On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act (Public Law 116-127). As with all COVID-19 assistance efforts, FBFK has fielded a stream of questions from employers looking for legal input about how the Act works and what elements affect employers the most. This document is intended to help employers navigate the ins and outs of this legislation.

First, below is a summary of the key provisions affecting employers, including:

  • Division C – Emergency Family and Medical Leave Expansion Act
  • Division E – Emergency Paid Sick Leave Act
  • Division G – Employer reimbursement of amounts paid

The full text the Act is available here.

 

Division C – Emergency Paid Family and Medical Leave

What employers need to know:

This section of the Act includes key expansions of the Family and Medical Leave Act (FMLA, 29 USC §§ 2601-2654), and is in effect April 1, 2020 through December 31, 2020.   In short, there are new expansions of the terms “Employer,” “Employee” and “Qualifying Leave” within this section.

For purposes of the Emergency Paid Family and Medical Leave:  

  • “Eligible employee” is now defined as an employee who has been employed for at least 30 calendar days by the employer from whom leave is requested. (Under the standard FMLA, an “eligible employee” must be in the service of a “covered employer” for at least 12 months and have served a minimum of 1250 hours.)
  • “Covered employer” is now defined as employers with fewer than 500 employees. (Under the standard FMLA, a “covered employer” is one who employs 50 or more employees within a 75-mile radius of the worksite for 20 or more workweeks in the current or preceding year).

 

Possible exceptions to the requirements of the Act:

  • Certain healthcare providers and emergency responders may be exempt from the definition of “eligible employee.”
  • Small businesses with fewer than 50 employees if following the Act’s requirements would jeopardize the viability of the business.

Qualifying Leave. “Public Health Emergency” leave is available under this Act for:

  • An employee who is unable to work (or telework) due to a need for leave to care for the 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.

Leave Granted. The first two weeks of leave under the Emergency Paid Family and Medical Leave are unpaid.  Employees may elect to substitute PTO, vacation, or sick or medical leave during unpaid leave. After these initial two weeks, employers must provide paid leave for each day of leave taken related to a Public Health Emergency.

Paid Leave Amounts.  The employer is required to provide paid leave at a rate of not less than two-thirds (2/3) of an employee’s regular rate of pay up to $200 per day or $10,000 in the aggregate, based on the employee’s normally scheduled hours of work.

Where hours vary, the number will be equal to the average number of hours the employee was scheduled over the six-month period preceding the date of leave.  If the employee did not work during the preceding six-month period, the paid leave rate should equal the “reasonable expectation” of the employee at the time of hiring, with respect to the average number of hours per day that the employee would be scheduled to work.

Notice Requirements. Consistent with traditional FMLA terms, the employees are required to provide notice to the employer to the extent practicable.

Job Restoration.  Eligible employees who take emergency paid family medical leave are entitled to be restored to the position they held when the leave commenced or to obtain an equivalent position with their employer.  The Act limits this rule for employers with fewer than 25 employees.  In such circumstances, if an employee takes emergency paid family medical leave, then the employer with fewer than 25 employees does not have to return the employee to their position if:

  • The position does not exist due to changes in the employer’s economic or operating condition that affect employment and were caused by the coronavirus emergency;
  • The employer makes “reasonable efforts” to restore the employee to an equivalent position; and
  • If these efforts fail, the employer makes an additional reasonable effort to contact the employee if an equivalent position becomes available. The “contact period” is the one-year window beginning on the earlier of (a) the date on which the employee no longer needs to take leave to care for the child or (b) 12 weeks after the employee’s paid leave commences.

Union Employees. The Act contains a separate section for collectively bargained employees. It provides that such employers may fulfill their obligations under these amendments by making contributions to a multiemployer fund, plan, or program based on the paid leave each of its employees would be entitled to under the terms of the agreement.

Special provisions. Special rules apply for certain employers and for health care providers and emergency responders.

Enforcement.  If the employer does not meet the standard definition of “covered employer” under the FMLA – that is, 50 or more employees within a 75-mile radius of the worksite for 20 or more work weeks in the current or preceding year – the employer cannot be subject to a civil action by employees for violation of the new public health emergency leave.  The DOL may bring claims to recover damages and may impose additional penalties and fees including liquidated damages for willful violations.

 

Division E – Emergency Paid Sick Leave

What employers need to know:

This section of the Act creates Emergency Paid Sick Leave for covered employees and is in effect April 1, 2020 through December 31, 2020. This section of the Act requires covered employers to provide employees with two weeks of paid sick time if the employee is unable to work (or telework) for a qualifying event (described below).

“Covered employer” is defined as private employers with fewer than 500 employees, government employers, and all other non-private entity employers with more than one employee.

“Eligible employee” is any full time or part time employee, regardless of how long the employee has worked for the employer.

Possible exceptions to the requirements of the Act:

  • Certain healthcare providers and emergency responders may be exempt from the definition of “eligible ”
  • Small businesses with fewer than 50 employees if following the Act’s requirements would jeopardize the viability of the business.

