These are unprecedented times and ensuring health and safety of the world’s population is certainly on everyone’s mind. For those running and operating businesses, a whole separate challenge exists.
Due to the various orders and advisories to self-quarantine, school closings, and far-reaching spread of the COVID-19 pandemic, employers are faced with a rapidly changing workforce. They are grappling with how to continue business while dealing with the safety of their workers. It is a moral and financial dilemma. As employers of all sizes must consider how to manage this ever changing situation, new laws, requirements, and relief are being released just as quickly.
Given the economic downturn spurred by the recent turn of events, additional legal requirements are undoubtedly daunting for employers who face uncertainty or are weighing difficult decisions regarding their workforce. To help provide some clarity on these new obligations, this Client Alert discusses the emerging laws affecting employers and their health plans, including expanded benefits under FMLA, as well as additional required paid sick days.
Families First Coronavirus Response Act (“FFCRA”)
This past Wednesday, March 18, 2020, the Families First Coronavirus Response Act (“FFCRA”) was signed into law. The FFCRA applies numerous requirements and obligations to employers. In addition to expanding unemployment benefits, lessening financial obstacles for COVID-19 testing, and setting forth funding to assist with domestic nutrition programs, the FFCRA’s affects employers by amending the Family and Medical Leave Act (FMLA) to provide a new type of leave relating to the COVID-19 pandemic and separately requiring that employers provide paid sick days to employees for COVID-19 related matters.
The FFCRA becomes effective on April 1, 2020. Therefore, employers must understand its provisions and act quickly.
Emergency Family and Medical Leave Expansion Act
The FFCRA modifies FMLA under the Emergency Family and Medical Leave Expansion Act (“FMLA Expansion Act”). While the FMLA, in general terms, applies to employers with 50 or more employees and protects employees who have worked at least 12 months with that employer, the FFCRA now changes that with respect to COVID-19 related issues and adds a new section titled “Public Health Emergency Leave.”
In summary, FMLA leave now also applies to employees who have been employed at least 30 days by employers who employ fewer than 500 employees (and public agencies) if those employees are unable to work (or telework) because they need to care for their under age 18 children due to the closure of schools or unavailability of day care due to a government declared COVID-19 public health emergency. The first 10 days of the 12-week job-protected leave is unpaid; however, subsequent days must be paid leave in an amount of not less than two-thirds of regular pay, capped at $200 per day with a maximum cap of $10,000 per employee.
The FMLA Expansion Act is applicable from April 1, 2020 to December 31, 2020.
Specifically, the FMLA Expansion Act applies to qualifying needs related to a public health emergency, as set forth below:
- “Qualifying need related to a public health emergency” is when an employee is “unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider … is unavailable, due to a public health emergency.” The terms “child care provider” and “school” are also defined.
- “Public health emergency” is an emergency with respect to COVID-19 declared by a Federal, State, or local authority.
The leave requirements apply to employers with fewer than 500 employees, as well as public agencies.
Exemptions may apply for employers with less than 50 employees if complying would jeopardize the viability of the business as a going concern and if regulations are so issued. See: 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. We expect such regulations to be issued in April of 2020.
Special rules apply in cases of employment under multi-employer bargaining agreements.
Employees who have been employed for at least 30 calendar days by the employer are eligible for the leave if they have a qualifying need related to a public health emergency. Certain health care providers and emergency responders may be excluded from this additional protection, if regulations are so issued. Additionally, an employer of an employee who is a health care provider or an emergency responder may elect to exclude such employee.
Employees must provide the employer with notice of leave as practicable.
Special rules apply in cases of employment under multi-employer bargaining agreements.
Unpaid and Paid Leave Components:
The 12-week FMLA leave has both unpaid and paid components.
Unpaid leave applies for the first 10 days; however an employee may substitute accrued vacation, personal, medical or sick leave time.
Paid leave must be provided by the employer for days in excess of 10 days, calculated based on at least two-third’s of an employee’s regular rate of pay and the number of hours the employee would otherwise be scheduled to work.
