The Department of Labor has issued several resources on the Families First Coronavirus Response Act: a fact sheet for employers, a fact sheet for employees and a Questions and Answers resource. In particular, the last of these resources answers many, although certainly not all, of the multitude of questions that have arisen in the wake of the enactment of the FFCRA and its paid sick leave and expanded Family and Medical Leave Act requirements, which we discussed in our March 19, 2020 E-Lert.
Of particular significance, the DOL offers the following guidance to employers:
Effective Date. We finally have a definitive date – April 1, 2020.
Which Employees Are Counted. The DOL states that employers count all employees in the United States, as well as its territories and possessions. The following employees must be included in the count:
- Employees on leave.
- Temporary employees jointly employed by the company and another employer, regardless of which payroll they are on. (See below for more on joint employer status).
- Day laborers supplied by a temporary agency if there is a continuing employment relationship.
- Employees from all of a company’s separate establishments or divisions.
Independent contractors are not counted.
Related Corporate Entities and Joint Employer Status. The DOL states that a corporation is typically considered to be a single employer for purposes of the FFCRA. If one corporation has an ownership in another, they are still separate employers unless they are considered joint employers under the Fair Labor Standards Act. The DOL recently released its final rule setting forth its revised joint employer analysis, as we discussed in our January 13, 2020 E-Lert, and summarize here.
Under the revised joint employer analysis, the DOL has identified two scenarios: (1) where an employee’s hours worked for one employer simultaneously benefits another employer; and (2) where the employee works separate sets of hours for different employers in the same workweek. Under the first scenario, the DOL assesses joint employer status by examining whether the potential joint employer is acting directly or indirectly in the interest of the employer in relation to the employee. Under a four-factor test, the DOL examines whether the potential joint employer:
- hires or fires the employee;
- supervises and controls the employee’s work schedules or conditions of employment to a substantial degree;
- determines the employee’s rate and method of payment; and
- maintains the employee’s employment records.
The DOL states that the joint employer determination will depend on all the facts in a particular case, with the weight given each factor varying depending on the circumstances. Of particular note, the potential joint employer must actually exercise the power to take these specifically identified or other such actions – the ability or reserved right to do so will not alone trigger joint employer status.
If the entities are joint employers of particular employees, then all of their common employees must be counted by each employer towards the 500-employee threshold for purposes of both the paid sick leave and the expanded FMLA mandates.
Related Corporate Entities and Integrated Employer Status. The DOL also acknowledges that two or more corporate entities are separate employers unless they are deemed integrated (or a single) employer under the Family and Medical Leave Act. In determining whether separate entities are an integrated employer, the DOL assesses four factors:
- common management
- interrelation between operations,
- centralized control of labor relations, and
- degree of common ownership or financial control.
No one factor is dispositive, but centralized control of labor relations/human resources functions is one of the more significant one. If the entities are found to be an integrated employer, then all employees of the entities that constitute the integrated employer are counted towards the 500-employee threshold for the expanded FMLA mandate.
How the Small Business Exemption Will Work. The FFCRA provides an exemption from both the paid sick leave and expanded FMLA mandates for employers with fewer than 50 employees if providing the mandated benefits “would jeopardize the viability of the business as a going concern.” The DOL will be issuing regulations to govern this process, but for the time being states that employers will need to document why they would the meet the criteria that will be addressed in forthcoming regulations. Notably, the DOL states that the process will not involve providing the DOL with the documentation to support the request. Presumably, employers granted the exemption may be required to substantiate their representations through documentation at a later time.
Include Overtime Hours in Calculating Pay. The DOL states that, under the expanded FMLA for the closure of a school or child care, employees are entitled to unpaid FMLA leave for the first two weeks and, thereafter must be paid the hours that they would normally have been scheduled to work, including overtime. (The rate of pay is at 2/3 of the regular rate of pay.)
Note, however, that under the paid sick leave provisions of the FFCRA, paid sick leave is capped at 80 hours. Thus, an employee who regularly works a 50-hour week, including overtime, would be entitled to receive 50 hours of paid sick leave in the first week of expanded (unpaid) FMLA leave and 30 hours of paid sick leave in the second week. Of course, under the law, the employee would be able to use any other available paid leave to cover the remaining unpaid portion of the expanded FMLA leave, before the paid portion of expanded FMLA leave kicks in at week three.
Of particular interest, the DOL states “that pay does not need to include a premium for overtime hours under either the Emergency Paid Sick Leave Act or the Emergency Family and Medical Leave Expansion Act.” (Emphasis added). Thus, although the normally scheduled hours are considered, the rate of pay is still employee’s regular rate of pay before overtime.
How to Calculate Pay. The DOL guidance states that the rate of pay used to calculate paid leave is the average of the employee’s regular rate during the six-month period prior to the leave. Alternatively, the employer can take the total compensation earned by the employee and divide it by the total number of hours worked during that six-month period. If the employee has not worked for six months, the rate is the average of the employee’s regular rate for each week worked.
Commissions, tips and piece rates must be incorporated into the regular rate.
Other Information. Also of interest to employers, the DOL, along with the Internal Revenue Service and Department of Treasury released a statement on March 20, 2020, in which they further explained the mechanism for the refundable tax credits being used to reimburse employers for the FFCRA’s paid leave mandates. In the statement, the DOL stated that it would be issuing a temporary non-enforcement policy establishing a 30-day period during which it would will focus on compliance assistance and will refrain from bringing an enforcement action against an employer who has acted reasonably and in good faith to comply with the FFCRA.
We will continue to monitor the situation and provide updates on any additional guidance provided by the DOL or other federal employment agencies. We have also updated our FAQs to include this new information.