Families First Coronavirus Response Act is now law

On March 18, 2020, the U.S. Senate passed and President Trump signed the Families First Coronavirus Response Act, which we first described to you on March 16, 2020, following its passage of the U.S. House of Representatives. This new law comes as employers around the world are reeling from the COVID-19 pandemic. Lanier Ford's employment lawyers have already provided guidance to multiple employers to assist them in responding to this virtually unprecedented issue.

The Families First Act expands the Family Medical Leave Act (FMLA) to a new group of employees and employers and also, separately, provides for paid leave for those who are experiencing coronavirus symptoms, diagnosed with the illness, or caring for certain individuals who are affected. Importantly, sections of the new law require employers provide paid sick leave to care for a child if the child's school or daycare has closed due to COVID-19. These financial outlays are to be reimbursed to the employer through a series of tax credits.

The law was passed by the Senate without changes to version sent to it by the House. In broad summary, the law provides two different types of paid leave to certain employees experiencing a need to care for themselves or others. These two different entitlements are broken down into two separate laws within the act: (1) the Emergency Paid Sick Leave Act and (2) the Emergency Family Medical Leave Expansion Act.

Both of these laws provide for some measure of paid leave, with money fronted by the employer and later reimbursed to the employer through payroll tax credits. The economic impact on covered employers could be substantial.

Emergency Paid Sick Leave Act

The Emergency Paid Sick Leave Act is the easiest to understand, though it’s a whopper in and of itself. This aspect of the law has changed since my original summary, and now includes exceptions under which employees who are able to telework would be ineligible for the paid sick leave. This will be a comfort to many employers who have struggled mightily over the past few weeks to achieve telework solutions for their employees. Those employers can rest assured that if their employees are teleworking (and presumably not themselves overcome with the virus in a way that would prevent telework), the law’s paid sick leave provision should not apply.

With that edit, the new law will require all governmental employers in America and all private employers with fewer than 500 employees to provide 80 hours of paid sick time for full-time employees (or, for part-time employees, an amount equivalent to their average hours over 2 weeks) under certain defined circumstances. There are a lot of details but let’s begin with the triggers for the paid leave under the law. The triggers for paid leave are listed in Section 5102(a) of the law, as follows:

1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
2. The employee has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19.
3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
4. The employee is caring for an individual who is subject to an order as described in paragraph 1 or has been advised as described in paragraph 2.
5. The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the childcare provider of such son or daughter is unavailable, due to COVID-19 precautions.
6. The 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.

One big proviso

The law provides that an employer of any employee who is a “healthcare provider” may elect to exclude such employee and not provide the paid sick leave to such an employee. The term “healthcare provider” appears to be undefined, however, meaning we will have to await regulations before we understand precisely how far this carve-out goes.

On top of this, the Secretary of Labor has the authority under the Emergency Sick Pay Act to issue regulations “for good cause” to (a) exclude certain healthcare providers and emergency responders from the list of those employees eligible for leave, including by potentially allowing certain employers to opt out, and (b) to exempt small businesses with fewer than 50 employees where the imposition of these requirements would jeopardize the viability of the business. Just how any such authority could be used remains uncertain at this time. 

Divining exactly how much employers are to pay affected workers is painstaking. There is a general rule, but it is subject to several caps and exceptions. The general rule is that employees are entitled to be paid at their “regular rate” as defined by the Fair Labor Standards Act (FLSA) (i.e., their hourly rate or its equivalent for salaried workers) for the duration of the leave. (There are special procedures in the act for calculating the appropriate compensation for part-time employees with irregular schedules.) However, this “regular rate” general rule is subject to multiple different and highly important clarifications:

• First, the Act provides that the paid sick leave shall “in no event” exceed $511 per day—i.e., $5,110 in the aggregate—“for a use described in paragraph 1, 2, or 3 of section 5102(a).” Section 5102 is the lengthy section quoted above which describes the various triggers for receiving pay. The reference to the first three sections means that the full amount of the potential compensation is only available for individuals who are subject to a quarantine or isolation order; advised by a healthcare provider to self-quarantine; or who are experiencing symptoms of COVID-19 and seeking a medical diagnosis.

• For the remainder of workers who are potentially eligible for paid sick leave under the Emergency Paid Sick Leave Act, the total compensation available shall not exceed $200 per day, or $2,000 in the aggregate. Those eligible employees are those covered by a circumstance identified in paragraph 4, 5, or 6 of section 5102(a). In other words, those eligible for the $200 maximum are those who are caring for an individual who is subject to a quarantine or isolation order; those caring for a child whose school or place of care has been closed or whose provider is unavailable due to precautions; and those who are 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.” We do not know at this time just what those “substantially similar conditions” might be, but regulations are coming within the next 15 days.