The amount shall not exceed $200 per day and $10,000 in the aggregate. However, for an employee whose schedule varies from week to week and an employer is unable to determine with certainty the number of hours the employee would have worked, the employer must instead average the number of hours the employee was scheduled per day over the 6-month period ending on the date the employee took such leave (or if the employee did not work, the employer must use a reasonable expectation the employee’s average hours at the time of hiring).
Small Employer Partial Exception:
FMLA’s restoration to work provisions will not apply to employers with fewer than 25 employees if:
- The employee takes leave pursuant to a public health emergency;
- The position held by the employee no longer exists due to economic conditions or operation changes that affect employment and are caused by a public health emergency during the leave;
- The employer makes reasonable efforts to restore the employee to an equivalent position (with equivalent benefits, pay, and other terms and conditions of employment); and
- If the above efforts of the employer to restore the employee fail, the employer makes reasonable efforts to contact the employee if an equivalent position becomes available for a period of 1 year beginning on the day the qualifying need related to the public health emergency concludes (or the date that is 12 weeks after the date the employee’s public health emergency leave starts).
Significantly, small employers who are not accustomed to FMLA must now comply with the FMLA Expansion Act for COVID-19 related leaves. However, in a joint news release issued late in the day of Friday, March 20, 2020, the U.S. Treasury Department, Internal Revenue Service, and the U.S. Department of Labor stated that small businesses with fewer than 50 employees will be eligible for an exemption in cases where the viability of the business in threatened. See: 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
Additionally, unless otherwise specified, all covered employers must apply FMLA’s typical protections for these public health emergency leaves, including job-protection and restoration, and the continuation of group health plan coverage with employer contributions during such leaves.
Emergency Paid Sick Leave Act
The FFCRA also requires employers to provide up to 80 hours of paid sick time for COVID-19 related issues under the Emergency Paid Sick Leave Act (“EPSLA”).
The EPSLA is effective from April 1, 2020 to December 31, 2020.
The EPSLA applies to virtually all private employers with fewer than 500 employees and to virtually all public agencies employing 1 or more employees. Exemptions may apply for employers with less than 50 employees if complying would jeopardize the viability of the business as a going concern and if regulations are so issued. Additionally, future regulations may allow an employer of an employee who is a health care provider or an emergency responder to opt out.
The EPSLA requires no hour or service requirement to receive paid leave, which may be immediately used. However, employers of employees who are health care providers or emergency responders may elect to exclude these employees from the above.
Special rules apply for multi-employer bargaining agreements.
Reason for Paid Sick Leave:
Under EPSLA, employers shall provide employees with paid sick time if they are unable to work (or telework) due to a need for leave because:
- The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
- The employee has been advised by a health care provider to self-quarantine due to concerns relating to COVID-19;
- The employee has COVID-19 symptoms and is seeking a medical diagnosis;
- The employee is caring for an individual subject to quarantine or isolation or advised to self-quarantine as described in paragraphs (1) or (2) above;
- The employee is caring for his/her child if the school or place of care has been closed or the child care provider is unavailable due to COVID-19 precautions; and
- The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.
Amount of Paid Sick Time:
Paid sick time is calculated based on the employee’s required compensation and the number of hours the employee would otherwise be scheduled to work capped at:
- $511 per day and $5,110 in the aggregate for reasons (1)-(3) under Reason for Paid Sick Leave above; and
- For Reasons (1)-(3), compensation shall not be less than the greater of the employee’s regular rate of pay under the Fair Labor Standards Act (“FLSA”), minimum wage rate under the FLSA, or the minimum wage rate in the applicable State or locality (whichever is greater) in which the employee is employed.
- $200 per day and $2,000 in the aggregate for reasons (4)-(6) under Reason for Paid Sick Leave above
- For Reasons (4)-(6), compensation shall be two-thirds of that described for Reasons (1)-(3).
