On Wednesday, March 18, 2020, President Trump signed the Families First Coronavirus Response Act into law. This law makes sweeping changes to an employer’s legal obligations: (1) imposing a paid sick and safe leave (“PSL”) mandate for COVID-19-related reasons on most employers with fewer than 500 employees; (2) temporarily expanding coverage for school and child care closures associated with COVID-19 and imposing a paid leave requirement under the Family and Medical Leave Act (“FMLA”) on these same employers; (3) encouraging states to extend unemployment benefits for reasons associated with COVID-19; and (4) giving a payroll tax credit to employers for the paid sick leave and paid family and medical leave mandates.
While we had previously provided a summary of the Act as it was originally passed by the House, and then another on the House’s substantive “technical amendments” to the Act, we are now summarizing the final law here.
- “Emergency Paid Sick Leave Act”
This section of the Coronavirus Response Act requires employers with fewer than 500 employees to provide 10 days of paid sick leave (“PSL”) to employees to use for themselves and to care for their family members during this COVID-19 emergency. The Act sunsets at the end of the year. Notably, this Act may go beyond the requirements of similar state and local paid sick and safe leave laws. And please note that this is a separate and additional grant of sick leave, in addition to any existing sick leave policies.
What Leave Is Provided: The Act provides ten days of paid leave (80 hours) at the employee’s regular rate (as calculated under the Fair Labor Standards Act), to a maximum of $511 per day and an overall total of $5,110, if the employee is unable to work or telework for the following reasons:
- The employee is subject to federal, state, or local quarantine or isolation order
- A health care provider has advised the employee to self-quarantine
- The employee has symptoms of COVID-19 and is seeking diagnosis
Paid sick leave may be paid at 2/3 the employee’s regular rate, to a maximum of $200 per day and an overall total of $2,000, for an employee who is unable to work or telework for any of the following reasons:
- The employee is caring for an individual under quarantine
- A child’s school or place of care is closed or the child care provider is unavailable due to COVID-19
- Some other substantially similar condition specified by the Secretary of HHS in consultation with the Secretaries of Labor and Treasury
Who Is Covered: Private (along with certain governmental) employers with fewer than 500 employees, with certain exclusions as explained below, are covered by this Act, which applies to all of their employees, both full-time and part-time. The Secretary of Labor will issue regulations to exclude certain health care providers and emergency responders from the definition of employee, and to allow employers of such workers to opt out of the paid leave requirement. By regulation, the Secretary may also exempt small businesses with fewer than 50 employees if the sick leave mandate “would jeopardize the viability of the business as a going concern.”
In our view, the 500 employees would be counted across the company, not by location. In addition, whether the employees of affiliated companies, like sister companies or parent-subsidiary companies, would be aggregated towards the 500 employee count would depend on whether the affiliated companies are so closely intertwined so as to constitute a “single employer” under the Fair Labor Standards Act.
Amount of PSL: Full-time employees receive 80 hours of PSL. Part-time employees receive a prorated amount of PSL based on the number of hours that they work on average during a two-week period. If the part-time employee works a varying schedule, the hours are calculated by determining the average number of hours that employee was scheduled to work over the prior 6-month period, including any leave. If the employee has not worked over that period, then the hours are calculated based on the reasonable expectation at hire of the average number of hours per day that the employee would normally be scheduled to work. The Secretary of Labor must issue guidelines to assist in the calculation of the amount of PSL within 15 days of enactment.
There is no carryover of unused PSL. In addition, this appears to be a one-time use of leave; once an employee has returned from leave, no further PSL is required. Unused PSL does not need to be paid out upon termination.
Notice and Use of Leave. PSL is available for immediate use. The employer cannot require the employee to look for or find a replacement worker. If other paid leave is available, the employee may choose to use PSL first, and the employer cannot require the employee to use other paid leave before PSL.
After the first workday on which PSL is used, the employer can require the employee to follow reasonable notice procedures for the use of any additional PSL.
Multi-Employer Bargaining Agreements. The Act contains a provision specific to employers that are covered by multiemployer collective bargaining agreements. Such employers comply with the Act by contributing to a multiemployer fund, plan or program at the required statutory accrual rate, as long as employees can receive pay for the specified reasons from this arrangement.
Employer’s Notice and Recordkeeping Requirements. The Secretary of Labor will prepare a notice within 7 days of enactment that must be posted in conspicuous places where the employer normally posts other such employment notices. Employers must retain records for three years.
Prohibited Actions and Enforcement. Employers may not discharge, discipline or discriminate in any other way against an employee for taking leave under the Act or who has filed a complaint, instituted a proceeding or testified in such proceeding.
