Update: How the Passed Families First Coronavirus Response Impacts Employers
Late on March 18, 2020, the Senate passed House Bill 6201, named the "Families First Coronavirus Response Act" and the White House promptly signed it that evening. House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin, with the White House's authority, had negotiated and drafted the legislation, which had cleared the House late last week. While the bill broadly addresses the COVID-19 crisis, it contains some provisions that significantly impact all private employers with less than 500 employees; namely by requiring COVID-related paid sick leave and paid FMLA leave. While the paid leave obligations will end on December 31, 2020, the afforded leave will not carry over, and the law provides for certain tax credits, employers should nonetheless brace themselves for the financial and administrative impact the law will have on their operations.
Emergency Paid Sick Leave
The law requires employers to provide full and part time employees, regardless of their tenure, two weeks of paid sick leave for certain COVID-19 related reasons. Full-time employees will be entitled to 80 hours of paid sick leave, and part-time employees will be entitled to paid sick leave in the number of hours they typically work in a two-week period. Notably, employers may not require employees to use other forms of paid leave before allowing them to use the paid sick leave mandated under the new law.
The amount of pay will depend on the reason for the leave. Employees are eligible for paid sick leave at a rate of 100% their regular rate of pay, up to a cap of $511 per day and $5,110 total, if leave is taken because: (a) the employee is subject to a federal, state, or local quarantine or isolation order; (b) a medical provider has told the employee to self-quarantine; or (c) the employee is experiencing COVID-19 symptoms and will seek medical diagnosis or treatment. Alternatively, employees will be eligible to receive two-thirds of their regular rate of pay, up to $200 per day and $2,000 total, if leave is taken because the employee: (a) is caring for an individual (not just family members; any individual) told by a healthcare provider to self-quarantine or who is subject to a quarantine or isolation order; (b) is caring for his/her child because a school or care provider is closed or is unavailable due to COVID-19 reasons; or (c) is “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.” As of this writing, the Secretary has not issued any guidance concerning what may be a “substantially similar condition.”
The new law also states that if the Secretary of Labor finds that the requirements would jeopardize the viability of a business as a going concern, the Secretary may exempt small businesses with fewer than 50 employees from being obligated to offer paid sick leave to employees who are caring for children whose school or day care provider has been closed or is unavailable due to COVID-19. At this time, however, it is unclear what, if any, exemptions the Secretary will grant, and whether those exemptions would be on a per business or per industry basis. Further, even the Secretary grants an exemption, the exemption would not apply with respect to the other grounds for paid sick leave.
Finally, the new law includes consequences for employers that fail to comply. Employers who violate the sick leave provisions will be subject to liability under Sections 16 and 17 of the FLSA, which authorize liquidated damages and attorneys’ fees.
The bill creates a type of coronavirus-specific FMLA leave that would apply to all full and part time employees who have worked for the employer for at least 30 calendar days. The traditional FMLA requirements – i.e., that the employer must have more than 50 employees, that the employee work at a site where the employer has 50 or more employees in a 75-mile radius, and that an employee must have worked at least 1250 hours in the last year – do not apply for this special type of leave.
Under the law, covered employees are entitled to 12 weeks of job protected FMLA leave under certain limited circumstances. After the first two weeks of leave, the remaining 10 weeks must be paid at a rate of at least “two-thirds of an employee’s regular rate of pay” or based on a six-month average if the employee has varying or irregular hours. This emergency FMLA applies only when an employee's leave is due to a “qualifying need related to a public health emergency,” which occurs when “the employee is unable to work (or telework) due to a need for leave to care for a son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.” This is a narrower definition of circumstances allowing paid FMLA leave than the one included in the earlier version of the bill passed by only by the House. Paid leave under the FMLA is subject to a cap of $200 per day or $10,000 total per employee. The first ten days (or two weeks) may be unpaid, but the employee may elect to use paid sick leave (including the legally mandated paid sick leave described above), although the employer may not require the employee to do so.
Just as with the new paid sick leave, the law allows the Secretary of Labor to provide exemptions to certain business with less than 50 employees. Again, however, it is unclear how or when the Secretary may grant any exemptions.
In addition, for employers with less 25 employees, the job restoration requirement for coronavirus-related FMLA leave is not as demanding as it is for other types of FMLA leave. A business with less than 25 employees will not have to restore an employee to the employee’s prior position after coronavirus related FMLA leave if the business had to eliminate the employee's position due to changes in the economic or operating conditions that affected employment and were caused by the public health emergency. However, the employer must show that it made reasonable efforts to restore the employee to an equivalent position and must contact the employee if an equivalent position becomes available in the one-year period after the earlier of the end of the public health emergency or 12 weeks after the employee began taking coronavirus related FMLA leave.
Finally, because these new provisions are amendments to the FMLA, all of the remedial provisions under the FMLA would apply to employers that fail to comply with the new obligations.
Employers in the Healthcare Industry
The statute grants the Secretary of Labor with authority to exempt employers with employees who are health care providers or emergency responders from the leave requirements. Mnuchin has stated that he will do so.
To offset the financial burden that the paid leave mandate imposes on employers, the law allows employers to credit the payments against various taxes paid by employers, such as the 6.2% match of OASDI (Social Security taxes under Section 3111(a)) and the 1.45% Hospital Insurance (Medicare under Section 3111(b)). These credits are allowed against an employer’s employment tax liability on the wages paid to all employees each quarter. In addition, there are special provisions for a refund if the credit exceeds the employer’s employment tax liability.
The tax credit caps match the caps applicable to the employee's pay entitlement under the new sick and FMLA leave provisions. Thus, if an employer provides employees with paid benefits that exceed the caps mandated under the law (as described above), the employer will be unable to claim tax credits for any additional amounts paid. Further, credits can be taken only with respect to leave paid up to December 31, 2020, when the employer's paid leave obligations end under the new law.
Self-employed individuals are also eligible for similar tax credits. However, although employers with 500 or more employees can offer paid leave to their employees for coronavirus related reasons, these larger employers will not be eligible or entitled to any tax breaks under the bill.
Two other measures indirectly affecting employers include: (a) a mandate for OSHA to issue an emergency, temporary standard that requires certain employers to develop and implement a comprehensive infectious disease exposure control plan to protect health care workers; and (b) funding to assist the states in processing unemployment claims and expand benefits. Generally, the bill also includes measures for free coronavirus testing, additional funding for several food assistance programs, and Medicaid supplements.
The Families First Coronavirus Response Act was negotiated, drafted, and passed in record time. As a result, it is sure to contain ambiguities and unaddressed issues that will give employers headaches for months to come. Employers should work closely with their trusted advisors as they develop workplace policies and plan for the financial hardships of the COVID-19 crisis and the laws that have passed and are yet to come. Indeed, many state and local governments already have or are in the process of enacting their own paid sick leave laws. The Families First Coronavirus Response Act does not preempt those state and local laws, and thus, additional requirements may apply depending on the location of an employer or one or more of its offices.