By Scott Dondershine
March 2020
Workers, employers, and families are struggling with how to deal with the COVID-19 (“Coronavirus”) pandemic. On March 18, 2020, the Federal Government adopted the Families First Coronavirus Response Act (“Act”). The first two sections of this Client Alert explain the two primary obligations of employers and the third describes assistance from the Federal Government to businesses in the form of tax relief for complying with the Act. The Act becomes effective April 1, 2020 and generally remains in effect through December 31, 2020.
The requirements apply to private employers with fewer than 500 employees. An employer with less than 50 employees may be eligible for an exemption if complying with the Act would jeopardize the “viability of the business as a going concern.” The Department of Labor should promulgate regulations within the next two weeks to further define the term “viability of the business as a going concern,” how a business would prove it qualifies for the exemption, and many other gray areas discussed below.
I. Emergency Paid Sick Leave. Employers subject to the Act must provide up to two weeks of emergency paid sick leave for an employee who is “unable to work (or telework) due to a need for leave” as a result of any of the following six reasons:
A. The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
B. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
C. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis (for instance, the employee has contacted a provider and is seeking a diagnosis);
D. The employee is caring for an individual who is subject to a federal, state, or local quarantine order, or an individual who has been advised to self-quarantine due to concerns related to COVID-19;
E. The employee is caring for his or her child, if the child’s school or child-care facility has been closed, or the child’s care provider is unavailable due to COVID-19 precautions; or
F. The employee is experiencing any other substantially similar condition specified by Health and Human Services in consultation with the Department of the Treasury and the Department of Labor.
Importantly, under each of the six conditions listed above, an employee must also be unable to work or telework as a result of the condition. Regulations are needed to further explain what this means. Employees are eligible for sick leave regardless of how long they have worked for their employer, unlike with the expanded FMLA discussed below in Section II of this Client Alert.
If an employee is eligible for the paid sick leave, the amount of pay depends upon whether the condition is the “employee’s own condition” (see A-C above). If the condition is the “employee’s own condition”, then the amount paid is calculated based on the employee’s regular rate of pay or applicable minimum wage, whichever is greater. The amount is limited to $511 per day ($5,110 in total).
If, on the other hand, the employee is acting as a caregiver (see D-F above), the amount due is less. In this case, it is calculated based on two-thirds of the employee’s regular rate of pay or applicable minimum wage, whichever is greater. The limit is $200 per day ($2,000 in total).
In either scenario, the rate determined above is paid for (1) 80 hours for full-time workers or (2) with respect to part-timers, the number of hours equal to the number of hours that such employee works on average over a two-week period.
II. Emergency FMLA. The Act also provides for an expansion of the Family and Medical Leave Act (“FMLA”). Employers subject to the Act (all except those with more than 500 employees or less than 50 if complying would jeopardize the viability of the business as discussed above) must provide 12 weeks of job-protected emergency FMLA leave (“Emergency FMLA”) to an employee meeting the following three requirements:
A. If the employee is unable to work or telework;
B. The employee needs to care for children (under 18) if schools are closed or their daycares are unavailable; and
C. The need arises because of a public health emergency (defined as COVID-19).
An employee is only eligible for the Emergency FMLA if he or she has been working for the employer for thirty days. The 12 weeks of Emergency FMLA has two parts.
(1) The first two weeks are unpaid, although the employee may (a) substitute any accrued vacation leave, personal leave or medical or sick leave for the unpaid portion or (b) use the Emergency Paid Sick Leave described above in Section I of this Client Alert.
(2) The last ten weeks are paid at the rate of at least (a) two-thirds of the employee’s regular rate of pay (salary or hourly rate) times (b) the number of hours that the employee would have normally worked. The amount paid to an employee is capped at $200 per day or $10,000 in the aggregate.
When an employee returns to work after taking the leave, the employee must be restored to the employee’s prior position as follows:
(1) For an employer with between 25 and 500 employees, the requirement is to restore the employee to his or her same position, or an equivalent position if the employee’s position is no longer available.
(2) For an employer with fewer than 25 employees, the restoration requirement is relaxed if (a) the employee’s job no longer exists due to economic conditions or changes in operational conditions caused by the public health emergency during the Emergency FMLA period; and (b) the employer has made a reasonable effort to find the same or equivalent position for the employee. In such a case, the employer must contact the employee if an equivalent position becomes available within one year after the date on which the employee’s Emergency FMLA ends.
III. Tax Credits. The Act provides for refundable tax credits against the amounts otherwise due with respect to the employer’s share of FICA taxes (the 6.2% social security portion only, i.e. not the Medicare portion). Self-employed persons enjoy similar credits. The credits will probably be claimed on quarterly Form 941 tax returns.
The credits against FICA tax are generally for the amount of wages paid in emergency sick leave (Section I above) and Emergency FMLA leave (Section II above) and are increased to account for the amount of an employer’s qualified health plan expenses as they are both properly allocable to the sick leave wages or qualified family leave wages for which the credits are allowed. Other nuances are beyond the scope of this Client Alert.
IV. Summary. The Act is an important step in assisting workers and businesses through this crisis. Since the Act applies effective April 1, 2020, employers have little time to prepare. It is also important to keep track of state and local laws, and additional federal legislation including a new act that is currently under discussion, that may apply.
We hope that this Client Alert provides some guidance, although please understand that the Client Alert does not represent a full discussion of the issues. Please contact our firm if you have any questions and we wish that you and the members of your family and business stay safe and healthy.
Lastly, we want to recommend the following important resources for additional information:
1. For employers and their workplace: https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html
2. U.S. Department of State (Travel Advisories): https://travel.state.gov/content/travel/en/traveladvisories/ea/travel-advisoryalert-global-level-3-health-advisory-issue.html
3. EEOC (ADA Guidance): https://templatelab.com/ada-rehabilitation-act-coronavirus/
4. EEOC Publication: “Pandemic Preparedness in the Workplace and the ADA”: https://www.eeoc.gov/facts/pandemic_flu.html
5. OSHA: Safety & Health Topics: https://www.osha.gov/SLTC/covid-19/
6. OSHA Publication: “Guidance on Preparing Workplaces for COVID-19”: https://www.osha.gov/Publications/OSHA3990.pdf
7. DOL: Coronavirus Resources: https://www.dol.gov/coronavirus DOL Wage & Hour Division: FMLA COVID-19 Q & A: https://www.dol.gov/agencies/whd/fmla/pandemic
8. DOL Wage & Hour Division: FLSA COVID-19 Q & A: https://www.dol.gov/agencies/whd/flsa/pandemic
This Client Alert is intended as an introduction only to the topics addressed – it is not a full discussion of the issues presented. Let us know if you want to discuss the issues in this Client Alert in greater detail or if you have other questions.
DISCLAIMER. This Client Alert does not provide legal advice. We are providing it for general informational purposes only.