CLIENT ALERT – The Families First Coronovirus Response Act (“FFCRA”) Summary

March 30, 2020

The Families First Coronavirus Response Act (“FFCRA”) was signed into law by President Trump on March 18, 2020. FFCRA is effective on April 1, 2020, and its requirements expire on December 31, 2020.  It contains a broad array of relief that will significantly impact small and mid-size employers, and most public employers of all sizes, including:

  1. COVID-19-related paid leave requirements (pg. 1)
  2. Unemployment compensation augmentation (pg. 5)
  3. Free COVID-19 testing (pg. 5)

Paid Leave Requirements

As more fully set forth below, FFCRA provides for two types of new paid leave requirements for small and mid-sized employers and most public employers: a temporary, limited expansion (pg. 1) of the Family & Medical Leave Act of 1993 (“FMLA”); and emergency paid sick leave (pg. 2). With respect to these paid leave provisions, FFCRA applies only to employers with fewer than 500 employees and most public agencies with greater than one employee.

Note: Public employers covered by Title II of the Family and Medical Leave Act are not covered by the expanded FMLA provision of the FFCRA. The Paid Sick Leave provision does apply.  FAQs for public employees will be forthcoming from the DOL.

There are limited exceptions to the paid leave requirements discussed below, such as for small employers under certain circumstances, health care providers, and first responders. In addition, to offset the costs of these leave requirements, the FFCRA provides that non-governmental employers will receive a tax credit quarterly equal to 100% of qualified sick leave wages paid under the FMLA expansion and the Emergency Paid Sick Leave Act, credited against the employer share of Social Security taxes.

This memo supplements a previous memo on the topic as it includes analysis on how to count employees (pg. 3); the impact of the FFCRA on collective bargaining agreements (pg. 4); and the required FFCRA notice to employees (pg. 4).

Temporary, Limited Expansion of the FMLA

In general, the FMLA applies only to employers with at least 50 employees. It also only applies where an employee has worked for a qualifying employer for one year and meets other requirements, such as having worked a certain number of hours in a defined time period. In addition, the FMLA guarantees only unpaid leave.

The FFCRA changes these familiar FMLA parameters, at least with respect to “qualified absences” through the end of 2020, in several significant ways. Before discussing these changes, it is important to note that a “qualifying absence” under the FFCRA exists where an employee cannot work (even remotely) due to the need to care for a child if the child’s school or care provider has been closed due to a public health emergency. Leave for an employee’s own COVID-19 illness is not a “qualifying absence.” In addition, the employee must affirm that there is not another suitable adult available to care for the child. Thus, the FMLA expansion described below applies only to a limited class of childcare-related leaves caused by a public health emergency.

The first significant way that the FFCRA alters the FMLA for “qualified absences” is that it applies to employers with less than 500 employees and government employers with more than one employee.  Second, under the FFCRA, such employers are required to provide employees who have been employed 30 days (instead of the traditional one year) with 12 weeks of protected leave for qualified absences. Third, unlike the FMLA, there is no requirement that a minimum number of hours have been worked.

In the final significant change from the FMLA discussed here, the FFCRA requires some paid leave.  Specifically, after ten days of unpaid leave, the remainder of the qualifying absence, up to 12 weeks, must be partially paid at a rate of 2/3 the employee’s regular wage rate. The cap on this expanded FMLA leave pay is $200/day and $10,000 total. During the first ten days, the employee can choose to use the Emergency Paid Sick Leave described below, or other available paid time off. However, the employer cannot require the use of accrued paid time off. The FFCRA further provides that the wages paid as leave under the FMLA expansion are not taken into account for Social Security taxes.

In addition to the changes described above, many familiar FMLA concepts apply to this new leave for a qualifying absence. Employees are only entitled to a total of 12 weeks per year of FMLA leave, including weeks already used as regular FMLA leave.  Discrimination and retaliation are prohibited. The available remedies, penalties, and damages are those available under the FMLA. Post-leave position restoration is required. However, employers with fewer than 25 employees can be exempted from this requirement where the position no longer exists due to economic conditions caused by the public health emergency, the employer makes reasonable efforts to restore the employee at the end of the leave, and the employer attempts to reach the employee should equivalent positions come open during the year after the leave started.

