Further Developments Regarding the Families First Response Coronavirus Act

On March 24, 2020, the Department of Labor (DOL) issued its initial guidance explaining the provisions of the Families First Response Coronavirus Act, which provided the new paid sick leave and emergency FMLA leave benefits briefly outlined in a prior release. The DOL guidance included a Fact Sheet for Employers https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave and a Question and Answers document https://www.dol.gov/agencies/whd/pandemic/ffcra-questions.

The DOL guidance provided the following updated information, among other areas:

• The DOL guidance states that the Act will become effective on April 1, 2020. (The Act was initially announced with an effective date of April 2, 2020.)
• The DOL guidance also specifies that the tax credits will extend to wages paid pursuant to the Act, as well as amounts paid to maintain health insurance coverage. Additional information about the tax credits can be found at https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus

On March 25, 2020, the DOL published the poster employers are required to post explaining the requirements of the Act. The poster can be found at the following link: https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf A Q&A regarding the poster can be found at https://www.dol.gov/agencies/whd/pandemic/ffcra-poster-questions.

The DOL will be providing further guidance in coming days, including additional fact sheets and more Q&A. Below, however, are some key reminders of the benefits, some of the updates found in the newly released Q&As, and examples related to the tax credits. As the below is not exhaustive, you should thoroughly review the Q&As and guidance as well as any forthcoming guidance. You should also post the poster in accordance with the guidance.

Update Regarding Applicability of New Benefits to Employers:

The paid sick leave and expanded family and medical leave provisions apply to private employers with fewer than 500 employees (as well as certain public employers).

You have fewer than 500 employees if, at the time your employee’s leave is to be taken, you employ fewer than 500 full-time and part-time employees within the United States, which includes any State of the United States, the District of Columbia, or any Territory or possession of the United States. In making this determination, you should include employees on leave; temporary employees who are jointly employed by you and another employer (regardless of whether the jointly-employed employees are maintained on only your or another employer’s payroll); and day laborers supplied by a temporary agency (regardless of whether you are the temporary agency or the client firm if there is a continuing employment relationship). Workers who are independent contractors under the Fair Labor Standards Act (FLSA), rather than employees, are not considered employees for purposes of the 500-employee threshold. Employers with joint operations or more than one company should review the FAQs above and consult with counsel to determine the fewer than 500 threshold. This standard means essentially that, to take advantage of these new paid leave benefits and their tax credits, you would have to maintain the fewer than 500 threshold throughout the entirety of the effective date of this law, or until December 31, 2020.

Small Business Exemption: This exemption has not yet been fully developed. But, it appears that employers with fewer than 50 employees will have to elect this small business exemption through documenting why providing these benefits would jeopardize the ongoing viability of the business with fewer than 50 employees, which criteria will be set forth in more detail in upcoming guidance and/or regulations that will be issued by the DOL. For now, however, the DOL’s FAQs state that an employer should not send any materials to the DOL when seeking a small business exemption for these new paid leave benefits.

Update on Rate of Pay for New Leave Benefits: For purposes of the new paid leave benefits, the regular rate of pay used to calculate an employee’s paid leave is the average of the employee’s regular rate over a period of up to six months prior to the date on which the employee takes leave. If the employee has not worked for you for six months, the regular rate used to calculate the paid leave is the average of the employee’s regular rate of pay for each week the employee has worked for you. If an employee is paid with commissions, tips, or piece rates, these wages will be incorporated into the above calculation. An employer can also compute this amount for each employee by adding all compensation that is part of the regular rate over the above period and divide that sum by all hours actually worked in the same period.

Also, for the emergency FMLA, keep in mind that if an employee regularly worked overtime, then the number of hours compensated for must take this overtime into account. The new paid sick leave though is limited to 80 hours in two weeks for full-time employees, as set forth in the below reminder.

Update Regarding New Benefits and Existing Paid Leave Benefits: The new paid leave benefits are in addition to any sick leave/PTO/vacation the employee is already provided by an employer including any newly adopted policies on such benefits, which were adopted prior to April 1, 2020. Therefore, the employees would have the 80-hours of paid sick leave added on to whatever their available balance is as of April 1, 2020. The same holds true for the paid emergency FMLA leave – those benefits are in addition to any other paid leave benefits existing prior to April 1, 2020. This also means that an employer also cannot deny an employee paid sick leave under the new paid leave benefits even if that employer gave employees paid leave for a reason identified in the new federal paid leave benefits prior to April 1, 2020.

The new paid leave benefits are not retroactive.

