Families First Coronavirus Response Act Seminar Notes (March 19, 2020)
RLG Alert Call: March 19, 2020
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The Families First Coronavirus Response Act (FFCRA) is an economic stimulus plan aimed at addressing the impact of the COVID-19 outbreak on Americans and introducing paid sick leave and an expanded family and medical leave to the nation’s employers. This legislation will go into effect on April 2, 2020 and run through December 31, 2020.
This Act includes many provisions which apply to employers, such as paid sick leave for employees impacted by COVID-19 and those serving as caregivers for individuals with COVID-19. The Act also contains several provisions to increase funding for familiar benefit programs, like WIC and SNAP.
There are two provisions providing paid leave to employees forced to miss work because of the COVID-19 outbreak: an emergency expansion of the Family and Medical Leave Act (FMLA) and a new federal paid sick leave law.
Layoff v. Furlough
There have been a number of initial questions regarding the terms layoff, furlough and reductions-in-force. These first two terms can and are being used interchangeably. The difference between these terms are driven by what you, the employer, does with the employees, and may also be driven by your insurer. For unemployment purposes, an employee can collect unemployment benefits whether they are on furlough or on layoff.
There are differences in general interpretation of these definitions. For example, furlough is often seen as an alternative to layoff. When an employer furloughs its employees, it either requires them to work fewer hours or to take a certain set amount of unpaid time off – like working 4 out of 5 days in a week or taking a week off over the holidays. That’s not really what is happening here because we don’t have a set time frame … we literally have no idea when we will be back to work. Note: Employers must be careful when furloughing exempt employees so as not to jeopardize their exempt status under the Fair Labor Standards Act (FLSA). A furlough that encompasses a full workweek is one way to accomplish this, since the FLSA states that exempt employees do not have to be paid for any week in which they perform no work.
A layoff is a separation from payroll, where the employee remains or does not remain on the payroll (the latter being a permanent layoff). When on a temporary layoff, there is an indefinite amount of time that an employee will be off work, but he/she will remain on the “books” as an employee until they are called back. Here again they can collect unemployment benefits. When there is a permanent layoff – we are really looking at a situation where there is a reduction in force (RIF).
A RIF – or permanent layoff – occurs when a position is eliminated without the intention of replacing it and involves a permanent cut in headcount. A layoff may turn into a RIF should the business not recall the employee. When an employee experiences a RIF, they are no longer considered an employee.
In both furloughs and layoffs, the employee will remain in the system as if still employed by the company – essentially what we do when an employee is on an unpaid leave of absence. Such an action may help the company retain health coverage for their employees.
Employers should review their plan documents to see how their employees are treated from an eligibility perspective during a period of either reduced work or no active employment. Once the employer is familiar with the terms of their plan, if the employer wants to maintain benefit eligibility, they should also contact their legal counsel about whether a plan amendment is needed. Employers will also want to contact either their insurance carrier or stop loss carrier to find out what “words” or actions they will accept to allow an employer to remain on the company’s benefit plan while off work during this pandemic.
Expanded Family and Medical Leave Act
The new law also includes a temporary expansion of the FMLA to allow leave (up to 12 weeks) to be used for a qualifying need related to a public health emergency concerning COVID-19, as declared by federal, state, or local authorities. A “qualifying need” is limited to circumstances where the employee is unable to work or telework due to the need to care for a child under 18 if the child’s school or childcare is closed due to a COVID-19-related public health emergency.
The current employee threshold for FMLA coverage would change from only covering employers with 50 or more employees to instead covering those employers with fewer than 500 employees. Employees are eligible for the leave if they have worked for the employer for at least 30 calendar days. (This is much broader than the usual eligibility rules for existing forms of FMLA leave.) As a result, thousands of employers not previously subject to the FMLA may be required to provide job-protected leave to employees for a COVID-19-designated reason.
