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On Wednesday, March 18, 2020, the U.S. Senate passed, and President Trump signed into law, the “Families First Coronavirus Response Act” (H. R. 6201), two days after the final bill was approved in the U.S. House of Representatives. The legislation goes into effect on April 2, 2020.
As we highlighted in an earlier Client Alert, the legislation contains several provisions that will impact private employers with 500 or fewer employees and all public employers as they navigate the sweeping effects of the novel coronavirus (COVID-19). Below is a summary of some of the legislation’s provisions that will have the greatest effects on employers and their employees.
Emergency Paid Sick Leave
The legislation requires all private employers with fewer than 500 employees and all public employers to provide 10 days of Emergency Paid Sick Leave to all full- and part-time employees, regardless of tenure, who are unable to work (or telework) due to:
- being subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
- being advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- experiencing symptoms of COVID-19 and seeking a medical diagnosis;
- caring for an individual who is self-isolating because of a COVID-19 diagnosis, or is experiencing symptoms and is seeking a medical diagnosis;
- caring for a son or daughter if the son or daughter’s school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to COVID-19; or
- experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.
Full-time employees are entitled to 80 hours of paid sick leave, and part-time employees are entitled to a number of hours equal to the number of hours they work, on average, over a two-week period.
If the employee is in self-isolation because of an isolation order (item (1) above) or advice from a health care provider to self-quarantine (item (2) above), or is experiencing symptoms of COVID-19 and is seeking medical diagnosis (item (3) above), the leave is to be paid at the lesser of (i) employee’s regular rate, or (ii) $511 per day.
If, however, the leave is to care for an individual who is sick or self-isolating (item (4) above), to care for a son or daughter whose school or place of care has closed or is unavailable (item (5) above), or due to the employee experiencing any other substantially similar condition specified by the Secretary of Health and Human Services (item (6) above), the leave is to be paid at the lesser of (i) two-thirds of employee’s regular rate, or (ii) $200 per day.
This paid sick time is in addition to any paid leave already available to the employee under current employer policies. An employer may not require an employee to use other paid leave before using paid sick time under this provision.
The Act authorizes the Secretary of Labor to issue regulations authorizing the following exceptions: (i) employers with fewer than 50 employees may apply to the U.S. Secretary of Labor for a hardship exemption if paying sick leave for 10 days “would jeopardize the viability of the business as a going concern”; and (ii) employers may require employees who are health care providers or emergency responders to be excluded from the legislation.
Private employers with over 500 employees are not covered by this portion of the legislation and may not receive the tax credits even if they offer similar paid leave programs to their employees.
This portion of the legislation takes effect no later than April 2, 2020 (15 days after enactment), and expires on December 31, 2020.
Emergency Family and Medical Leave Expansion Act
In addition to paid sick leave, the legislation also temporarily expands Family and Medical Leave Act (FMLA) eligibility to employees who have (i) worked for qualified employers (private employers with 500 or fewer employees and public agency employers) for at least 30 calendar days and (ii) a need for leave to care for a son or daughter if the son or daughter’s school or place of care has been closed, or the child care provider of such son or daughter is unavailable due to COVID-19. This is a change from the first version of the bill passed by the House, which provided expanded FMLA leave for other reasons including self-isolation due to a medical diagnosis and care for a family member self-isolating due to a medical diagnosis. The legislation as passed by the Senate makes paid leave under the FMLA available for the sole purpose of caring for a son or daughter whose school or place of care has been closed or is unavailable due to COVID-19.
Under this expansion of FMLA, the first 10 days for which an employee takes this leave may consist of unpaid leave. We anticipate, however, that most eligible employees will take the first 10 days as paid leave under the Emergency Paid Sick Leave portion of the legislation described above. After the first 10 days, this leave is to be paid at the lesser of (i) two-thirds of the employee’s regular rate of pay for the number of hours the employee would otherwise normally be scheduled to work for the remainder of this FMLA (up to 10 additional weeks), or (ii) $200 per day (not to exceed $10,000 in the aggregate).
Employers of health care providers or emergency responders may elect to exclude them from eligibility for this expanded FMLA leave related to COVID-19.
This portion of the legislation also takes effect no later than April 2, 2020 (15 days after enactment), and terminates on December 31, 2020.
Tax Credits for Paid Sick and Paid FMLA Leave
Under this legislation, employers are eligible to receive a refundable tax credit equal to 100% of the qualified wages paid by the employer for any paid Sick Leave or paid FMLA Leave. If the credit exceeds the amount the employer owes in Social Security taxes at the end of the quarter, then it is refundable. In other words, the employer should be “made whole” at the end of the quarter after taking into account both the amount paid to qualifying employees under the Act and the tax credits.
Additional Benefits to Laid-Off Employees and New Unemployment Insurance Requirements for Employers
The Act includes an additional $1 billion in 2020 for emergency grants to states for additional unemployment insurance benefits.
In addition to extending benefits to employees whose employment is terminated as a result of COVID-19, the legislation includes the following additional requirements for employers:
- Requiring employers to provide notification of potential unemployment insurance to laid-off workers;
- Ensuring that workers have at least two ways (e.g., online and phone) to apply for benefits;
- Notifying terminated employees when an unemployment application is received by the employer and is being processed (or explaining why an application cannot be processed and assisting the former employee with successful processing).
If a state experiences an increase of 10% or more in their unemployment rate, the regular 26 weeks of unemployment insurance can be extended by the state by an additional 26 weeks (52 weeks total).
Recommended Next Steps for Clients
This emergency relief requires immediate employer action to prepare for employee leave requests beginning no later than April 2, 2020. Initial action steps for employers to consider include:
- Determining if the law applies to them and for smaller employers, considering a hardship waiver;
- Collaborating with human resources, payroll, legal, and tax trusted advisors to implement leaves and credits;
- Adjusting existing leave policies and/or practices;
- Adapting payroll practices to facilitate tax credit filing; and
- Providing notices of new leaves and benefits and clearly communicating to employees and management about new paid leave provisions.