Reminder Regarding Federal Paid Sick Leave Benefit:

Effective: April 1, 2020 - December 31, 2020 (note: although not entirely clear, it does not appear that the federal government will allow reimbursement for paid sick leave under this new federal program offered prior to April 1st, so we do not recommend allowing use of this amount before this date).

Amount of Paid Sick Time: Up-to 80-hours for full-time employees. If you are part-time, you may receive the amount of time based upon a two-week average number of hours. The FAQs answer more questions about how to calculate this two-week average if schedules vary.

Paid Sick Leave can be used for the following:

If an employee is unable to work (or telework) due to a need for leave because...

1. The employee is subject to a federal, state or local quarantine or isolation order related to COVID-19.

2. The employee has been advised by a health care providers to self-quarantine due to concerns related to COVID-19.

3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.

4. The employee is caring for an individual who is subject to an order or self-quarantine as described above.

5. The employee is caring for a son or daughter is school or child care is closed/unavailable do to COVID-19.

6. The employee is experiencing 'any other substantially similar condition' specified by the U.S. Department of Health and Human Services.

The paid sick leave is compensated at the employee's normal rate of pay for qualifying reasons 1, 2 or 3 above. Capped at $511 per day and $5,110 in the aggregate per person for qualifying reasons 1, 2 or 3.

The paid sick leave is compensated at 2/3 the employee's regular rate of pay for qualifying reasons 4, 5 or 6. Capped at $200 per day and $2,000 in the aggregate per person for qualifying reasons 4, 5 or 6.

Reminder Regarding Federal Emergency FMLA Benefit

Effective: April 1, 2020 - December 31, 2020 (note: although not entirely clear, it does not appear that the federal government will allow reimbursement for paid sick leave under this new federal program offered prior to April 1st, so we do not recommend allowing use of this amount before this date).

Amount is up to 10 weeks of paid FMLA leave calculated at two-thirds the employee’s regular rate of pay where an employee, who has been employed for at least 30 calendar days, is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19. This pay generally occurs after the employee has first been paid the new federal sick leave for 2 weeks at 2/3rds the regular rate of pay (if taken for the same reason, e.g., to care for a child due to school/childcare closure and/or unavailability). The employee could, however, elect to use any other available paid leave benefits during this time (e.g., if they have vacation or preexisting paid sick leave, they could take this time off which is usually paid at 100% rather than 2/3rds).

The FAQs clarify that an employee only gets a maximum of twelve weeks off paid through the new federal leave benefits to care for the child whose school or childcare provider is closed or the childcare provider is unavailable. The twelve weeks would be under the new emergency FMLA benefit, and the first two weeks would generally be paid through use of the new paid sick leave benefit, as clarified above.

Reimbursement through tax credits to employers: Although certain areas remain to be clarified by the federal government, at this point it appears that you will be able to seek reimbursement for these paid leave benefits, as well as health insurance maintained during this time, via retaining payroll taxes including federal income taxes, the employee share of the Social Security and Medicare taxes and the employer share of the Social Security and Medicare taxes. They have also stated that if there are not sufficient payroll taxes to cover the cost of qualified sick leave, employers will be able to file a request for an accelerated payment from the IRS.

Examples:

If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.

If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.

Penalties and Enforcement: Employers in violation of the first two weeks’ paid sick time or unlawful termination provisions will be subject to the penalties and enforcement described in Sections 16 and 17 of the Fair Labor Standards Act. 29 U.S.C. 216; 217. These are generally lost wages, liquidated damages in an amount equal to the lost wages, interest, attorneys’ fees and costs, and possible penalties of $1,100 for each violation or more, as well as criminal penalties if convicted. Employers in violation of the provisions providing for up to an additional 10 weeks of paid leave to care for a child whose school or place of care is closed (or child care provider is unavailable) are subject to the enforcement provisions of the Family and Medical Leave Act which could include the same as listed above as well as punitive and emotional distress damages, among others. To avoid these potential damages and penalties, please comply with the new paid leave provisions.

The DOL will observe a temporary period of non-enforcement for the first 30 days after April 1, 2020, or until May 1, 2020, so long as the employer has acted reasonably and in good faith to comply with the new laws. For purposes of this non-enforcement position, “good faith” exists when violations are remedied and the employee is made whole as soon as practicable by the employer, the violations were not willful, and the DOL receives a written commitment from the employer to comply with the law in the future.

This summary provides an overview of the law. It is not intended to be, and should not be construed as, legal advice for any particular fact situation.