Updated March 25, 2020
On March 18, 2020 President Trump signed into law the Families First Coronavirus Response Act (FFCRA), in response to the ongoing spread of COVID-19. The Department of Labor (DOL) issued answers to some of the most frequently asked questions about that legislation on March 25, 2020, providing further clarity on the application of the FFCRA for employers. Pursuant to that guidance, the FFCRA goes into effect April 1, 2020 (and is not retroactive).
Scope of the FFCRA
The scope and implications of the FFCRA on FMLA and sick leave may be particularly daunting for small employers who are already stretched thin on revenue and resources. As outlined in more detail in DWT’s blog post concerning Employer Obligations Under Families First Coronavirus Response Act, the key provisions of FFCRA include the following:
- Temporary expansion of the Family Medical Leave Act (FMLA) to provide up to 12 weeks of FMLA-protected leave to employees unable to work due to needing to care for a minor child whose school or childcare facility is closed, or if the usual childcare provider is unavailable (the first 10 days of which are unpaid and the following 10 weeks of which are to be paid at the lower of two-thirds of the employee’s regular rate of pay or $200 per day); and
- Provision of 10 days of paid sick leave for employees experiencing certain COVID-19-related qualifying events, available to any employee who:
- Is subject to a federal, state, or local quarantine or isolation order;
- Has been advised by a health care provider to self-quarantine;
- Is experiencing symptoms of coronavirus and is seeking a medical diagnosis;
- Is caring for a person subject to a federal, state, or local quarantine or isolation order or who has been advised by a health care provider to self-quarantine;
- Is caring for a son or daughter whose school or day care is closed; or
- Is experiencing any other substantially similar condition specified by the Secretary of Health & Human Services, the Secretary of the Treasury, and/or the Secretary of Labor.
For qualifying events 1-3, the employee receives from the employer his or her regular rate of pay, up to $511 per day. For qualifying events 4-6, the employee receives from the employer the lesser of two-thirds his or her regular rate of pay or $200 per day. Employers are entitled to claim a tax credit for the full value of the amounts paid to employees under this emergency statute; however, employers may not claim the credit for amounts paid prior to April 1, 2020.
FFCRA Small Business Exemptions
Recognizing the strain these requirements may cause small businesses, the FFCRA gives the Secretary of Labor the authority to issue regulations and guidelines which may exempt employers with fewer than 50 employees from certain FFCRA requirements. Please see our blog post, Department of Labor Answers FFCRA Questions for more detail on how to calculate the total number of employees for purposes of the FFCRA.
Please note that because the FFCRA is not retroactive, former employees whose employment ended prior to April 1, 2020 will not be counted for FFCRA purposes and will not be eligible to take leave under the FFCRA. In addition, the Department of Labor has announced that it “will observe a temporary period of non-enforcement for the first 30 days after the Act takes effect, so long as the employer has acted reasonably and in good faith to comply with the Act.”
Below are the possible FFCRA exemptions for small businesses that we are currently monitoring (note that there are other possible exemptions for healthcare employees and first responders, which are outside the scope of this article):
- Paid Family Leave (FMLA): The Secretary of Labor is considering an exemption to the expansion of FMLA for businesses with fewer than 50 employees if providing such a benefit would “jeopardize the viability of the business as a going concern.”
- Paid Sick Leave: The Secretary of Labor is considering an exemption to the 10 days paid sick leave requirement for businesses with fewer than 50 employees, but only if (i) the leave is for the purpose of caring for a child whose school or childcare center is closed due to COVID-19, and (ii) providing such a benefit would “jeopardize the viability of the business as a going concern.”
Consequently, an employer with fewer than 50 employees is expected to extend the ten days of paid leave for the other five categories of qualifying events, even if it may jeopardize the business’s viability.
The DOL’s guidance directs small businesses seeking an exemption to document internally why their business qualifies (i.e. why compliance would jeopardize the business’s viability), but does not require a filing with DOL.
In addition, for businesses that are required to comply with the FFCRA leave requirements but lack the cash flow to pay, this DOL bulletin advises that such businesses should make payment of sick leave or family leave wages as soon as possible, but not later than seven calendar days after the business has withdrawn an amount equal to the required paid sick leave and expanded family and medical leave wages from their Federal payroll tax deposits or, to the extent such deposits are not sufficient, after the business has received a refund of the credit amount from the IRS to cover the required wages.
We recommend that the FFCRA requirements as well as the above possible exemptions be factored into the business and viability projections of any business with fewer than 50 employees. Some states also have more generous benefits for employees (which supersede less generous federal benefits) and may also be passing their own emergency legislation that should be taken into account when conducting a cost analysis. In the event that this analysis compels the conclusion that headcount must be reduced in order to maintain the business as a going concern, we recommend that those decisions be made in consultation with counsel (particularly in light of the rapidly evolving legal and business landscape).
We anticipate that the Department of Labor will issue further guidance in the days to come prior to the April 1, 2020 effective date of the FFCRA, and we will provide updates as more information becomes available. For additional coverage of the Families First Coronavirus Response Act, see our advisories about workplace safety and other employer obligations.
The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.
DWT will continue to provide up-to-date insights and virtual events regarding COVID-19 concerns. Our most recent insights, as well as information about recorded and upcoming virtual events, are available at www.dwt.com/COVID-19.