However, for any part-time employee whose schedule varies from week to week and an employer is unable to determine with certainty the number of hours the employee would have worked, the employer must instead average the number of hours the employee was scheduled per day over the 6-month period ending on the date the employee took such leave (or if the employee did not work, the employer must use a reasonable expectation the employee’s average hours at the time of hiring). The Department of Labor is expected to issue additional information and guidelines regarding calculation of this paid sick time.
Duration of Paid Sick Leave:
For full-time employees, 80 hours of paid sick time must be provided. For part-time employees, paid sick time will be the number of hours that the employee works, on overage, over a two-week period. There will not be a carryover from one year to the next. Paid sick time is terminated with the employee’s next scheduled work shift immediately following the point when leave is no longer needed as defined under EPSLA.
Employers must post, in conspicuous places where employer notices are customarily posted, an approved notice describing the requirements of the EPSLA. The Secretary of Labor will make a model notice availability no later than March 25, 2020. It must be posted by April 1, 2020.
Employers cannot discharge, discipline, or otherwise discriminate against employees who take leave under the EPSLA or have filed a complaint, instituted (or caused to be instituted) any proceeding or has testified or is about to testify in any proceeding related to the EPSLA.
Additionally, the EPSLA states that employers cannot require that an employee be involved in a search or find a replacement to coverage his/her hours during the leave.
Employers also cannot require that an employee use other employer provided paid leave prior to using leave under the EPSLA.
Employers who fail to comply will be subject to stiff penalties under the Fair Labor Standards Act.
Tax Credits for Paid Sick and Paid Family and Medical Leave
While the FFCRA requires employers to comply with additional paid FMLA and sick leave relating to the COVD-19 pandemic, it also provides some relief for employers in the form of tax credits.
Employers will be allowed a quarterly tax credit equal to 100 percent of the qualified sick leave wages paid under the EPSLA and equal to 100 percent of the qualified family leave wages paid under the FMLA Expansion Act, subject to limitations and requirements. For example, the sick leave wages taken into account shall not exceed $200 per day (or $511 per day for leaves associated government order quarantine or isolation due to COVID-19, self-quarantine as advised by a health care provider due to COVID-19 concerns, or if an employee has COVID-19 symptoms and is seeking a diagnosis) up to a limited number of days. The family leave wages taken into account shall not exceed $200 per day or up to $10,000 in the aggregate and is limited to certain employment taxes.
The credits also include a portion of the health plan cost allocable to the paid leave.
Tax credits are also available for eligible self-employed individuals.
However, these tax credits are subject to additional restrictions and requirements. As the law continues to evolve and new guidance is to be issued this week, an in-depth discussion is beyond the scope of this Client Alert.
While aspects of the FFCRA are not completely clear, we certainly hope to see more guidance from the Department of Labor prior to the law’s April 1st effective date.
Current actions for employers include analyzing the interplay between the FFCRA’s new leave and paid sick time requirements, their own policies, as well as other federal, state, and local laws. Questions to ask include whether the employer’s leave of absence provisions should be amended and whether paid time off polices need to be rewritten.
Benefits are also a key component in this analysis. Depending on potential layoffs or leaves of absence, even if unaffected by the FFCRA, will benefits be continued? What do the applicable employee benefit plans, insurance policies, and/or other governing documents provide? How will monthly payments by the employee continue? Is there a risk of insurers denying continued benefits? Does COBRA apply? What are the Affordable Care Act or Pay or Play consequences if coverage is terminated, or if coverage is continued but the employer contribution ceases for non-FMLA leaves? Do benefit documents require amendments to comply?
A plethora of questions are mounting and the rapid nature of legal changes is not helping. However, as always, careful consideration of options and benefits is paramount.
Of some relief, good faith efforts toward compliance will be considered. In a subsequent IRS News Release issued on Friday, March 20, 2020, the Department of Labor stated that it will be issuing a temporary non-enforcement policy in order for employers to come into compliance with the Act. “Under this policy, Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period.” See 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.
Again, the law and guidance are rapidly evolving in this area. Please check with your Fraser Trebilcock attorney for the most recent updates.
This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.
Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or email@example.com.