Paid Sick Time.  Over the taxable year, full-time employees are entitled to 80 hours of paid sick time and part-time employees are entitled to the number of hours they work on average over a two-week period.  This paid sick time is available for immediate use regardless of how long the employee has been employed, and employers may not require an employee to use other pay leave before using this newly available paid sick time.

Where hours vary, the number will be equal to the average number of hours the employee was scheduled over the six-month period preceding the date of leave.  If the employee did not work during the preceding six-month period, the paid leave rate should equal the “reasonable expectation” of the employee at the time of hiring, with respect to the average number of hours per day that the employee would be scheduled to work.

Termination of Paid Leave.  Once an employee’s coronavirus-related need for using the emergency paid sick leave ends, the employer may terminate the paid sick time. Further, paid sick time shall not carry over from one year to the next.

Qualifying Leave. If the employee is unable to work (or telework), this Act requires employers to provide paid sick time for immediate use for the following purposes:

  1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
  2. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
  3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
  4. The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).
  5. The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the childcare provider of such son or daughter is unavailable, due to COVID-19 precautions.
  6. The employee 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.

Amounts Payable. The amount of compensation payable to the employee on leave is the greater of the employee’s regular rate of pay or the state or federal applicable minimum-wage.

The paid sick leave rate for qualifying events (1), (2), and (3) above must be paid out at 100% of the employee’s regular rate of pay, not to exceed $511 per day or $5,110 in the aggregate.

The paid sick leave rate for qualifying events (4), (5), and (6) above must be paid out at not less than two-thirds (2/3) of the employee’s regular rate of pay not to exceed $200 per day or $2,000 in the aggregate.

The Secretary of Labor must issue guidelines to assist employers in calculating paid sick time within 15 days of the bill’s enactment.

Notice Requirements. Employers will be required to post a notice of the new Emergency Paid Sick Leave Act provisions and a model notice will be released by the Secretary of Labor seven days after enactment.

Enforcement.  Violations are considered failure to pay minimum wages under the Fair Labor Standards Act and be subject to damages including wages owed (times 2 for liquidated damages) plus employment, reinstatement or promotion.  Either the employee or the DOL can bring a civil action to enforce this Act.

 

Division G – Employer Reimbursement for Amounts Paid

What employers need to know:

This section of the Act creates a system for employers to receive a payroll tax credit for required paid sick leave and for required paid family and medical leave.   Please consult your tax advisors or CPA for appropriate calculations of employer tax credits or other possible reimbursements.

Payroll Tax Credit.  Employers may, through a payroll tax credit, be refunded 100% of the wages paid out under Divisions C and E of the Act for each calendar quarter through December 31, 2020. The tax credit is allowed against the employer portion of Social Security and Railroad Retirement payroll taxes.

 Tax Credit Amounts.  Employers may take the following tax credits for wages paid under Division C and E of the Act:

  • Emergency Family Medical Leave Wages. The amount of wages paid under Division C for each employee is capped at $200 per day and $10,000 for all calendar quarters.
  • Paid Sick Leave Wages. If an employee receives paid sick leave because they are subject to a federal, state or local quarantine order, they have been advised by a health care provider to self-quarantine, or they are seeking a medical diagnosis of the Coronavirus because they are experiencing symptoms, the amount of qualified sick leave wages taken into account for each employee is capped at $511 per day.If an employee receives paid sick leave because they are caring for an individual who is subject to a federal, state or local quarantine order, the employee is caring for a son or daughter whose school or place of care is closed because of the Coronavirus, or they are experiencing any other substantially similar condition as specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor, the amount of qualified sick leave wages taken into account for each employee is capped at $200 per day.The total number of days that the employer can take into account with respect to a particular employee for that quarter may not exceed 10 days minus the number of days taken into account for that employee for all previous quarters.
  • Health Plan Expenses. The tax credits available for health plan expenses are increased to include the amounts employers pay for the employee’s health plan coverage while the employee is on leave under Division C or E of the Act.

Limits on Tax Credits: The credit allowed for any calendar quarter cannot exceed the total employer payroll tax obligations on all wages for all employees.  If the amount of the credit that would be allowed exceeds the total payroll tax obligations for any calendar quarter, the excess will be treated as an overpayment and refunded to the employer.

No Double Credit: Employers may not receive the tax credit if they are also receiving a credit for paid family and medical leave under Revenue Code Section 45S created by the 2017 Tax Cuts and Jobs Act.  Instead, such credit amounts must be included in the employer’s gross income.

 

CONCLUSION

We are continuing to monitor the federal, state, and local action and direction, so we can provide you the latest information within our firm’s capabilities on the Coronavirus pandemic and emerging legal challenges.

Traci focuses on general employment law matters as well as ERISA and employee benefits, including executive compensation. She has both worked in Human Resources, and served as in-house counsel - including a position as General Counsel to a small capital publicly traded company.

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