The Act includes language allowing the Secretary of Labor to exclude healthcare providers and emergency responders from the definition of employees who are allowed to take such leave, and to exempt small businesses with fewer than 50 employees if the required leave would jeopardize the viability of their business. We do not see any specific analysis as to how the 500 or less provision was determined. Employers should be cautious in attempting to avoid coverage because it will have the burden of establishing that these emergency rules do not apply to them. Any representations with inconsistent positions may be used to determine whether coverage applies or not.
The rules for when this amended FMLA leave is paid versus unpaid differ greatly from existing forms of FMLA leaves, all of which are unpaid. If an employee takes leave to care for a child due to a COVID-19-related school closure, the first 10 days of the leave may be unpaid. The employee may elect (but may not be required) to use accrued vacation or sick leave during this time. After this first 10 days, the employer must provide PAID leave of no less than two-thirds of the employee’s regular rate of pay (as that term is defined by the FLSA for purposes of calculating overtime compensation), not to exceed $200 per day and $10,000 aggregate.
An employee who uses this FMLA leave is entitled to reinstatement to the same or equivalent position UNLESS the employer has fewer than 25 employees, the position held by the employee at the time the leave started no longer exists due to economic conditions or other operating condition caused by the public health emergency, and the employer has tried to restore the employee to an equivalent position. If there is no position available, the employer must still make reasonable effort for one year to contact the employee if an equivalent position becomes available.
The expanded FMLA law takes effect “no later than” 15 days from the date of its enactment.
Emergency Paid Sick Leave Act
Under this new law, employers with fewer than 500 employees must provide employees with two weeks (10 days) of emergency paid sick leave benefits to be used for COVID-19-related absences. For full-time employees, this means 80 hours of paid sick leave. For part-time employees, this means the number of hours the employee works on average over a two-week period. There is no minimum tenure of employment in order to for an employee to be eligible for this paid sick leave benefit.
The full benefits must be available for immediate use and do not accrue over time based on hours worked. Importantly, an employer cannot require employees to exhaust other forms of paid leave before using this new Coronavirus paid leave. Additionally, the Coronavirus paid leave is in addition to any paid leave the employer already provides. It does not appear that an employer with an existing paid sick leave policy (e.g. in California) is excused in-whole or in-part from compliance with the new law.
An employee may use paid sick leave if the employee is unable to work for any of the following reasons:
- The employee is subject to a federal, state, or local quarantine or isolation order for Coronavirus;
- The employee is advised by a health care provider to self-quarantine due to Coronavirus concerns;
- The employee is experiencing symptoms of Coronavirus and seeking a medical diagnosis;
- The employee is caring for an individual who is under a quarantine or isolation order or has been advised to self-quarantine;
- The employee is caring for a child whose school or childcare has been closed due to Coronavirus;
- The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.
Employees using paid sick leave for purposes (1)-(3) above must be paid their “regular rate of pay” (as defined for purposes of calculating overtime compensation), which cannot be less than the minimum wage in the state or locality where the employee works.
Employees using leave for reasons (4)-(6) must be paid 2/3 of these amounts.
However, an employer’s obligation to provide paid sick leave is subject to the following “caps:”
- An employee using paid sick leave for reasons (1)-(3) above need not be paid more than $511 per day and/or $5,110 in the aggregate; and
- An employee using paid sick leave for reasons (4)-(6) above need not be paid more than $200 per day and/or $2,000 in the aggregate.
The Secretary of Labor can issue regulations to exempt health care providers, emergency responders, and employers with fewer than 50 employees from this paid sick leave law. There is no built-in exemption, however.
Employers are required to post a notice in the workplace of paid sick leave rights under the new law. The Secretary of Labor is supposed to publish this notice for employers to use within 7 days.
Failure to comply with the paid sick leave law will be deemed a failure to pay minimum wages under the FLSA and subject an employer to various penalties.
The employee’s ability to use paid sick leave for these purposes ceases upon the termination of the qualifying event. Paid leave provided under this law does not carry over year-to-year and any unused leave does not need to be paid out on termination of employment.
