How Will the Proposed “Families First Coronavirus Response Act” Affect Small Businesses?

How Will the Proposed “Families First Coronavirus Response Act” Affect Small Businesses?

In response to the COVID-19 pandemic, on Friday, March 13, 2020, the U.S. House of Representatives passed the Families First Coronavirus Response Act (“FFCRA”). The law, if enacted as written, will provide numerous temporary relief measures that apply to employers with fewer than 500 employees and government employers, with some exceptions for smaller businesses. Many of these measures will be impacted by state and local actions.

The FFCRA, as currently written, proposes: (i) to expand the Family and Medical Leave Act and provide some paid leave for certain leaves related to COVID-19; (ii) up to two weeks of paid leave for covered employees; (iii) a tax credit equal to qualified sick leave wages (capped at either $511 or $200 per day depending on the basis for the leave); (iv) expanded unemployment insurance coverage; and (v) free COVID-19 testing.

Here are the key points of each relief item noted above:

Family and Medical Leave Act (FMLA)

The expansion of the FMLA would require employers with fewer than 500 employees and government employers to provide all employees, whether temporary, part-time, or full-time, and who have been on the job for at least 30 days, with twelve (12) weeks of job-protected leave for COVID-19-related time off, including for these purposes:

  • To comply with a recommendation or order by a public official or health care provider that: (a) the physical presence of the employee on the job would jeopardize the health of others because of exposure to Coronavirus, or exhibition of symptoms of Coronavirus;and (b) the employee is unable to both perform the functions of the position of the employee’s job and comply with the medical recommendation or order.
  • To care for a family member who (a) has exhibited symptoms of COVID-19, or (b) with respect to whom a public official with jurisdiction or a health care provider has made a determination that the presence of the family member in the community would jeopardize the health of other individuals because of exposure to COVID-19.
  • To care for the employee’s child under age 18 if the child’s school or place of care has been closed, or the childcare provider of the child is unavailable due to a public health emergency.

Employers must provide two weeks of paid leave (pursuant to the Emergency Paid Sick Leave Act; see requirements below), and no less than two-thirds pay after the first two (2) weeks for the remaining ten (10) weeks.

These requirements would become effective 15 days after the law is enacted and would expire on December 31, 2020. The amendment allows the U.S. Secretary of Labor to develop regulations to exempt small businesses with fewer than 50 employees when the imposition of the new requirements would jeopardize the business as a going concern, but the standard is unclear.

An employee may elect to substitute any paid time off for the unpaid portion of leave (including the new Emergency Paid Sick Leave or existing paid time off benefits), but an employer cannot require it.

Employers with 25 or more employees must return employees to the same or a substantially equivalent position under the existing FMLA rules.

Employers with less than 25 employees are not required to return the employee to work if the following conditions are met:

  • The position held by the employee when the leave commenced does not exist due to economic conditions or other changes in operating conditions of the employer that affect employment and are caused by a public health emergency during the period of leave.
  • The employer makes reasonable efforts to restore the employee to a position equivalent to the position the employee held when the leave commenced, with equivalent employment benefits, pay, and other terms and conditions of employment.
  • If the reasonable efforts of the employer fail, the employer makes reasonable efforts to contact the employee if an equivalent position described becomes available. This “contact period” remains in effect for the one-year period beginning on the earlier of: (a) the date on which the qualifying need related to a public health emergency concludes, or (b) the date that is twelve (12) weeks after the date on which the employee’s leave commences.

Employees who work under a multi-employer collective agreement and whose employers pay into a multi-employer plan are eligible for the same leave.

Emergency Paid Sick Leave Act

This law would require employers with fewer than 500 employees and government employers to provide all employees up to two weeks of paid sick leave for qualifying COVID-19 absences. The requirements would become effective 15 days after the law is enacted and expire on December 31, 2020. Paid sick time would be available for immediate use regardless of length of employment.

Full-time employees could receive up to 80 hours. Part-time employees receive the average number of hours of work they work over a two-week period. If the part-time employee’s schedule varies, the employee receives the average number of hours scheduled per day over the prior 6-month period, including hours for which the employee took any type of leave. If neither is calculable, the part-time employee receives the amount the employee expected to work when hired.

