Note: The following is the Permanent Equity Legal Team’s analysis of the Families First Coronavirus Response Act. It is not legal advice. Consult your own legal resources before making decisions for your business.

On Wednesday, March 18, 2020, President Trump signed into law H.R. 6201, known as the Families First Coronavirus Response Act (the FFCRA).  It is “Phase 2” of the Federal government’s response to COVID-19, with “Phase 1” consisting of an $8.3 billion dollar bill funding efforts to prevent transmission and to develop a vaccine, and a pledged “Phase 3” that is expected to include, among other things, direct payments to individual taxpayers, additional funds to distressed industries, and a small business interruption loan program. 

The FFCRA is an expansive piece of legislation that provides resources and financial assistance to businesses, families and individuals who have been impacted by COVID-19, and aids the efforts of those trying to contain the spread of the virus. The FFCRA has provisions addressing access to free COVID-19 testing, increases to federal Medicaid funding, relaxation of regulations on providing meals to the underprivileged, and emergency grants to enhance state-level federal unemployment insurance assistance. 

There are also portions of the FFCRA that are more focused on business owners and operators. These provisions include: (i) the Emergency Family and Medical Leave Expansion Act; (ii) the Emergency Paid Sick Leave Act; and (iii) Tax Credits for Paid Sick and Paid Family and Medical Leave. Let’s briefly explore each of these provisions and how they might impact your business: 

I. EMERGENCY FAMILY AND MEDICAL LEAVE EXPANSION ACT (Division C of the FFCRA): 

Note: This provision does not take effect until April 2, 2020, and will remain in effect until December 31, 2020.

The Emergency Family and Medical Leave Expansion Act (EFMLEA) expands the existing Family and Medical Leave Act of 1993 (more commonly known as FMLA) to require employers to provide up to 12 weeks of leave to an employee who is not able to work due to the need to care for such employee’s child because the child’s school or place of care has been closed, or such child’s care provider is unavailable, due to a COVID-19 public health emergency, as declared by any federal, state, or local authority.

Employers Subject to the EFMLEA

Unlike the FMLA, which generally only applies to businesses with at least 50 employees, the EFMLEA applies to all employers with fewer than 500 employees. So, even if you are a business that is not subject to the FMLA, you may still be subject to the EFMLEA.

The EFMLEA does provide the Secretary of Labor with the authority to issue regulations that would exempt small businesses with fewer than 50 employees from the requirements of the EFMLEA to the extent that compliance “would jeopardize the viability of the business as a going concern.” At this point, however, such regulations have not been issued.

Employees Eligible for Leave Under the EFMLEA 

All employees who have been employed for at least 30 days are eligible for up to 12 weeks of leave under the EFMLEA. This represents a material change to the FMLA, which only applies to employees who have been employed for at least 12 months and have worked at least 1,250 hours during those 12 months. The Secretary of Labor is authorized to issue regulations that would exclude certain health care providers and emergency responders. No such regulations have been issued.

Paid or Unpaid Leave

The first 10 days of leave under the EFMLEA are unpaid, although many employees will be eligible to receive full or partial wages during this period under the Emergency Paid Sick Leave Act (see below). An employee may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for unpaid leave during this initial unpaid leave.

After the initial 10 day period of unpaid leave, employees are entitled to be paid for the remainder of their EFMLEA leave. During this time, employees must be paid a wage that is no less than 2/3rds of their regular rate of pay, provided no employee is entitled to receive paid leave in excess of $200 per day, or $10,000 in total.   

Employees Returning from Leave

Leave under the EFMLEA is “job-protected”, meaning that when an employee returns, they must be restored to the same or an equivalent position as the one held by the employee when their leave commenced. However, this requirement does not apply if (a) the employer has fewer than 25 employees; (b) the employee’s position no longer exists due to economic conditions arising as a result of the COVID-19 public health emergency; and (c) the employer makes a reasonable effort to restore the employee to an equivalent position or contact the employee when such a position becomes available. 

II. EMERGENCY PAID SICK LEAVE ACT (Division E of the FFCRA):

Note: This provision does not take effect until April 2, 2020 and will remain in effect until December 31, 2020.

The Emergency Paid Sick Leave Act (EPSLA) requires employers to provide employees with up to 2 weeks of paid sick leave for certain covered purposes related to and arising out of the COVID-19 public health crisis. 

Employers and Employees Subject to the EPSLA

Like the EFMLEA, the EPSLA is applicable to all employers with fewer than 500 employees, as well as any governmental and non-private entity employers with more than 1 employee. Paid sick leave under the EPSLA is available to all employees, regardless of how long they have been employed and whether they are full or part-time employees. 

