Many clients have reached out to me for help understanding the Families First Coronavirus Response Act (the “Act”). In an effort to efficiently provide information to as many people as possible, I am using this blog format rather than individualized emails. As such, this blog is not intended to constitute legal advice or create an attorney-client relationship. Please contact me if you have any questions or if you would like to discuss your situation.
The Act takes effect on April 2, 2020 and will remain effective until December 31, 2020. The Act creates an Emergency Paid Sick Leave (“EPSL”) benefit and expands FMLA laws currently in place. It currently applies to employers of 500 or fewer employees, although employers with 50 or fewer employees may later be exempted from part or all of the Act's provisions. Even with just those three sentences, there are some key takeaways:
- Decisions regarding retaining or terminating employees should be made prior to April 2, 2020 when possible, before the Act comes into effect.
- Hiring employees after April 2, 2020 will bring them under the provisions of the Act.
- The Act is likely to be amended, possibly even before April 2, 2020.
- There will be regulations and other official, unofficial and temporary interpretations of the Act, so we will need to stay on top of how it evolves.
- As a result, while it is important to put a plan in place now regarding your employees, it may also be beneficial to implement as little of the plan as possible prior to April 2, 2020, in case the Act changes or important exemptions are granted.
Emergency Paid Sick Leave
An employee is entitled to receive EPSL benefits under any of six situations: 1) the employee is subject to any governmental quarantine or isolation due to COVID-19; 2) a healthcare provider advised the employee to self-quarantine due to COVID-19 concerns; 3) the employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis; 4) the employee is caring for someone (not necessarily a family member) who is subject to 1 or 2 above; 5) the employee is caring for the employee's child whose school or day-care is closed due to COVID-19; or 6) the employee qualifies under any regulations created by the Department of Health and Human Services.
The EPSL benefit is that full-time employees receive 80 hours of paid sick leave and part-time employees receive the equivalent of the hours that they worked, on average, during a two-week period. In situations 1, 2 and 3 above, the paid sick leave is at the employee's regular compensation with a limit of $511 per day and $5,110 in total (i.e. 10 days at 8 hours per day). In situations 4, 5 and 6 above, the employees will receive paid sick leave at two-thirds of their regular rate, with a maximum of $200 per day and therefore $2,000 in total. This leave is in addition to PTO and the employee is entitled to take this leave before taking PTO. Employers cannot require employees to provide advance notice prior to the first day in which the employee takes EPSL. The EPSL benefits cease on the employee's next scheduled work shift immediately following the termination of need for paid sick time. Employers will receive a tax credit (i.e. a dollar-for-dollar reduction of taxes) against their employer payroll tax obligations for payments made to employees pursuant to EPSL, although this part is somewhat convoluted and outside the focus of this email.
Here are some key takeaways of EPSL:
- Due to the fast-evolving nature of COVID-19 and governmental responses, unfortunately the eligibility requirements are already outdated. Virtually every person in this country can take EPSL under options 3, 4 and 5 above at this moment. Almost all of your employees can receive their full compensation or two-thirds of their full compensation up to the above limits, without working, starting April 2, 2020. The Act prohibits retaliating against employees who take EPSL, but we fully expect that the benefits under this Act are going to be abused. You will need to be very careful in determining which employees you may need to terminate and why (it should not be because you believe that employee will take EPSL benefits), while at the same time realizing that some employees who are crucial to operations may take EPSL, perhaps unexpectedly, over the next few months.
- Given the maximum daily compensation of $511 or $200, depending on the situation, and the breadth of EPSL, it will be difficult to incentivize employees to not take EPSL.
- Expect a significant number of employees to attempt to qualify for benefits under reason 3 above, because it is the easiest to meet the qualifications for the greatest compensation.
- Employers with fewer than 50 employees may ultimately be exempted or have a process to seek an exemption from the Act if it would jeopardize the business's viability as a going concern, but we do not know what that looks like as of now.
Typically, FMLA only applies to employers with 50 or more employees and only applies to employees who have worked for at least the past 12 months and worked more than 1,250 hours during the past 12 months. In that situation, FMLA provides unpaid leave for reasons such as the employee's serious health condition, to care for a family member with a serious health condition, or to care for a newborn infant. From April 2, 2020 through December 31, 2020, the Act expands FMLA to include all employers with 500 or fewer employees and expands the eligible employees to everyone who has worked for the employer for 30 calendar days or more. Under the Act, FMLA is now available to an employee that is “unable” to work, including telework, due to a “need” to care for his or her child under the age of 18 and whose school or daycare has closed due to COVID-19. The benefit to employees in this situation is up to 12 weeks of leave, the first 10 days/2 weeks of which are unpaid (in effect, this is a 10 day waiting period), unless the employee chooses to take PTO, sick leave or accrued vacation for those 10 work days. Thereafter, for the remaining 10 weeks, the employee is entitled to receive from the employer two-thirds of his normal wages based on the hours that the employee would normally work, up to a maximum of $200 per day and $10,000 in total ($200 per day x 5 days a week x 10 weeks). For employers with 25 or more employees, an employee returning from FMLA leave is entitled to reinstatement to the same position unless that position no longer exists due to economic conditions or changes to operating conditions caused by the public health emergency, but even then the employer must use reasonable efforts to restore the employee to an equivalent position for up to a year. As with EPSL, the employer will receive a tax credit against payroll taxes for amounts paid pursuant to this FMLA expansion. In addition, as with EPSL, employers with fewer than 50 employees may ultimately be exempted or have a process to seek an exemption of the Act.