A failure to provide sick leave or retaliation for exercising rights under the Act will be subject to the penalties under the FLSA. This includes a fine of not more than $10,000 and/or imprisonment of not more than 6 months. Either the Secretary of Labor or the employee may also bring a lawsuit for the unpaid leave, an equal amount as liquidated damages, equitable relief, attorneys’ fees and costs, and for injunctive relief.
Lawsuits may be brought for up to two years after the alleged violation, unless the violation was willful, in which case the period is extended to three years.
An Employer’s Existing Policy? The Act specifically provides that it does not diminish any rights under existing employer policy. This means that this is a new bank of paid sick leave.
Verification or Certification? The Act currently does not contain any provisions that allow the employer to obtain certification of the need for leave, to verify the reasons for the leave if fraudulent use is suspected, or to discipline employees if fraudulent use is confirmed. This is not necessarily to say that employers may not do this but simply to note that the bill is silent on these matters.
No Preemption of State or Local Laws. The Act also does not preempt state and local paid sick and safe leave laws. Thus, employers subject to such laws will need to ensure that they are still complying with all applicable laws.
Collective Bargaining Required. While the Act provides that it does not diminish the rights and benefits under any collective bargaining agreement, it contains no other provision regarding the interaction of the Act with an existing CBA. Because employers must comply with the Act almost immediately upon enactment, this may require unionized employers to provide notice to and an opportunity to bargain with unions over any required changes to CBA provisions or administration.
Effective Date. This section takes effect not later than 15 days after enactment of the Coronavirus Response Act. As noted previously, however, it expires at the end of 2020.
- “Emergency Family and Medical Leave Expansion Act”
Another section of the Coronavirus Response Act temporarily (until December 31, 2020) adds the COVID-19-related closure of a school or child care facility to the reasons for which leave may be taken under Family and Medical Leave Act (“FMLA”) and makes such leave partially paid.
The FMLA as It Currently Exists. The FMLA requires employers with 50 or more employees to provide eligible employees with up to 12 weeks of unpaid leave for certain qualifying conditions:
- For incapacity due to pregnancy, prenatal medical care or childbirth;
- To care for the employee’s child after birth or placement for adoption or foster care;
- To care for the employee’s parent, spouse, or child who has a qualifying serious health condition;
- For a qualifying serious health condition that makes the employee unable to perform his/her job;
- For certain qualifying exigencies resulting from a military servicemember’s deployment to a foreign country.
In addition, employees may take up to 26 weeks to care for a servicemember who was injured or became ill as a result of their military service.
To be eligible for existing FMLA leave, an employee must have worked for the employer for 12 months, have worked at least 1,250 hours during the 12 month period immediately preceding the date the leave is to begin, and be employed at a worksite where 50 or more employees are employed by the employer within 75 miles of that worksite.
New Reason for FMLA Leave. Until the end of the year, the FMLA adds a new reason for leave and includes a new paid leave mandate pertaining to the COVID-19 emergency. Under this section, in addition to the existing FMLA reasons, employees will be entitled to take FMLA leave if “the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 year of age of such employee 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.”
Who Is Covered. This section will apply to an employer with fewer than 500 employees (rather than 50 or more). Thus, it will cover small employers who are not subject to FMLA otherwise (subject to the exemption discussed below) and will not apply to large employers. As under the Paid Sick Leave Act portion of the Act, however, the Secretary of Labor will issue regulations to exclude certain health care providers and emergency responders from the definition of employee, and to exempt small businesses with fewer than 50 employees if the sick leave mandate “would jeopardize the viability of the business as a going concern.” A slight difference between the two sections allows employers of health care providers or emergency responders to exclude such workers from the FMLA expansion, without waiting for regulations from the Secretary of Labor.
The bill does not define “emergency responders.” The existing FMLA regulations define the term “health care provider” as the following: doctors, podiatrists, dentists, clinical psychologists, optometrists, chiropractors, nurse practitioners, nurse-midwives, clinical social workers, physician assistants, Christian Science Practitioners, and any health care provider accepted by the employer’s group health (or equivalent) plan. It does not include registered nurses, GNAs, CNAs, medical technicians, and the like. Thus, these lower-level health care providers are entitled to the expanded FMLA rights, unless and until the forthcoming regulations address this group.
An employee will be eligible if they have been employed for at least 30 days (rather than 12 months, and there is no hours of service requirement, as with existing FMLA).
New Paid Leave Mandate. The FMLA expansion provides that the first 10 days for which an employee takes this school/child care closure FMLA leave is unpaid, although the employee may choose to substitute any paid leave (such as PSL if applicable). Unlike with regard to regular FMLA leave, the employer may not require the substitution of paid leave.
Of significant import, after the first 10 days has passed, the law requires that any additional leave for school/child care closure, up to the 12-week entitlement under FMLA, be paid. The amount of pay must be at least 2/3 of the employee’s regular rate of pay (as determined in accordance with the Fair Labor Standards Act), up to a maximum of $200 per day and $10,000 aggregate per employee, for the number of hours that the employee would otherwise normally be scheduled to work. The same varying schedule calculation that applies to the Paid Sick Leave Act also applies here.
