Updated March 25, 2020
On March 18, the President signed the Families First Coronavirus Response Act (FFCRA). The signed bill scaled back the version of the law that passed the House on March 14.
The FFCRA will become effective on April 1, according to guidance issued on March 24 by the U.S. Department of Labor (DOL). The FFCRA contains a number of major provisions concerning paid leave, job protection and tax implications that will affect employers nationwide. The FFCRA “sunsets” on December 31.
Importantly, the FFCRA only applies to employers with fewer than 500 employees. The threshold for coverage is tied to the Fair Labor Standards Act, which means that all but the smallest employers with 500 or fewer employees will be covered. Tax credits are available to help employers defray the costs for paid sick leave, and employers with less than 50 employees may apply for an exemption. The DOL’s guidance, FAQ’s and Factsheets will help employers better understand if they are covered by the FFCRA.
Changes to FMLA to Include Paid Leave When Child’s School or Child Care Provider is Closed
FMLA Protections. The bill expands FMLA and provides paid leave for “Qualifying need related to a public health emergency.”
Paid FMLA Leave.
Exemptions. The U.S. Department of Labor will develop rules exempting certain healthcare providers and emergency responders from taking leave under the bill. Rules will also exempt businesses with fewer than 50 employees from the requirements of the bill if it jeopardizes the viability of the business.
Federal Paid Sick Leave (PSL)
Qualified PSL Reasons. Employers with fewer than 500 employees must provide all employees with PSL when an employee is unable to work (or telework) due to a need for leave because of the following six reasons:
Amount of PSL. Full-time employees are entitled to up to 80 hours of PSL. For part-time employees, they are entitled to a pro-rata share of hours worked, on average, over a two-week period.
PSL Payments. PSL will be paid at the regular rate of pay for reasons 1, 2 or 3 (above). PSL for reasons 4, 5 or 6 (above) will be paid at two-thirds the regular rate of pay.
Daily PSL Payments and Caps. Employers provide PSL based on the number of hours the employee would otherwise be normally scheduled to work. However, the FCCRA sets caps of $511 per day (and $5110 maximum) for PSL taken for reasons 1, 2 or 3 (above), and $200 per day (and $2000) maximum for PSL taken for reasons 4, 5 or 6 (above).
No carryover. There is no carryover of PSL from one year to the next.
Eligibility. Paid sick leave under FFCRA shall be provided regardless of how long the employee has been employed.
Interaction with Existing Paid Leave Benefits. Employers may not require an employee to use any other type of paid leave before the employee uses PSL under the FFCRA. Thus, employees are entitled to use PSL under the FFCRA prior to using any employer-provided vacation, PTO or paid sick leave under state or local law.
Employer Notice. Employers are obligated to post a PSL notice to employees, and by March 25, the DOL will provide a model notice.
Multi-Employer CBAs. Employees covered by a multi-employer collective bargaining agreements who receive paid leave benefits from a trust arrangement are entitled to receive leave benefits commensurate with the above requirements.
DOL Rules. The DOL will issue PSL guidelines to assist employers by April 2.
It shall be unlawful for any employer to discharge, discipline or, in another manner discriminate against any employees because they have taken leave provided under FFCRA, or filed any complaint, instituted any proceeding, or testified or is about to testify in any proceeding relating to FFCRA.
Remedies for Violations
Employers are liable for unpaid benefits, liquidated damages of 100 percent, injunctive relief, fines of up to $10,000 along with criminal penalties and attorney’s fees for a violation of the FFCRA.
Unemployment Compensation, Coverage for COVID-19 Testing
FFCRA provides for increased funding for state unemployment programs and requires a waiver of co-pays for COVID-19 testing by health care plans and insurers.
Employers required to pay workers can offset some of the financial impact through refundable employment tax credits. The tax credit equals 100 percent of qualified sick leave and qualified paid FMLA paid by employers. A credit would also be available for self-employed taxpayers.
Credits for both qualified sick leave and qualified family leave wages are subject to caps. The credit for qualified sick leave is limited to $511 per day for employees when an employee is taking care of themselves or $200 per day for employees caring for a family member – both with an aggregate cap of 10 days. This effectively caps the qualified sick leave credit between $2,000 and $5,110 per employee. The credit for qualified FMLA wages is limited to $200 per day and $10,000 aggregate for any employee. The FFCRA would prevent double benefits by increasing an employer’s gross income by the amount of credits received (i.e., the payroll credit is offset by an equal income item which results in a net-zero effect on taxable income, though of course the credit is more valuable than the income tax deduction). It would also prevent a credit for wages where a credit is allowed under section 45S (employer credit for paid family and medical leave).
The FFCRA leaves out many details. These may be covered through future regulations issued by the Internal Revenue Service. One important detail is what happens when businesses lack cash to pay employees for payments subject to the refundable credit. According to the Wall Street Journal, “Treasury Secretary Steven Mnuchin has said the government is prepared to advance the funds to businesses that can’t cover the costs now.” The budgetary impacts of the FFCRA would not impact budget limitations imposed by pay-as-you-go requirements.
Covered employers should strongly consider implementing COVID-19 policies, which should include a discussion about the interaction with state and local paid sick leave laws. Many states, including Washington, Oregon and California, already have required paid sick leaves. We recommend working with counsel to prepare a policy that addresses how federal, state and local sick leaves will interact with existing PTO and vacation policies.
Businesses should also consider the impact of PSL on businesses that close due to lack of work or because of a state or local order to close non-essential businesses. There is no question that businesses and employees are facing a significant impact because many people are self-isolating or quarantined. As written, the FCCRA does not cover employees who are sent home by their employers due to a COVID-19 related decrease in business. But it may cover employees who are sent home due to a “shelter-in-place” or related order public health order. Again, we recommend working with counsel to discuss your businesses’ individual circumstances.
For more information, consult Lane Powell’s COVID-19 Resource Center or contact Paul Ostroff, Priya Vivian or Lewis Horowitz.
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