Here are some considerations regarding the FMLA expansion:
- The terms “unable” and “need” are potentially very helpful to employers, but it is unclear how the costs and risks of litigation will weigh on employers versus employees in this situation. Expect litigation to come from disagreements between employers and employees on whether the employee is “unable” to work due to a “need” to care for his child. Employers may be working from an unsympathetic position under these circumstances, so err on the side of caution.
- It may be best to try to move under the 25 employee threshold prior to April 2, if that is relevant, and then stay under it while this Act is in effect.
- Although FMLA is not triggered by a quarantine, the regular FMLA rights and benefits still apply.
- An employee whose child's school is closed can combine EPSL and FMLA to ultimately obtain up to 14 weeks of leave (2 weeks EPSL paid, 2 weeks unpaid FMLA and 10 weeks paid FMLA) and a maximum benefit of $12,000.
- Employees who are entitled to EPSL for reasons other than school closure, but then also have a school closure reason for benefits under FMLA, could ultimately receive a maximum benefit of $15,110 due to the higher EPSL benefit.
Healthcare Worker Exception
- An employer of health care providers and emergency responders may elect to exclude only health care providers and emergency responders from the application of the FMLA expansion and EPSL provisions. This means that employees of medical and dental practices who are not health care providers are not exempted and the FMLA expansion and EPSL still applies to them.
- For purposes of both the FMLA expansion and the EPSL, a “health care provider” is defined as a “doctor of medicine or osteopathy who is authorized to practice medicine or surgery by the state in which the doctor practices, or any other person determined by the Secretary to be capable of providing health care services”. The second part of this definition typically includes podiatrists, dentists, clinical psychologists, optometrists, chiropractors, nurse practitioners, nurse midwives, clinical social workers, physician assistants who are authorized to practice under State law and who are performing within the scope of their practice as defined under State law, and any other health care provider from whom an employer or the employer's group health plan's benefits manager will accept certification of the existence of a serious health condition to substantiate a claim for benefits.
Miscellaneous Provisions and Considerations
- Both the EPSL and FMLA will ultimately be subject to non-discrimination and non-retaliation requirements by the regulations, in addition to some very simple provisions currently in the Act. Eventually there will likely be significant litigation against employers who based firing decisions on who would likely seek benefits under the EPSL and FMLA, so make your decisions on who to fire, furlough or retain for other reasons.
- The employer payroll tax credits described above have some unique provisions and caps that will need to be reviewed in detail. Ultimately, the tax considerations are not the focus of this email, so please discuss them with your accountant as more information is available.
- Depending on your specific situation, consider going through the proper process of converting salaried employees to hourly if there is going to be a reduction of hours. That may help the employer with cash flow while allowing the employee to receive some income and then possibly seek unemployment benefits for a reduction in hours.
- At some point with some employees, it may be better for them to receive full unemployment benefits rather than a small amount of wages.
- The COBRA provisions are not altered by the Act, and it is worth considering subsidizing some of the COBRA costs for employees that you may want to rehire.
- The Act is unclear on whether an employer can provide health insurance to employees who are furloughed before April 2, 2020 and whether furloughed employees would be eligible for benefits under the Act.
- You are required to post a EPSL notice along with your other labor law notices at the office. The notice should be made available later this week.
- For part-time employees with uneven work schedules such that the employer is unable to determine the amount of hours that the employee would have worked over the benefit period, the determination of hours worked is based on the average hours the employee was scheduled to work over the six month period preceding the EPSL or FMLA leave, including hours for which the employee took any type of leave. If the employee did not work over that 6 month period, then the benefit is based on the reasonable expectation of the employee at the time of hiring of the average hours per day that the employee would normally be scheduled to work.
- Some provisions of the Act attempt to translate the EPSL provisions to a self-employed individual. That is outside the scope of this email, but we can discuss those provisions upon request.
- Many states are in the process of passing legislation to provide additional benefits. Please contact us for an update on the status of your state.
Ultimately, the goal is to keep your business financially afloat and as many of your employees financially stable as possible until the country can resume business as usual. You want to keep your key employees satisfied through this crisis as much as possible, but it is also an opportunity to reset other employment relationships. Further, if the unemployment rate is going to be as high as predicted, then you will have a rare opportunity to attract great talent going forward.
In these unprecedented times, the law firm of Litchford, Pearce & Associates, PLLC remains ready and able to assist your business in navigating the rapidly evolving employment, tax and business planning landscape. Please do not hesitate to contact me with any questions.