Notably, FMLA leave still may be available if the underlying reason qualifies for leave under existing FMLA provisions, such as if the employee is infected with COVID-19 or has to care for an infected family member, and the illness meets the requirements for a “serious health condition” under the FMLA. But no pay will be required (other than the employee’s right or employer’s mandate that available paid leave be substituted) for leave under existing FMLA provisions. The FMLA paid leave mandate does not apply to regular FMLA leave, including for the illness of the employee or family member.
Use of Expanded FMLA. Where the need for leave is foreseeable, the employee must provide as much notice as is practicable (as opposed to 30 days for regular FMLA).
While the regular FMLA requires job reinstatement (with limited exceptions), the FMLA expansion provides that employers with fewer than 25 employees are not required to reinstate employees where (1) the employee’s job position no longer exists because of economic conditions or other changes in operating conditions caused by the public health emergency, (2) the employer makes reasonable efforts to restore the employee to an equivalent position, and (3) if no such position is then available but becomes available within one year and the employer makes reasonable efforts to contact the employee. The one-year period begins on the earlier of the date on which the leave concludes or the date that is 12 weeks after the commencement of the leave.
Multi-Employer Bargaining Agreements. The FMLA expansion contains the same provision as to funding the leave through a multi-employer fund, plan or program as under the Paid Sick Leave portion of the Act.
Prohibited Actions and Enforcement. The normal FMLA prohibitions and penalties apply to violations of the requirements under the FMLA expansion. However, unlike with regard to other FMLA violations, the FMLA expansion provides that an employer with fewer than 50 employees cannot be sued by an employee for violations of the right to leave for school/child care closures. The employer may be subject to administrative enforcement or suit by the Secretary of Labor, however.
Existing Paid Leave Policies? In our view, the FMLA paid leave is a new benefit that must be offered in addition to any existing paid leave benefit. However, this may be subject to clarification in the forthcoming regulations.
Effective Date. The FMLA expansion takes effect not later than 15 days after enactment of the Coronavirus Response Act. As noted previously, however, it expires at the end of 2020.
- Unemployment Insurance Benefits for COVID-19 Illnesses and Quarantines
The Act provides emergency administration grants to states to assist with processing and paying unemployment insurance benefits, if the state “demonstrate steps it has taken or will take to ease eligibility requirements and access to unemployment compensation for claimants, including waiving work search requirements and the waiting week, and non-charging employers directly impacted by COVID-19 due to an illness in the workplace or direction from a public health official to isolate or quarantine workers.” By doing so, states would allow employees to obtain UI benefits if they are ill or ordered into quarantine due to exposure to COVID-19 – a matter that is currently left to each state’s interpretive discretion.
- Tax Credits for Paid Sick Time and Paid Family and Medical Leave
The Act provides a payroll tax credit equal to 100% of the required PSL, up to $511 per day for leave taken because of the employee’s own personal needs and up to $200 for leave taken to care for a family member or because of a school closure or loss of child care, subject to other limitations and conditions.
In addition, the Act provides a payroll tax credit equal to 100% of the required paid FMLA, up to $200 per day or an annual aggregate of $10,000. Again, there are other limitations and conditions.
Employers should consult with their accountant or tax counsel for further guidance on the proposed tax credit.
Next Steps for Employers
Given the already existing school closures in many jurisdictions and the increasing number of infected individuals, as well as the expanding numbers of people who are subject to governmental or employer-required quarantines, employers must take action to prepare for the impending effective date of this Act.
As for PSL, employers will need to comply with this new leave mandate. Typically sick leave is compensated at an employee’s regular rate; if the employer wishes to take advantage of the 2/3 rate for leave taken to care for a family member or because of school/child care closures, it will need to make the necessary logistical arrangements for the calculation of such leave and account for the $511/200 caps. In addition, employers must ensure that they obtain and post the Secretary of Labor’s soon-forthcoming notice.
With regard to the FMLA expansion, covered employers (those with fewer than 500 employees) will also need to prepare to provide this new paid leave benefit, which may be compensated at the 2/3 rate, subject to the $200 daily cap. The notice and designation requirements of regular FMLA will apply, and employers need to ensure compliance. Those with fewer than 50 employees may wish to see if the Secretary of Labor will grant the referenced hardship exemption (although it is not yet clear how exemptions will be determined). Similarly, those employing certain healthcare personnel or emergency responders may also be exempted by the Secretary.
Employers should also be aware that employees without paid leave rights may be entitled to unemployment insurance benefits, which the Act specifically encourages the states to extend to COVID-19-related illnesses and quarantines.