In response to the coronavirus pandemic, President Trump signed into law the Families First Coronavirus Response Act, which provides leave to employees for certain time off related to COVID-19.
As we previously reported, the FFCRA (a) increases the number of employees who will qualify for leave under the Family and Medical Leave Act; (b) provides for leave for coronavirus-related illnesses and circumstances; and (c) allows for paid sick leave for those who are under quarantine, sick, or affected by childcare needs.
Further, as we previously reported, the U.S. Department of the Treasury, the Internal Revenue Service, and the Department of Labor issued a joint communication addressing the costs associated with providing paid leave to employees impacted by COVID-19 and attempting to ameliorate those costs.
While the new law has generally been well-received, it has left many small business owners worried about whether they must comply with this law and, if so, whether they can afford to do so without going out of business. Small businesses are already dealing with a decrease in consumer demand, supply, and revenue. The mandated paid leave, while important to employees, may deliver a “knockout punch” to small-business owners.
The bill signed by the president takes effect on April 1, 2020, giving small business owners some time to digest the new law, run numbers, and await further guidance from the government.
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Possible exemptions for small businesses
Emergency Family and Medical Leave Expansion Act
Under the original FMLA, employers are required to provide 12 weeks of job-protected leave to qualifying employees who have serious health conditions or who are caring for family members with serious health conditions (among other things). This leave is unpaid.
The FMLA expansion recently signed into law requires companies employing less than 500 employees to provide 12 weeks of emergency FMLA leave to employees that cannot work or telework because they have to care for a minor child whose school or place of child care is closed due to COVID-19. The first 10 days of this leave can be unpaid (though employees may elect to substitute accrued paid leave), but the remaining 10 weeks must be paid, typically at two-thirds the employee’s regular rate. This paid leave is capped at $200 a day, and $10,000 in the aggregate.
However, companies that employ less than 50 people can apply to be exempt from the requirement if providing these benefits would jeopardize the viability of the business. Recent guidance from the DOL suggests that a company need not submit documentation to the department when a company is seeking this exemption and instead recommends that employers “should document” why the company meets this exemption. Hopefully, additional guidance will be issued shortly that will shed additional light on this provision.
Additionally, employers with 25 or more employees are required to return employees to the same or equivalent position upon the employee’s return to work (as is generally the case following traditional FMLA leave). However, employers with less than 25 employees may be excluded from this requirement in certain circumstances. Employers can also exclude health care providers and emergency responders from these provisions.
This provision expires on December 31, 2020.
Emergency Paid Sick Leave Act
Under this act, companies that employ less than 500 employees are required to pay for up to 80 hours of sick leave for employees who are unable to work or telework for one of the following reasons:
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The employee is under a federal, state, or local quarantine or isolation order because of COVID-19;
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The employee is advised by a health care provider to self-quarantine because of COVID-19;
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The employee has symptoms of COVID-19 and is seeking a medical diagnosis;
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The employee is caring for an individual who meets one of the first two conditions, above;
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The employee is caring for a son or daughter whose school or child care center is closed because of COVID-19 precautions, or whose child care provider is unavailable for the same reason; or
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“The employee is experiencing any other substantially similar condition.”
Under this law, the Secretary of Labor may exempt businesses with less than 50 employees from providing paid sick leave in order for the employee to care for a child (No. 5, above) if, as before, providing these benefits would jeopardize the viability of the business. However, if an employee cannot work for any of the other five listed reasons, it appears there is no exception and small employers will be required to provide paid leave (though the amount of the payment varies depending on the reason for the leave). Employers can also exclude health care providers and emergency responders from these provisions.
Numerous states and cities have implemented shelter-at-home or stay-at-home orders, and many of those orders will remain in place after April 1, 2020. Thus, it appears small employers may be required to provide paid sick leave if the workforce is subject to a government quarantine. Hopefully, we will get more guidance on this point, too.
This provision also expires on December 31, 2020.
Summary of exemptions available to small businesses
A company with fewer than 50 employees can apply for an exemption to the emergency FMLA law and the requirement to provide paid sick leave to employees that cannot work because they must care for minor children. However, even if an employer received the exemption, the company would still be legally required to provide up to 80 hours of paid sick leave to employees who qualify. While perhaps not a huge comfort to small businesses, this exception at least limits the number of scenarios in which small businesses will have to pay employees for more than two weeks of COVID-19-related leave under the FFCRA.
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Tax relief for small businesses
The FFCRA also provides tax relief for employers who are required to pay employees for leave related to COVID-19 under the new law. One major concern that has been voiced by small businesses is, while the potential for tax relief is a welcome benefit, it does not help small businesses here and now. Small businesses, especially those in the service and hospitality industries, are already suffering because of the decrease in or complete lack of business due to COVID-19.
In response to the concern regarding immediate help, the IRS, DOL, and U.S. Treasury Department issued a joint communication, which states, in part, that private employers and self-employed individuals will be reimbursed 100 percent for paid leave given to employees under the FFCRA. As we previously reported, eligible employers will be able to claim tax credits based on qualifying paid leave that they provide between the effective date and December 31, 2020. Equivalent credits are available to self-employed individuals based on similar circumstances.
Employers should consult with their tax specialists or tax attorneys for a comprehensive assessment of the potential costs or benefits related to this provision.
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For small businesses in looking into furloughs, reduced hours, or layoffs
If your business has been forced to close by the government or the effects of the pandemic, you may be exploring furloughs, reducing employee hours, or layoffs. Small businesses with less than 50 employees do not have to comply with the federal Worker Adjustment and Retraining Notification Act. However, state-specific “mini-WARN” acts could still apply.
Additionally, many states have provided expedited or mass unemployment insurance claim filing procedures for employees seeking unemployment insurance due to furloughs or layoffs due to COVID-19.
Employers should reach out to counsel to determine whether and when they have to provide state-specific notices to employees subject to a layoff as well as to obtain state-specific information regarding unemployment insurance.
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What now? When is relief coming?
While the FFCRA was only just passed and the Department of Labor has only begun to issue guidance on FFCRA compliance, small businesses with less than 50 employees should immediately evaluate whether they can afford to provide qualifying employees with up to 80 hours of paid sick leave. Depending on the size of the company, it may be the only leave that the company is required to pay under the FFCRA.
As of the date of publication, Congress is still negotiating a stimulus package for individuals and businesses impacted by COVID-19. It may include additional monetary relief for small businesses and economic incentives for providing leave to employees instead of laying them off.
Please contact your Constangy attorney with any questions.
Please be aware that substantial changes in the governmental guidance and underlying laws are occurring on almost a daily basis, which will impact the analysis of the legal issues related to COVID-19. It is critical that you check the Resource Center often for the most recent information and stay in continual contact with your Constangy attorney.
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