With respect to further exceptions, the FFCRA provides that the Secretary of Labor may grant exceptions for businesses with fewer than 50 employees where the requirements would jeopardize the viability of the business as a going concern. On April 1, 2020, the DOL in a temporary rule setting forth detailed requirements for qualifying for an exception.  Finally, health care providers and emergency responders, both broadly defined, may elect to be excluded from this FMLA expansion.

Emergency Paid Sick Leave

The Emergency Paid Sick Leave Act is a new statutory obligation requiring all employers with fewer than 500 employees to provide employees up to two weeks (ten working days) paid leave for qualifying COVID-19 related absences. Qualifying COVID-19 related absences arise where:

  1. the employee is subject to a federal, state or local quarantine or isolation order related to COVID-19;
  2. a health care provider has advised the employee to self-quarantine due to COVID-19 concerns;
  3. the employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
  4. the employee is caring for a person satisfies #1 or #2 above;
  5. the employee is caring for a child whose school or care provider is closed due to COVID-19; or
  6. the employee has substantially similar condition as specified by the US Secretary of Health and Human Services.

The two-week paid leave:

  1. is available immediately, regardless of the employee’s tenure at the employer;
  2. must be used by the end of the year 2020;
  3. does not carry over to subsequent years; and
  4. is not required to be paid out to departing employees, if unused.

Full time employees are eligible for up to 80 hours paid leave. Part time employees are eligible for a pro rata number of hours based on hours worked in the past six months. In addition, there are varying caps and rates of pay for this paid leave. For an employee’s absence related to the employee’s own care, the employee receives the greater of their regular rate of pay or minimum wage subject to a cap of $511/day or $5,111 total.  For an employee’s absence related to the care of others, the employee is entitled to receive two thirds of their regular pay with a cap of $200/day or $2,000 total.

The DOL guidelines provide more detailed instruction on this pay calculation for specific scenarios, such as calculating part time pay and establishing a regular rate of pay. The guidance also includes a requirement that normal overtime be included in the calculations. The guidance can be found here.

Employees may choose to use this paid sick leave first, before exhausting existing any other paid time off benefits. Employers may not require employees to use accrued leave before using the emergency sick leave in the Act. This leave is an addition to existing rights under law, contract, and employer policy, and does not diminish any employee’s right to paid leave.

As with the FMLA extension discussed above, the FFCRA permits the Secretary of Labor to grant exceptions for businesses with fewer than 50 employees where the requirements would jeopardize the viability of the business as a going concern. On April 1, 2020, the DOL in a temporary rule setting forth detailed requirements for qualifying for an exception. Finally, health care provider and first responder employers, both broadly defined, may elect to exclude their employees from application of this rule.

Discrimination and retaliation for taking paid sick leave or reporting complaints concerning the Act are prohibited. The Department of Labor published a poster detailing the Act’s requirements, which employers are required to post which can be found here:

https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf

Guidance on How to Count Employees

The Department of Labor issued guidance on the question of how to count employees to determine whether the FFCRA applies. The guidance provides that the count of employees must:

  1. be calculated on the day an employee seeks to take leave;
  2. include all full and part time employees within the United States and its territories;
  3. include all employees on leave;
  4. include all temporary employees who are jointly employed with another company; and
  5. include day laborers supplied by a temp agency.

Independent contractors are not to be counted.

Typically, a corporation is considered one employer even where it has multiple sites. With respect to related corporations or other entities, the DOL guidance provides that, generally, if an entity has an ownership interest in another entity, they are considered separate employers. However, there is an important exception where the entities are “joint employers” under the FLSA. Under the FLSA joint employer test, key factors include whether the related company:

  1. has the power to hire or fire employees;
  2. actually exercises substantial control over terms or conditions of employment or supervisory authority;
  3. determines rate of pay and method of payment; and/or
  4. maintains employee records.

This is a fact intensive analysis. If two entities are joint employers applying these factors, all employees must be counted with respect to both the new emergency sick leave and the extended FMLA paid leave.  In addition, the DOL guidance also adopted the FMLA’s “integrated employer” test to determine whether entities should be separate or combined for employee counting purposes with respect to the extended FMLA paid leave only. Factors under the FMLA integrated employer test include: common management, interrelation between operations, centralized control of labor relations and degree of common control/ownership. This too is a factual analysis. See 29 C.F.R. 825.104(c).

Interplay of the FFCRA and Collective Bargaining Agreements

As an initial matter, the FFCRA provides no exemptions or exclusions for employers who are parties to a collective bargaining agreement. The FFCRA paid leave requirements under the both the FMLA extension and the Emergency Paid Sick Leave Act apply even where collective bargaining agreements are present.

