Employer Advisory On Federal Coronavirus Legislation
Late last week, the United States House of Representatives passed legislation in response to the spread of the coronavirus (“COVID-19”) across the United States called the “Families First Coronavirus Response Act” (“H.R. 6201”). H.R. 6201 was approved by the Senate and signed into law by President Trump on March 18, 2020. H.R. 6201 has potentially significant implications for small businesses across the United States.
In summary, H.R. 6201 applies to employers who employ fewer than 500 employees. It requires these employers to extend FMLA protections to certain employees, to offer certain amounts of paid, sick leave, and makes covered employers eligible for tax credits to offset the cost of providing these benefits.
FMLA Extended: The Emergency Family and Medical Leave Expansion Act
H.R. 6201 contains the “Emergency Family and Medical Leave Expansion Act” which extends the Family Medical Leave Act’s (“FMLA”) protections. Eligible employees must have been on the employer’s payroll for 30 days (Note: there is no minimum hours threshold like traditional FMLA leave), and may use emergency FMLA 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 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. A “public health emergency” under this provision is an emergency with respect to the COVID-19 as declared by the federal, state, or local authorities.
The first 10 days of leave may be unpaid. If the employee has accrued vacation, personal, medical, or sick leave, the employee may substitute the unpaid leave for paid leave.
If the employee still needs leave after the 10 days of unpaid leave expires, employers must continue paid FMLA leave at a rate of no less than two-thirds of the employee’s usual rate of pay. In no event shall such paid leave exceed $200 per day and $10,000 in the aggregate.
The Emergency Family and Medical Leave Expansion Act exempts certain groups from coverage (e.g. health care providers, emergency responders, and small businesses with fewer than 50 employees where these requirements would jeopardize the viability of the business).
Leave under the Emergency Family and Medical Leave Expansion Act also requires covered employers to follow the FMLA’s job protections. Specifically, a covered employer must return the employee to the same or equivalent position upon their return to work. There is an exception to this requirement for employers with fewer than 25 employees if the employee’s position does not exist after FMLA leave due to an economic downturn or other operating conditions exist that affect employment caused by a public health emergency during the period of leave (subject to certain conditions, including reasonable attempts to return the employee to an equivalent position, and required efforts to contact a displaced employee for up to a year after they are displaced).
The Emergency Family and Medical Leave Expansion Act takes effect no later than 15 days after the date of the bill’s enactment (April 1, 2020), and is applicable for the one-year period following enactment.
Emergency Paid Leave: The Emergency Paid Sick Leave Act
H.R. 6201 also has the “Emergency Paid Sick Leave Act.” This provision provides that a covered employer must provide eligible employees with up to roughly 2 weeks of paid leave if the employee cannot work or telework due to a need for leave because:
- The employee is subject to a federal, state, or local quarantine 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 a federal, state, or local quarantine related to COVID-19 or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- 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; and/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.
For 1-3 (above), the employee must be paid at the employee’s regular rate and shall not exceed $511 per day and $5,110 in the aggregate. Leave is paid at 2/3 the employee’s regular rate for 4-6 (above) and shall not exceed $200 per day and $2,000 in the aggregate.
The Emergency Paid Sick Leave Act applies regardless of the length of time the employee has been employed. Full-time employees are entitled to 80 hours of paid leave; part-time employees are entitled to the typical number of hours that they work in a normal 2-week period.
The Emergency Paid Sick Leave Act also applies to multiemployer collective agreements. Employees who work under a multiemployer collective agreement and whose employers pay into a multiemployer plan are provided with leave.
The paid sick time under the Emergency Paid Sick Leave Act is to be made available to employees in addition to any existing paid leave policy. Covered employers may not change any pre-existing policies on or after such date of enactment of the Emergency Paid Sick Leave Act to avoid allowing additional leave for employees. And, an employer may not require that the employee take other leave before taking leave allowed under the Emergency Paid Sick Leave Act.
Failure to comply with the Emergency Paid Sick Leave Act shall be considered a violation of the Fair Labor Standards Act of 1938 (“FLSA”) and subject to penalties as described in sections 16 and 17 of the FLSA. The Emergency Paid Sick Leave Act also includes anti-retaliation protections.
Finally, the Emergency Paid Sick Leave Act allows employers of employees who are in the healthcare and emergency response space to exclude employees from its application.
Paid sick time under this section of the Emergency Paid Sick Leave Act does not carry over yearly, and these requirements phase out on December 31, 2020. The requirements under the Emergency Paid Sick Leave Act shall take effect no later than 15 days after the date of enactment.
The Emergency Paid Sick Leave Act allows the United States Department of Labor (“DOL”) to issue regulations to exempt small business with fewer than 50 employees from the paid COVID-19 leave requirements “when the imposition of such requirement would jeopardize the viability of the business as a going concern.” In practice, however, it is likely that any such small businesses will be required to take action before the DOL might promulgate its regulations.
Tax Credits for Emergency Paid Sick Leave and Family and Medical Leave
In its present form, H.R. 6201 provides a series of refundable tax credits for employers covered by H.R. 6201.
First, there is a refundable tax credit for employers equal to 100% of qualified paid sick leave wages the covered employer must pay during each calendar quarter. The tax credit is allowed against the Social Security taxes an employer must pay under 3111(a) or 3221(a) of the Internal Revenue Code.
Second, there is refundable tax credit for employers equal to 100% of qualified family leave wages an employer must pay for each calendar quarter. The tax credit is allowed against the Social Security taxes an employer must pay under 3111(a) or 3221(a) of the Internal Revenue Code, except that the tax credit is capped at $200 per day and $10,000 for all calendar quarters. If the credit exceeds the employer’s total Social Security tax liability for any calendar quarter, the excess credit is refundable to the employer.
There are similar tax credits for eligible self-employed individuals.
Emergency Unemployment Insurance Stabilization and Access Act
Although imposing no direct obligation on employers, one section of Emergency Unemployment Insurance Stabilization and Access Act provides $1 billion in 2020 for emergency grants to states for activities related to processing and paying unemployment insurance (“UI”) benefits under certain conditions.
Five hundred million dollars is allocated to provide additional funding to all states for staffing, technology, systems, and other administrative costs. The following requirements regarding insuring access to earned benefits for eligible workers must be met:
- Require employers to provide notification of potential UI eligibility to laid-off workers;
- Ensure that workers have at least 2 ways to apply for benefits; and
- Notify applicants when an application is received and being processed and if the application cannot be processed, provide information to the applicant about how to ensure successful processing.
Another $500 million is reserved for emergency grants to states that experienced at least a 10% increase in unemployment. Any such state would be eligible to receive an additional grant (equaling the initial grant) to assist with costs related to any spike in unemployment claims. Any such affected state would also be required to take steps to ease eligibility requirements that are limiting access to UI during the COVID-19 outbreak mentioning relaxing work search requirements, required waiting periods, and requirements to increase employer UI taxes if they have high layoff rates.