For absences related to the employee’s own condition, the employee receives the greater of the employee’s regular rate of pay or the applicable minimum wage. For absences to care for others, the employee receives two-thirds (2/3) of the employee’s regular rate or the applicable minimum wage.

This paid sick time is in addition to time available under an employer’s existing policies. Employers may not reduce or modify existing policies to avoid providing paid sick time in light of the new law.

An employee may choose to first use the paid sick days under this new law before using paid time off benefits under the employer’s existing policy. An employer may not require any employee to use the employer’s other paid time off benefits (vacation, PTO, personal days, sick days, etc.) prior to the use of paid sick time under the new law.

The following reasons qualify for use of this sick leave:

  • To self-isolate because the employee is diagnosed with COVID-19.
  • To obtain medical diagnosis or care if the employee is experiencing the symptoms of COVID-19.
  • To comply with a recommendation or order by a public official with jurisdiction or a health care provider that the physical presence of the employee on the job would jeopardize the health of others because of (a) the employee was exposed to COVID-19, or (b) the employee is exhibiting symptoms of COVID-19.
  • To care for or assist a family member (a) who is self-isolating as a result of a diagnosis of COVID-19 or is experiencing symptoms of COVID-19 and needs to obtain medical diagnosis or care; and (b) with respect to whom a public official with jurisdiction or a health care provider makes a determination that the presence of the family member in the community would jeopardize the health of other individuals in the community because of exposure to COVID-19 or exhibition of COVID-19 symptoms.
  • To care for the employee’s child if the child’s school or place of care has been closed, or the childcare provider of the child is unavailable due to Coronavirus.

There is no carry-over of unused hours into subsequent years or payout upon termination. The employee must return to work as soon as the need for leave ends.

An employer may not require an employee to find a replacement when using this paid sick time. Employers cannot discriminate or retaliate against an employee for taking paid sick leave under the new law or for reporting complaints, testifying, or instituting proceedings related to the law.

A violation of the law is a minimum wage violation under the Fair Labor Standards Act. The penalties include lost wages, an equivalent amount as liquidated damages, and attorney’s fees and costs. Intentional violations may result in up to a $10,000 fine and, for repeat offenders, up to six months in prison after a prior conviction.

Employees who work under a multi-employer collective agreement and whose employers pay into a multi-employer plan are eligible for the same benefits.

Paid Sick Leave and Paid FMLA Tax Credits

Employers will receive a refundable tax credit against their share of Social Security taxes equal to 100 percent of qualified paid sick leave wages paid for each calendar quarter to be paid under the above laws. For employees taking leave to quarantine themselves as a result of COVID-19 diagnosis or treatment, the amount of qualified sick leave wages credited for each employee are capped at $511 per day. For employees on leave to care for a family member or a child whose school or place of care has closed, qualified sick leave wages for each employee are capped at $200 per day. For FMLA the tax credit is capped at $200 per day and $10,000 for all calendar quarters.

The U.S. Secretary of the Treasury is given broad authority to issue regulations and guidance necessary to carry out the tax credits, and will determine the effective date, which will be within 15 days of enactment of the law. If the credits exceed the employer’s total liability under section 3111(a) for all employees for any calendar quarter, the excess credit is refundable to the employer. Employers should consult their tax professionals about these caps and additional caps on the credits in the proposed law.

Unemployment Insurance

Unemployment insurance access will be expanded so long as States expand their eligibility requirements. States must amend their laws and ease unemployment eligibility requirements in connection with COVID-19 to receive the federal funding for reserve amounts. The State of Illinois has recently published emergency rules for COVID-19-related unemployment.

Free COVID-19 Testing

Group health plans must provide free testing for SARS-CoV-2, the technical name for the virus that causes COVID-19. Group health plans cannot charge for products and services needed for diagnostic testing.

If you have additional questions about how the proposed FFCRA might impact your business, contact an experienced employment and business attorney today.

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