• Further, where an employee’s required compensation is to be used to care for family members under Section 5102(a), not only is it capped at $200 a day ($2,000 in the aggregate), but the compensation also shall be limited to no greater than two-thirds of the employee’s regular rate, computed as set out above.

So in summary, those who are directly affected by a health concern or quarantine related to the virus are eligible to earn their regular rate of up to $500 a day for 2 weeks. Those who are more indirectly affected, such as parents who lose their child care, are eligible to earn their regular rate of up to $200 a day ($2,000 in the aggregate), subject to a general proviso that their compensation should never exceed two-thirds of their regular rate.

New law has teeth

Employers should be forewarned that this law has teeth. The law provides that it shall be a violation of the Fair Labor Standards Act (which provides for doubling of damages and attorneys’ fees) to “discharge, discipline, or in any manner discriminate” against any employee who takes leave under the act or engages in any protected activity (defined in the traditional sense of filing a complaint, instituting a proceeding, or cooperating in an investigation under the act).

In terms of how the leave is to be taken and when, the law has a sunset provision of December 31, 2020. Therefore, any leave must be taken this year. Beyond that, it appears to be the employee’s choice, or at least there is nothing in the law providing the employer any discretion or ability to schedule leave so as to minimize disruptions. In fact, the law provides that the employer “may not require an employee to use other paid leave provided by the employer to the employee before the employee uses the paid sick time.” In other words, an employer cannot require exhaustion of accrued paid leave; employees are entitled to immediately take the available sick pay leave, and may then use any accrued leave if they desire.

The entire intent of the law appears to permit employees to take their leave when they need it, provided the relevant triggers are met, with no barrier to taking of that leave. Of course, the law does provide that none of its mandates shall be interpreted to require financial or other reimbursement to employees who simply fail to take the leave allotted to them.

Emergency FMLA Expansion Act

On top of the foregoing requirement of paid leave for 2 weeks, the act temporarily amends and, for that period, significantly expands, the federal Family Medical Leave Act of 1993. The temporary amendment to the FMLA will provide an additional period of paid and unpaid leave for affected employees, over and above what is provided by the Emergency Paid Sick Leave Act. This is the component of the law referred to as the Emergency FMLA Expansion Act. This law will expire on December 31, 2020.

Small employers must pay attention to this law. Until its expiration date, the expanded FMLA will be far more robust than in the past. First and foremost, the law now applies to all government employers and all private employers with fewer than 500 employees (whereas previously, it exempted all employers with less than 50 employees within 75 miles of a worksite). In addition, the traditional FMLA rule under which employees are not eligible for leave until they have completed 12 months of service with their employer—in essence, a waiting period—is suspended. The FMLA provisions now cover all employees who have worked for covered employers for just 30 days.

The new law does contain a carve-out under which the Secretary of Labor will have the regulatory authority to exempt “small businesses with fewer than 50 employees” from the requirements of the law, but only where “imposition of such requirements would jeopardize the viability of the business as a going concern.” The law sets no standard for that determination, so we will have to await regulatory clarification—and it is possible affected businesses may have to apply for relief.

However, even without awaiting regulatory guidance, the law does soften the blow for certain very small employers by providing that if an employer has fewer than 25 employees, it still must provide leave but its restoration requirements are limited. Under this provision, if an employee of a very small employer takes the leave but the employee’s job is then eliminated due to the coronavirus emergency, the employer will be off the hook for any reinstatement so long as they continue to reach out to the employee for a defined one-year period if any equivalent position becomes available.

With these introductory matters out of the way, what the law says about the leave entitlement is actually fairly simple. The law amends section 102 of the existing FMLA (which already provides leave entitlements for the birth of a child, a serious health condition of the employee or a close family member, etc.) to tack on an additional leave category. That additional leave category is entitled “qualifying need related to a public health emergency.” The provision states that this term “means the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the childcare provider of such son or daughter is unavailable, due to a public health emergency.” In turn, the term “public health emergency” simply means “an emergency with respect to COVID-19 declared by a Federal, State, or local authority.”