Once again, the Secretary of Labor has the authority to issue regulations that would exempt small businesses with fewer than 50 employees from the requirements of the EPSLA to the extent that the imposition of such requirements “would jeopardize the viability of the business as a going concern.” In addition, the Secretary of Labor may issue regulations that would effectively exclude certain health care providers and emergency responders from the EPSLA by permitting their employers to opt out. In each case, no such regulations have yet to be issued by the Secretary. 

Qualifications for Paid Sick Leave

Covered employers are required to provide up to 2 weeks of paid sick leave to any employee who is unable to work (or telework) because: 

1. such employee is subject to a Federal, State or local quarantine or isolation order related to COVID-19 

2. such employee has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19

3. such employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis

4. such employee is caring for an individual who is subject to an order as described in in item (i) above, or has been advised as described in item (ii) above

5. such employee is caring for a child of such employee if the school or place of care of the child has been closed, or their childcare provider is unavailable, due to COVID-19 precautions

6. such employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor

Length and Amount of Paid Leave Available

Full-time employees are entitled to receive up to 80 hours (2 weeks) of paid sick leave, while part-time employees are entitled to receive paid sick leave of an amount equal to the number of hours that such employee works, on average, over a 2-week period. Unused time may not be carried over from one year to the next as the EPSLA is scheduled to terminate on December 31, 2020.

Employees taking sick leave pursuant to items (i), (ii) or (iii) above are entitled to the payment of wages of an amount no less than the employee’s regular rate of pay, provided that no such employee is entitled to receive more than $511 per day and $5,110 in the aggregate. 

Employees taking sick leave pursuant to items (iv), (v) or (vi) above are entitled to the payment of wages of an amount no less than 2/3rds of their regular rate of pay, provided that no employee is entitled to receive paid leave in excess of $200 per day and $2,000 in the aggregate.

Additional Considerations and Requirements for Employers Under the EPSLA

Sequencing of Benefits: An employee is permitted to first use the paid sick leave available under the EPSLA before using any other sick leave, vacation or PTO it might have with the employer. In other words, an employer is not permitted to require an employee to use other sick leave, vacation or PTO before using the sick leave available under the EPSLA.

Posting Requirements: All covered employees are required to post and keep posted, in conspicuous places where notices to employees are customarily posted, a notice, to be prepared or approved by the Secretary of Labor, setting forth the requirements of the EPSLA. A model form of notice will be prepared and made publicly available by the Secretary of Labor on or before March 25, 2020.

Anti-Discrimination/Retaliation: Employers are not permitted to “discharge, discipline, or in any other manner discriminate against” an employee who (i) takes paid sick leave under the EPSLA; or (ii) has filed any complaint or instituted any proceeding under or related to the EPSLA (e.g. seeking enforcement against an employer).

III. PAYROLL TAX CREDITS (Division G of the FFCRA):

This portion of the FFCRA provides employers with tax credits through the end of 2020 against the payment of payroll taxes (taxes under Section 3111(a) and 3221(a) of the Internal Revenue Code). The amount of the credit will be equal to 100% of the “qualified wages” paid by an employer under the EFMLEA and the EPSLA (Items I and II above) for each calendar quarter, subject to the limitations discussed below. The FFCRA also provides for certain credits against self-employment taxes as well.

Importantly, the newly created tax credits are refundable. This means that to the extent the value of the credits received by an employer exceeds the amount of payroll taxes incurred by such employer, the excess amount of credit will be deemed an overpayment and refunded to the employer.

The tax credits are not available for employers already receiving credits for paid family and medical leave under the Tax Cut and Jobs Act. 

Tax Credits Under the Emergency Family and Medical Leave Expansion Act

The amount of “qualified wages” that are eligible to be credited to an employer with respect to any individual employee is limited to $200 per day for any day for which the individual employee is on paid leave under the EFMLEA, and $10,000 in the aggregate.

Tax Credits Under the Emergency Paid Sick Leave Act:

The amount of “qualified wages” that are eligible to be credited to an employer with respect to any individual employee is limited to the aggregate amount of wages actually paid to such employee under the EPSLA for the length of such employee’s sick leave (but not to exceed 10 days).

CONCLUSION

There is no question that the FFCRA was a welcome response by the Federal government to the COVID-19 crisis. In particular, it goes a long way towards ensuring that individual employees are not faced with the reality of missing a paycheck in the event that the current public health crisis requires them to miss time in order to care for themselves or a loved one. At the same time, in the long run, the tax credits afforded to employers will provide some level of assistance, albeit delayed in nature. 

Unfortunately, however, “Phase 2” of the Federal government’s plan to battle COVID-19 does not go nearly far enough in providing small business owners and their employees with the assistance they desperately need in combating the current economic climate. It does not get immediate resources into the hands of business owners so that payrolls can be funded, jobs can be preserved, production can continue, and demand can be stabilized. Our sincere hope is that further consideration is given to the current realistic plight of the business owner as policy-makers continue working towards the implementation of “Phase 3” of their efforts to fight COVID-19 and stimulate our economy.