First Act also provides covered employers (i.e., private employers with fewer than 500 employees) payroll tax credits to cover the wages they must pay to employees under the emergency paid sick leave and paid COVID-19 public health emergency leave programs.
Specifically, the law provides for a series of refundable tax credits for employers providing paid emergency sick leave or paid COVID-19 public health emergency leave, including tax relief for self-employed individuals. The law provides a refundable tax credit for employers equal to 100 percent of qualified paid sick leave wages required to be paid by the Emergency Paid Sick Leave Act that are paid by an employer for each calendar quarter. The tax credit is allowed against the tax imposed by section 3111(a) of the Internal Revenue Code (the employer portion of Social Security taxes). The law also provides a refundable tax credit for employers that is equal to 100% of qualified wages required to be paid by the Emergency Family and Medical Leave Expansion Act for the employer-paid COVID-19 public health emergency leave for each calendar quarter. The tax credit is allowed against the tax imposed by section 3111(a) (the employer portion of Social Security taxes). The amount of qualified COVID-19 public health emergency leave wages taken into account for each employee is capped at $200 per day and $10,000 for all calendar quarters. If the credit exceeds the employer’s total liability under section 3111(a) for all employees for any calendar quarter, the excess credit is treated as an overpayment and will be refunded to the employer.
The tax credits also apply to qualified health insurance contributions for workers taking time off for illness or to care for children home from school. In addition, a special rule provides that the payments made for emergency paid sick leave and COVID-19 public health emergency leave will not be considered “wages” for purposes of social security taxes (pursuant to section 311 (a) of the Internal Revenue Code) and the amount of any Medicare taxes applied to the emergency paid sick leave and paid COVID public health emergency leave payments will be added to the tax credits discussed above.
The tax credits will apply only to wages paid during the period of the COVID-19 emergency; the beginning date will be determined by the Secretary of the Treasury (or the Secretary’s delegate) and will be a date during the 15-day period beginning on the enactment date of the Act and will end on December 31, 2020.
Emergency Unemployment Insurance Stabilization and Access Act of 2020
The Families First Act also provides $1 billion in emergency grants to allow states to process and pay unemployment insurance benefits. States that seek additional funding must (1) require employers to notify laid-off employees of their potential eligibility for unemployment insurance at the time of separation from employment (California already requires employers to provide a notice of change in status and unemployment benefits pamphlet to all discharged or laid-off employees by the effective date of separation); (2) ensure that employees can apply for benefits in at least two different ways (e.g., in person, online, and via telephone); and (3) provide information regarding the status of processing of applications for unemployment benefits. States that experience a spike in unemployment claims will be eligible to apply for an additional grant, provided the state can demonstrate the steps it has taken to ease eligibility requirements, such as waiving work search requirements and waiving waiting periods for claimants directly impacted by the pandemic. For all practical purposes, this portion of the Act will have little effect on employers, but will enhance state efforts to reduce barriers to applicants seeking unemployment benefits during this extraordinary time.
For further information about the above cases and recently enacted legislation, please contact your Ricketts Case employment attorneys.
|The contents of this newsletter are intended for general informational purposes only and should not be construed as legal advice or a legal opinion. You are advised to consult an attorney about any specific legal question.|