The only FFCRA provisions specific to collective bargaining agreements provide that, for employers who are signatories to multi-employer bargaining agreements, such employers can satisfy their paid leave obligations by making contributions to a multi-employer fund, plan or program based on the hours of paid sick time each of its employees is entitled to under the Act, provided that such fund, plan or program enables employees to secure pay from such fund, plan or program based on hours worked under the collective bargaining agreement. This is permitted only where it is consistent with the collective bargaining agreement. This is not an exception to the paid leave obligations. It is an optional, different delivery mechanism for the employer’s paid leave payments.

Interpreting the existing statute without the benefit of future expected regulations, here are some anticipated questions and answers:

Q: The FFCRA’s extended FMLA leave provisions provide paid leave for those caring for children whose school or care facility is closed due to a national emergency, after an initial unpaid ten-day period. Our contract requires paid leave to be exhausted first whenever leave is taken. Can I enforce the contract and require the employee to exhaust paid leave during the initial unpaid ten-day period?

A.  No. Even if a collective bargaining agreement contains such a requirement, the FFCRA provide no exception.

Q: With respect to the two weeks paid leave under the Emergency Paid Sick Leave Act, the new law says that an employee may choose to use this paid sick leave first, before exhausting existing any other paid time off benefits. Our contract requires accrued paid leave to be exhausted first. Can I enforce the contract?

A: No. Employers may not require employees to use accrued leave first, even in the presence of a contract.

In summary, the paid leave provisions of the FFCRA are additions to existing rights under law, collective bargaining agreements, contracts, and employer policies. They not diminish any employee’s right to paid leave.  Where a multi-employer collective bargaining agreement exists, an employer may use a payment delivery mechanism through contributing to an employer fund, plan or program based on the hours of paid sick time each of its employees is entitled to under the Act.

The Required FFCRA Notice to Employees

On March 25, 2020, the DOL published a required FFCRA notice that employers must provide employees. Employers are required to post the notice at physical work sites when permitted by local order and state law by or on April 1, 2020. During the pandemic, employers may satisfy the notice requirements of the Act by emailing or direct mailing the notice to employees or posting the notice on an employee information internal or external website. Because the Act’s requirements only apply to current employees, the notice does not have to be shared with laid-off individuals or prospective employees. The poster can be found here.

Expanded Eligibility and Support for Unemployment Compensation Benefits

Under the FFCRA, the federal government will provide up to one billion dollars to the states for activities relating to unemployment compensation. Half of that amount is to be allocated to administrative costs, and half for emergency grants to states that experience a 10% increase in unemployment compared to the same quarter of the previous year. To be eligible, states must amend their laws to ease eligibility requirements for unemployment benefits such as work search requirements and waiting periods. The Pennsylvania Senate recently passed such legislation. The grants can be used to support extending unemployment compensation benefits an additional 26 weeks after the initial 26 weeks. Additional state and federal legislation related to unemployment compensation has passed and is expected in the near future.

COVID-19 testing covered

The FFCRA requires that group health plans provide free COVID-10 testing, including the products and services needed for diagnostic testing.

Employer’s and Self-Employed Person’s Tax Credits to Help Offset the Costs

Sections 7001 through Section 7004 of the FFCRA provide that the employer (as well as self-employed persons) can receive a refundable tax credit against the employer’s share of FICA tax (the 6.2% of FICA wages) equal to 100% of the “qualified sick leave wages” and “required paid family leave” wages paid by the employer. However, the employer will be denied an income tax deduction for the “wages” used to generate the tax credit.

CONCLUSION

This summary covers some of the highlights of the FFCRA that will have significant impact on small and mid-size employers. Based on media reports, future legislation in response to COVID-19 may contain amendments or compliments to FFCRA, particularly the unemployment compensation and the paid leave provisions. We will continue to monitor future developments.

For further assistance, please contact Pam Connelly at pconnelly@smgglaw.com, Jean Novak at jnovak@smgglaw.com or Gerri Sperling at gsperling@smgglaw.com.

 

The summary above does not constitute legal advice. It is to be used for general informational purposes only. We fully expect that many of the provisions discussed above will be modified by future law changes and administrative guidance. You should refrain from acting on the basis of any content included in this alert without seeking legal or other professional advice.