So in effect, what we have here is a very pared-down version of the original Emergency FMLA Expansion Act. Assuming we are correctly reading Congress’s intention, the only new category of leave available under the law is for parents who are affected by a school closure or loss of childcare and who are unable to telework. Apparently, being subject to a mandatory quarantine or isolation order or suffering from COVID-19 itself is not going to be sufficient to trigger FMLA leave under this new law, which means employers will simply have to decide whether an employee in such a situation would otherwise qualify for leave under the original FMLA. My guess would be that an employee who complains of significant COVID-19 symptoms would be regarded as suffering from a serious health condition as defined by the original FMLA, though this would be case by case. An employee merely subject to an isolation order or quarantine may not necessarily qualify for leave under Section 102 of the FMLA, though their job may be protected as a matter of public policy—a complex question that employers should carefully explore if the situation arises.

Returning to the Expansion Act, for those parents who do qualify for the leave, the potential leave period is the same as the FMLA—up to 12 week. Of that 12 weeks, the initial 10 days of leave for the above reasons will be unpaid. (Note that the 10-day elimination period does not extend the total 12 weeks of available leave, it merely distinguishes those first 10 days from the remainder of any leave). During this 10-day period of unpaid leave, employees are permitted to use any accrued leave if they have it and wish to use it, but the law does not seem to permit employers to force this choice. Many employees may choose against using up that accrued leave, because the law appears to permit them to use their 80 hours of paid leave under the Emergency Paid Sick Leave Act during that time period.

Following the first 10 days of leave, the new law provides that the employer shall provide paid leave “for each day of leave . . . that an employee takes,” up to the existing statutory maximum of 12 weeks. However, the law clarifies that the employee’s paid leave shall only be “two-thirds of an employee’s regular rate of pay” for the number of hours the employee would otherwise work (for salaried employees, presumably 40 hours a week). Even this two-thirds number is actually subject to a cap. The statute provides that “in no event shall such paid leave exceed $200 per day and $10,000 in the aggregate.”

So in summary, the Emergency FMLA Expansion Act is of fairly limited scope. It will apply to parents only, and as to such parents, it will provide for a partial wage replacement of no more than two-thirds salary after a 10-day elimination period, subject then to daily and aggregate caps, all to be reimbursed to the employer later through the tax credits discussed below.

As with the Emergency Sick Pay Act, the Secretary of Labor is given the express authority to “exclude certain healthcare providers and emergency responders from the definition of eligible employee.” We will have to await any action from the Secretary on that score.

Violations of the Expanded FMLA will be enforceable in the same manner as the original FMLA—enforcement actions by the Department of Labor and private lawsuits for back pay and attorneys’ fees. In addition to mandatory leave provisions, the FMLA contains anti-interference and anti-retaliation provisions that employers should bear in mind.

Tax credits for certain employers and individuals

The Families First Act will reimburse private employers for the above-described paid leave entitlements(both under the Emergency Sick Leave Act and under the Emergency FMLA Expansion Act) through a quarterly tax credit to employers. Because the reimbursement is a tax credit, the reimbursement will not be immediate. But because the credit comes in the form of a social security payroll tax credit, employers will see the benefit of it in upcoming paychecks (through reduced payroll taxes) and will not have to wait until next year. Regardless, an initial financial outlay by small businesses appears likely as a result of this law.

The news is worse for government employers. The House bill specifically states that Federal, State, and local governments and agencies and instrumentalities thereof are not entitled to the tax credit, meaning there is no anticipated reimbursement for the mandated wages.

However, there is some good news for those who are self-employed. The tax credit portion of the law (Sections 7002 and 7004) provides that in the case of an eligible self-employed individual, a tax credit shall be available in an amount equal to the qualified sick leave entitlement and qualified FMLA sick leave entitlement of the individual, to the same extent as if the person worked for a covered employer.

Summary and Effective Date

The big takeaway from this huge piece of legislation is that between the Emergency Paid Sick Leave Act and the Emergency FMLA Expansion Act, many if not most employees in America will be entitled to 80 hours of paid leave, and some parents will receive additional allotment of up approximately 10 weeks of additional partially paid leave (at two-thirds of regular wages).

We expect additional relief is coming to businesses and public employers over the coming days, and also expect Congress will approve the concept of direct payments to individuals as well. There is no reason to expect that any subsequent enactments will delete or take away any of the provisions of the Families First Act, however, so employers should begin planning. The law goes into effect in just 15 days from the date that the President signs it into law.

Following that, the Secretary of Labor has 15 days to provide regulations and to prescribe a required notice that all covered employers must post in their workplaces. We will keep an eye out for any regulations and required posters, which employers will need to post immediately.

Items on this web page are general in nature. They cannot—and should not—replace consultation with a competent legal professional. Nothing on this web page should be considered rendering legal advice.

© 2020