Last week, the House of Representatives passed the Families First Coronavirus Response Act (the Response Act), and the Senate passed it on Wednesday, March 18, 2020. President Trump signed it that same day. The Response Act is designed to create paid leave rights for employees impacted by COVID-19. It does this in two ways.
Amendments to the Family and Medical Leave Act
First, the Response Act temporarily modifies the Family and Medical Leave Act (the FMLA) from April 1, 2020, through December 31, 2020, to address specific leave issues related to the COVID-19 pandemic. Specifically, the Response Act gives employees the right to take up to 12 weeks of leave (COVID-19 Leave) for a “qualifying need related to a public health emergency.” The term “qualifying need related to a public health emergency,” means “the employee is unable to work (or telework) due to a need for leave to care for [a] son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.” The term “public health emergency” means “an emergency with respect to COVID-19 declared by a Federal, State, or local authority.”
The Response Act provides COVID-19 Leave for employees who have worked for their employer for only 30 days (as opposed to the one-year and 1,250-hours eligibility requirement for “regular” FMLA leave). The Response Act provides that COVID-19 Leave is not paid during the first 10 days of leave but is paid for the remaining days thereafter through the end of the 12-week leave period (unlike “regular” FMLA leave, which is unpaid, unless an employer decides otherwise). COVID-19 Leave pay is paid in the amount of two-thirds of an employee’s regular rate of pay, up to $200 per day and $10,000 in the aggregate.
The COVID-19 Leave requirements are applicable to all employers with fewer than 500 employees. The Response Act authorizes the Secretary of Labor to issue regulations “for good cause” to exclude employers of health care providers and emergency responders from the requirements of COVID-19 Leave and to exempt small businesses with fewer than 50 employees from the requirements of COVID-19 Leave “when the imposition of such requirements would jeopardize the viability of the business as a going concern.” Employers of health care providers or emergency responders have the right to opt out of the requirement to provide COVID-19 Leave if the Secretary of Labor does not exempt them.
Finally, an employer with fewer than 25 employees is not required to reinstate an employee to his or her position upon expiration of COVID-19 Leave if the position has been eliminated because of the economic consequences of the COVID-19 pandemic, the employer makes reasonable efforts to find an equivalent position with equivalent pay and benefits, but has been unsuccessful in doing so, and the employer makes reasonable efforts to notify the employee of any equivalent position that later becomes available for a period of one year.
Creation of Sick Leave Benefits
Second, the Response Act creates Emergency Paid Sick Leave (Sick Leave) that will apply between April 1, 2020, and December 31, 2020, to employers with 500 or fewer employers. The Secretary of Labor is directed to issue guidelines to assist employers in calculating the amount of sick time by April 1, 2020. The Secretary also has the authority “for good cause” to (1) exempt small businesses with fewer than 50 employees if payment of Sick Leave benefits would “jeopardize the viability of the business as a going concern,” and (2) exclude health care providers and emergency responders from the definition of “employers” under the Response Act. The Response Act permits employers of health care providers and emergency responders to opt out if the Secretary does not issue regulations excluding them.
Employers must provide Sick Leave to full- and part-time employees, regardless of how long they have worked for the employer, as follows:
Applies to Employees Unable to Work (Including Telework) Because They:
- Are in a federal, state or local quarantine order related to COVID-19
- Have been advised by a health care provider to self-quarantine due to COVID-19 concerns
- Are experiencing symptoms of COVID-19
- Are caring for someone who:is subject to a federal, state or local quarantine order related to COVID-19, or
- has been advised by a health care provider to self-quarantine due to COVID-19 concerns
- Are caring for the employee’s child if the child’s school or care has been closed or the child’s care provider is unavailable due to COVID-19 concerns, or
- 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
Amounts Vary by Full- or Part-Time:
- Full-time employees are entitled to 80 hours of pay.
- Part-time employees are entitled to the average number of hours the employee works over a two-week period.
º Payments to part-time employees who work variable schedules week-to-week will be based on a six-month average or, for employees who did not work the prior six-month period, based on the employee’s reasonable expectation of average hours upon hire.
Amounts Vary Based on Reason for Leave:
- Employees who are themselves sick and are quarantined are entitled to 100 percent of the regular rate of pay they would have earned for working normally-scheduled hours, up to $511 a day and $5,100 in the aggregate.
- Employees who are caring for another qualified person are entitled to two-thirds of the regular rate of pay they would have earned for working normally scheduled hours, up to $200 a day and $2,000 in the aggregate.
Amounts Under Multi-Employer Bargaining Agreements:
- An individual employer who is a signatory to a multi-employer bargaining agreement may, consistent with such agreement, fulfill sick-pay obligations by making contributions to a multi-employer fund, plan or program based on the number of hours worked by the employee for the individual employer.
- Employees seeking sick time benefits under the Response Act need not find a replacement to cover the missed hours.
- Employers may not require that employees use any other paid leave provided by the employers before using the Sick Leave required by the Response Act.
- Sick Leave does not roll over at the end of this year and is not payable on termination of employment.
- Employers must post a notice of rights under the Response Act.
- The Response Act provides for penalties under the Fair Labor Standards Act for non-compliance.
Tax Credits for Paid Sick and Paid Family and Medical Leave
The Response Act provides two separate employer tax credits for employers that provide paid COVID-19 Leave or paid Sick Leave after April 1, 2020. The tax credits offset the employer’s tax liability under FICA—the employer’s share of Social Security and Medicare. Subject to the limitations discussed below, the credits are 100 percent of the qualifying paid COVID-19 Leave and Sick Leave provided by the employer as required under the Response Act.
The paid Sick Leave credit is limited to:
- $200 per day for an employee taking Sick Leave to care for an individual who is subject to a quarantine or isolation order related to COVID-19, or who is caring for a son or daughter whose school or childcare provider has closed
- In all other cases, $511 per day (i.e., the employee is subject to quarantine or isolation, or the employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis)
- Ten days of paid Sick Leave per employee, and a further limitation on the days in subsequent quarters
The paid COVID-19 Leave credit is limited to $200 per day per employee and no more than $10,000 per individual.
Both credits are determined quarterly and refundable after applying certain other FICA credits. The paid Sick Leave credit is applied first. The credits may become available to employers within the next few days under authority provided to the Secretary of Treasury.
Self-employed individuals can also take advantage of the credits, but the credits are further limited to 67 percent of the individual’s daily self-employment income (using 260 working days).
Those employers with qualifying health plans may also apply the credit against incremental health plan costs caused by the Response Act. The Response Act provides general parameters on how to accomplish that allocation.
Employers as to which the Response Act applies must act fast to prepare to comply with the Response Act requirements for all covered employees working for them on April 1, 2020, and to take advantage of available tax credits.
If you have any questions regarding the Response Act and how it may it apply to your business, please contact Sean Monson at SMonson@parsonsbehle.com or Susan Motschiedler at SMotschiedler@parsonsbehle.com.
If you have questions regarding the tax credits of the Response Act, please contact Ross Keogh at RKeogh@parsonsbehle.com.