Payroll Tax Credits for Employers Providing the Paid Leave
The new law provides payroll tax credits for employers who provide paid sick leave or paid family leave to employees for COVID-19 purposes set forth in the law. Specifically, an employer is entitled to a payroll tax credit for each calendar quarter in an amount equal to 100% of the qualified paid sick leave wages paid by the employer in the quarter, and the amount of qualified family leave wages paid by the employer, not to exceed $200 per day and $10,000 aggregate per employee.
No Additional FMLA Time Created by the FFCRA
Though the Act amends the FMLA in several material respects, it does not expressly add additional job-protected leave time. Employees who take this leave will be eligible for the same amount of FMLA leave (12 weeks) as employees who take leave for other FMLA-covered reasons. Additionally, employers in states like California, with their own state-equivalents of the FMLA, face the potential of leave covered by the amended FMLA that does not exhaust leave under their state’s FMLA equivalent law, unless those state laws are also amended.
Emergency Unemployment Insurance Stabilization and Access Act of 2020
This section provides $1 billion in 2020 for emergency grants to states for activities related to unemployment insurance benefit processing and payment, under certain conditions.
Half of the resources are to be allocated to provide immediate funding to all states for administrative costs so long as they meet some basic requirements, including: (1) requiring employers to provide notification of the availability of unemployment compensation at the time of separation; (2) ensuring applications for unemployment compensation and assistance with the application process are accessible in at least two ways (in-person, by phone, or online); and (3) notifying applicants when their application is received and being processed, as well as providing information about how to ensure successful processing if the application cannot be processed.
The other half would be reserved for emergency grants to states which experience an increase of unemployment compensation claims of at least 10% in comparison to the same quarter in the prior calendar year. Those states would be eligible to receive an additional grant to assist with costs related to such an unemployment spike if they meet additional requirements, including: (1) expressing commitment to maintain and strengthen access to unemployment compensation; and (2) taking or planning to take steps to ease eligibility requirements and access (like waiving work search requirements and the waiting period). The Act will provide those states that meet these requirements with 100% federal funding to provide extended unemployment benefits, up to an additional 26 weeks after the initial 26 weeks (i.e. up to 52 weeks of benefits). Previously, states were required to pay 50% of extended unemployment benefits. This provision will also remain in effect until December 31, 2020.
Tax Credits for Paid Sick and Paid Family and Medical Leave
This section provides a series of refundable tax credits for employers who are required to provide the Emergency Paid Sick Leave and Emergency Paid Family and Medical Leave described above. These tax credits are allowed against the employer portion of Social Security taxes. While this limits application of the tax credit, employers will be reimbursed if their costs for qualified sick leave or qualified family leave wages exceed the taxes they would owe.
Specifically, employers are entitled to a refundable tax credit equal to 100% of the qualified sick leave wages paid by employers for each calendar quarter in adherence with the Emergency Paid Sick Leave Act. The qualified sick leave wages are capped at $511 per day ($200 per day if the leave is for caring for a family member or child) for up to 10 days per employee in each calendar quarter.
Similarly, employers are entitled to a refundable tax credit equal to 100% of the qualified family leave wages paid by employers for each calendar quarter in accordance with the Emergency Family and Medical Leave Expansion Act. The qualified family leave wages are capped at $200 per day for each individual up to $10,000 total per calendar quarter. Only those employers who are required to offer Emergency FMLA and Emergency Paid Sick Leave may receive these credits.
Coverage for Testing For COVID-19
This section requires private health plans (including insured, self-insured, and grandfathered) to provide coverage for COVID-19 diagnostic testing and related services to employees and their covered dependents, without cost-sharing (like deductibles, copayments, and coinsurance) from enactment of the Act through the end of the national emergency period.
Covered services and related cost waivers apply to diagnostic testing, healthcare provider services (in-person and telehealth), and facility costs (physician office, urgent care center, and emergency room) to the extent the costs are related to evaluating the need for, or furnishing, COVID-19 diagnosis and treatment. In addition to coverage and cost waiver provisions, plans shall not require prior authorization or similar medical management requirements as a precondition of COVID-19 testing or services.
This information is provided for general use only. It is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact an attorney for legal advice.
Copyright © 2020 Roe Law Group, PLLC, All rights reserved.
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