The Lawletter Vol 45 No 3
On March 18, 2020, the federal Families First Coronavirus Response Act of 2020 ("Families First Act"), Pub. L. No. 116-127, was signed into law. The measure is the second in a series of recent legislative attempts to ameliorate the adverse health and economic effects of the novel coronavirus COVID-19 in the United States. The Act applies to employers with fewer than 500 employees, and its major provisions require (1) paid sick leave, and (2) paid FMLA leave for child care during the pandemic. The Act's leave provisions are effective April 2, 2020 through December 31, 2020.
A third piece of legislation, the Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act"), Pub. L. No. 116-136, was signed on March 27, 2020. A massive relief package, it provides for increased public health spending, cash relief for individual citizens earning under $75,000 a year ($150,00 a year for married couples), enhanced unemployment benefits, a lending program for small businesses, and targeted relief for certain heavily impacted industries.
Paid sick leave. Employers subject to the Families First Act must provide up to 10 days of paid sick leave at the employee's regular rate of pay (or the applicable minimum wage, if higher) to enable the employee to self-quarantine or seek treatment for COVID-19 illness. However, sick pay is limited to two-thirds of the employee's regular rate of pay/minimum wage when leave is taken to care for an ill family member or a child out-of-school.
Specifically, an employer must provide paid sick leave for any of the following reasons:
- The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19.
- The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
- The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
- The employee is caring for an individual who is subject to an order as described in the first point above or has been advised as described in the second point above.
- The employee is caring for his or her child because the child's school or place of care has been closed, or the child's care provider is unavailable, due to COVID-19 precautions.
- 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. (An employer of a health care provider or an emergency responder may elect to exclude the employee from this provision.)
Full-time employees are entitled to 80 hours of paid sick time. A part-time employee must be given a number of hours equal to the hours the employee works, on average, over a two-week period. The pay cannot exceed $511 a day and $5,110 in the aggregate when the leave is required for the employee's own health or need to quarantine, and it cannot exceed $200 a day and $2,000 in the aggregate when the leave is required to care for a family member or a child out-of-school.
Paid sick leave pursuant to the Families First Act must be granted in addition to any preexisting paid leave benefits the employee may have accrued, and the employer may not alter its existing paid leave policy to avoid this requirement. Sick leave must be made available for immediate use by an impacted employee regardless of length of employment, and the employer cannot require that any employee first exhaust other paid leave benefits.
An employer who violates the sick leave provisions of the Families First Act will be deemed to have failed to pay minimum wages in violation of the Fair Labor Standards Act ("FLSA") and will be subject to FLSA penalties.
"Public health emergency" child care leave. The Families First Act also amends the Family and Medical Leave Act ("FMLA") to provide up to 12 weeks of job-protected leave—10 of which must be paid, subject to a cap—to employees who have a "qualifying need related to a public health emergency." This new type of leave can be used by an employee who is unable to report for work due to a need to care for the employee's minor child at home when the child's school or place of care has been closed, or the child's care provider is unavailable, due to a public health emergency.
The first 10 days of emergency leave may be unpaid (presumably because 10 days of paid sick leave are available for this purpose under the Families First Act). The employee may elect to substitute other accrued paid leave during this time. After the first 10 days, the employer must provide paid leave in an amount not less than two-thirds of the employee's regular rate of pay, capped at $200 a day and $10,000 in the aggregate. The Families First Act provides a calculation for employees with varying workweek schedules.
Emergency leave may be used by any employee who has been employed for at least 30 calendar days by the employer, which is a much lower threshold than for other FMLA leave. Further, the regular requirement that the employee work at a job site with 50 employees within a 75-mile radius does not apply to emergency leave. For employers with fewer than 25 employees, there is a narrow exception to the FMLA's job reinstatement requirements that applies in specific circumstances.
The Families First Act gives the Department of Labor the authority to exempt small businesses (those with fewer than 50 employees) from the emergency leave requirements when the viability of the business as a going concern would be jeopardized. Guidance from the Department on the application of this exemption is anticipated.
Employer tax credits. The Families First Act provides employers subject to its leave requirements with payroll tax credits as a reimbursement measure. The paid sick leave credit is equal to 100% of the sick leave wages paid, including qualified health plan expenses related to those wages. The credit can be claimed on a quarterly basis. It is limited to $511 a day ($5,110 total) if an employee has taken time off for self-care, and to $200 a day ($2,000 total) if the leave have been taken to care for a family member who is quarantined or has symptoms of COVID-19, or a minor child whose school has closed.
For wages paid for public health emergency leave, an employer may take a payroll tax credit equal to 100% of the emergency leave wages paid, including qualified health plan expenses related to those wages. The credit is limited to $200 a day ($10,000 per employee total). Either type of credit is refundable if it exceeds the amount the employer owes in payroll tax. The Families First Act does not provide a payroll tax cut or an extension of standard filing deadlines for federal tax returns, although the IRS has separately extended the April 15th deadline for tax payments (but not filings) by 90 days. To prevent a double benefit, employers must include the amount of credits received in their gross income. Further, any wages taken into account in determining the credit allowed under the Families First Act will reduce the Code Section 45S paid family and medical leave credit that may be available to the employer under the 2017 Tax Cuts and Jobs Act.
On April 1, 2020, the Department of Labor issued temporary regulations implementing the sick leave and family leave provisions of the Families First Act. Visit www.federalregister.gov/d/2020-07237.
Unemployment benefits. The CARES Act creates the Pandemic Unemployment Assistance Program, which is in effect through December 31, 2020. The program provides federal funding for unemployment compensation to self-employed individuals, independent contractors, gig-economy workers (i.e., Uber drivers), and those with limited work history who are adversely impacted by the pandemic. Such workers must not be otherwise covered by state unemployment compensation laws. A worker eligible under this provision is entitled to the same unemployment benefits that regular employees receive under the relevant state's law.
The CARES Act also gives states the option of entering into agreements with the federal government to provide enhanced unemployment benefits under their existing benefit programs. Such an agreement would provide immediate benefit payments (i.e., no waiting period), an additional $600 a week for up to four months, and an additional 13 weeks of benefits for participating states.
Additionally, the states are offered agreements to receive funding for state-enacted "short-time compensation" programs that would subsidize employees whose hours have been reduced in lieu of a lay-off. Such employees would receive benefits prorated for the partial workweek reduction. Funded benefits under this provision are capped at 26 weeks.