Employer Obligations Under The Families First Coronavirus Response Act
Employer Obligations under the Families First Coronavirus Response Act
On March 18, 2020, the Senate passed the Families First Coronavirus Response Act in the same form passed by the House (with technical amendments). This is the first of likely several legislative measures expected to pass in response to the Coronavirus pandemic. Subsequent bills are expected to be geared toward broader economic relief measures. While this Act provides refundable tax credits for employers to offset paid leave obligations to employees, the Trump Administration is signaling that successive legislative measures will more directly focus on helping employers meet their payroll demands.
Regardless of what comes next, employers must prepare now for their new obligations under this bill, which is expected to be signed into law by President Trump shortly. Within 15 days of enactment, employers will be subject to the following obligations, all of which are presently scheduled to sunset on December 31, 2020.
Emergency Family and Medical Leave Expansion Act
There are new Family and Medical Leave Act (“FMLA”) entitlements that apply to all employers with fewer than 500 employees. Notably, the Act imposes the following FMLA entitlements even if an employer would not be considered a “covered employer” for traditional and family military FMLA purposes:
- Employers must allow eligible employees to take up to 12 weeks of FMLA leave (“Public Health Emergency Leave”) if 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 because the child’s school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to an emergency with respect to COVID-19 declared by a Federal, State, or local authority.
- The first 10 days of this leave may be unpaid, or an employee may choose to substitute another type of paid leave (g., vacation, personal leave, etc.), but an employer may not require an employee to do so.
- The remainder of the FMLA leave must be paid, generally at two-thirds of the employee’s regular rate, for the number of hours the employee would otherwise be scheduled to work.
- In no event shall such paid leave exceed $200 per day and $10,000 in the aggregate.
- The leave is job-protected, meaning the individual must be restored to the same or equivalent position following the expiration of leave.The Act carves out limited exceptions to the job restoration requirement for employers with fewer than 25 employees. Specifically, an employer with fewer than 25 employees would not have interfered with the employee’s FMLA right to restoration if the following conditions are met:
- The employee took Public Health Emergency Leave;
- The position held by the employee when the leave commenced no longer exists due to economic conditions or other changes in operating conditions of the employer (i) that affect employment; and (ii) are caused by a public health emergency during the period of leave.
- The employer makes reasonable efforts to restore the employee to a position equivalent to the position the employee held when the leave commenced, with equivalent employment benefits, pay, and other terms and conditions of employment.
- If the reasonable efforts of the employer fail, the employer makes reasonable efforts during the period to contact the employee if an equivalent position becomes available within 1 year from the date on which the qualifying need related to a public health emergency concludes; or the date that is 12 weeks after the date on which the Public Health Emergency Leave begins, whichever is earlier.
- Employers with fewer than 50 employees are excluded from civil FMLA damages or equitable relief in an employee-initiated lawsuit.
Emergency Paid Sick Leave Act
There are also new paid sick leave requirements that apply to all employers with fewer than 500 employees.
- Employers are required to provide up to 80 hours of paid sick leave for full-time employees, or for part-time employees, the equivalent of the number of hours the part-time employee works (on average) over a two-week period.The paid sick leave may be used under the following circumstances:
- 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 subparagraph (1) or has been advised as described in paragraph (2).
- 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 child care provider of such son or daughter 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.
Employers have the ability to exclude an employee who is a health care provider or an emergency responder from these benefits.
- Paid leave shall not exceed $511 per day ($5,110 in the aggregate) where leave is taken for reasons related to the employee’s own health, exposure, or quarantine under (1), (2), and (3) noted above; and $200 per day ($2,000 in the aggregate) where leave is taken for reasons (4), (5), or (6).
- This paid sick time will not carry over from one year to the next, and is not considered an earned benefit that must be paid out upon separation (like PTO or vacation).
- The paid sick time must be available for immediate use by employees regardless of their length of service.
- The availability of paid sick time provided under this provision ceases as soon as the employee starts their next scheduled shift.
- The paid sick leave required under the law must be provided in addition to whatever the employer already provides. Employers may not require employees to exhaust other employer-provided paid leave benefits before using Emergency Paid Sick Leave, and may not amend their paid leave policies to make the benefits run concurrently.
Under both Acts, the Secretary of Labor has the authority to issue regulations that would exclude certain health care providers and emergency responders from the definition of “eligible employee” for Public Health Emergency Leave or the definition of “employee” for Paid Sick Leave purposes. We note, however, that each Act already provides the employer with the option to exclude such employees without subsequent regulations.
The Secretary of Labor may also issue regulations to exempt small businesses with fewer than 50 employees from the Public Health Emergency Leave obligations, and the paid leave provisions related to child care outlined in (5) above, when the imposition of such requirements would jeopardize the viability of the business as a going concern.
Tax Credits for Paid Sick Leave and Paid Family and Medical Leave
In an attempt to ease the burden on employers for such paid leave obligations, Congress provides employers with refundable payroll tax credits through the end of the year that would cover wages paid to employees under the Acts for up to ten days.
The tax credit would be equal to 100% of the wages paid to an employee under the Acts, up to $511 per day for personal sick leave, or $200 per day if the sick leave is to care for a family member or child who must remain at home due to school closings. The total family leave tax credit an employer may receive is capped at $10,000. Similar credits are provided to self-employed individual who are responsible for self-employment taxes. Importantly, no tax credits for leave paid under either Act will be provided to employers who already receive tax credits for a qualifying leave program under the 2017 Tax Cuts and Jobs Act. Employers should be on the lookout later this year for additional guidance from the Treasury on how to specifically apply these provisions under a quarterly basis as they file their employment tax returns.
The Acts do not include a payroll tax holiday that had been proposed by the Administration earlier in the week.
Baird Holm Webinar
Baird Holm will offer a webinar detailing the new law’s requirements and other important legal issues facing employers related to COVID-19 on Friday, March 20, 2020 at 12 p.m. CST. Click here for more information and to register.