By Bello Welsh LLP
This Alert has been superseded. The updated Alert may be found here.
On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (the “Act”), which aims to address the impact of the COVID-19 pandemic by, among other things, providing a limited period of paid sick leave for employees affected by COVID-19 and expanding the Family and Medical Leave Act (“FMLA”) for a public health emergency. The paid sick leave and Emergency FMLA provisions of this new law apply to employers with fewer than 500 employees. For employers with more than 500 employees, the new law does not impact or change existing legal obligations under the FMLA or other federal employment laws, which remain as is.
Employers will be required to “front” the money for the leave required by the Act by paying employees directly, but the amounts will be subsidized by the federal government in the form of a tax credit or reimbursement. The Act will become effective on April 2, 2020, and will remain in effect until December 31, 2020. This alert summarizes the key provisions of the Act for employers. A summary in chart form, prepared by the House Ways and Means Committee, can be found here.
PAID SICK LEAVE
The Act requires private employers with fewer than 500 employees to provide paid sick time to any employee, regardless of tenure, who is unable to work 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 is seeking a medical diagnosis;
- The employee is caring for an individual who is subject to a quarantine or isolation order or has been advised by a health care provider to self-quarantine (note that this is not limited to just family members);
- The employee is caring for a child because the child’s school or place of care is closed or the child’s care provider is unavailable due to a public health emergency; or
- 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.
However, employers of healthcare providers or emergency responders may elect not to provide paid sick leave to those employees. In addition, the Secretary of Labor has the authority to exempt businesses with fewer than 50 employees if the required leave would jeopardize the viability of the business.
Duration of Leave
Full-time employees may take up to 80 hours of paid sick time, while part-time employees are entitled to the average number of hours worked over a two-week period. This paid sick time may not be carried over from year-to-year, the employer is not required to provide further sick leave under the Act once the employee returns to work if all the available leave has been used, and unused time need not be paid out at termination. An employer also cannot require an employee to find a replacement before taking paid sick time. Presumably, the paid sick time to which employees are entitled under the Act is in addition to all other sick time or PTO provided to employees under the employer’s policy or other applicable laws (such as the Massachusetts paid sick time law).
Rate of Pay
Employees who take leave for self-care must be compensated at the higher of (1) the employee’s regular rate of pay, (2) the federal minimum wage, or (3) the local minimum wage. Employees who take leave to care for others must be compensated at two-thirds of their regular rate of pay.
However, the paid sick leave amounts are capped at $511 per day for 10 days ($5,110 total) for employees who take leave for self-care (reasons 1-3 above), and at $200 per day for 10 days ($2,000 total) for employees who take leave to care for others or for a substantially similar condition (reasons 4-6 above).
Employer Tax Credits
The Act provides for certain tax credits to ease the financial burden on employers. Employers are entitled to a refundable tax credit equal to 100% of the paid sick leave wages paid to employees in each calendar quarter in accordance with the Act (up to the caps described above). The amount of the credit is increased by the amount of nontaxable group health plan expenses paid by the employer that are properly allocable to the qualified sick leave for which the credit is allowed. The tax credit is allowed against the employer portion of Social Security and Railroad Retirement payroll taxes. If the payments are not large enough to cover the credit, employers will be issued a refund.
Employers must post an approved notice concerning the paid sick leave provisions of the Act when it is made available by the Secretary of Labor.
Employers are prohibited from discriminating against an employee who takes paid sick leave under the Act and has filed any complaint, instituted or caused to be instituted any proceeding under the Act, or has testified or is about to testify in any such proceeding. Employers who terminate an employee for such discriminatory reasons, or who fail to provide paid sick time under the Act, will be considered in violation of the Fair Labor Standards Act and will be subject to its penalties, including payment of back pay, liquidated damages and attorneys’ fees.
EMERGENCY FMLA EXPANSION
The Act also substantially expands FMLA leave (“Emergency FMLA” or “E-FMLA”). The Act provides for up to 12 weeks of Emergency FMLA leave to any eligible employee who is unable to work (or telework) in order to care for a child who is under 18 because the child’s school or place of care is closed or the child’s childcare provider is unavailable due to the public health emergency. All employers with fewer than 500 employees are required to provide E-FMLA leave. However, the Secretary of Labor has the authority to exempt employers of healthcare providers and emergency responders, and to exempt businesses with fewer than 50 employees if the required leave would jeopardize the viability of the business.
Any employee is eligible for E-FMLA leave if the employee has worked for the employer for at least 30 days prior to taking leave.
Rate of Pay
The first 10 days of E-FMLA leave may be unpaid. During the unpaid period, an employee may elect (and an employer may require an employee) to substitute any accrued vacation, personal, or medical or sick leave for unpaid leave. Employees could also elect to use paid sick time under the Act to cover the first 10 days. After the 10-day period, the employer must pay full-time employees at two-thirds the employee’s regular rate for the number of hours the employee would otherwise be normally scheduled. Employees who work part-time must be paid based on the number of hours they worked over the preceding six month period or, if an employee has been employed less than six months prior to taking leave, based on the employee’s reasonable expectation at the time of hire. The Act limits paid FMLA leave to $200 per day and $10,000 total per employee (equivalent to 10 weeks of E-FMLA payments).
Employer Tax Credits
As with paid sick leave, employers may claim a refundable tax credit equal to 100% of the payments made to employees for Emergency FMLA leave in each calendar quarter, up to the caps described above. Similarly, the amount of the credit is increased by the amount of nontaxable group health plan expenses paid by the employer that are properly allocable to the qualified E-FMLA leave for which the credit is allowed. These tax credits are allowed against the employer portion of Social Security and Railroad Retirement payroll taxes, and employers will receive a refund if the payments are not large enough to cover the credit. However, employers are not allowed to take the credit with respect to any wages for which the general business credit for FMLA leave is allowed.
Employers are subject to the standard FMLA obligation to return any employee who has taken leave to the same or equivalent position upon return to work. The only changes under Act are: (1) employers with fewer than 25 employees are excluded from the requirement to return the employee to the same or an equivalent position if the position no longer exists when an employee seeks to return from Emergency FMLA leave because of an economic downturn or other conditions caused by a public health emergency, and (2) an excluded employer must attempt to contact the employee if an equivalent position becomes available in the next year. This explicit exception for small employers could be read to mean that no such exception is available for employers with more than 25 employees. However, this would contradict existing FMLA regulations (which appear to be incorporated into the Act) providing that there is no reinstatement obligation if an employer can show that “an employee would not otherwise been employed at the time reinstatement is requested” as the result of a reduction-in-force. 29 C.F.R. § 825.216(a).
NEXT STEPS FOR EMPLOYERS
Employers with fewer than 500 employees should take steps immediately to prepare to comply with the provisions of the Act. Employers will also be required to provide notice to their employees in the form approved by the Secretary of Labor once it is made available. In addition to the federal Act, several states have proposed legislation to enact or expand their own paid sick leave or family and medical leave laws to address COVID-19 issues. These state laws may impose additional requirements beyond the requirements of the federal Act. Though Massachusetts has not yet enacted legislation to expand paid sick leave or family and medical leave, the legislature has taken several measures to address the needs of employees and businesses in the Commonwealth, including loosening restrictions on unemployment claims and working with banks and other stakeholders to ease financial pressures on businesses.
We have prepared other resources to assist you during this time, including a review of key considerations and frequently-asked questions and answers. We will continue to monitor legal developments related to COVID-19 and provide updates as new laws applicable to employers are enacted.
Your Bello Welsh counsel is available to advise you on these matters and to work with you to determine available options, assess legal and business risk, and implement an agreed plan.