Employment Law Alert: The Families First Coronavirus Response Act

The Families First Coronavirus Response Act was enacted into law on March 18, 2020. This will summarize the practical effect of the law on employers in business and industry (excluding the health care industry) with fewer than 500 employees.  The law provides special categories of paid leave for up to 12 weeks “because of a qualifying need related to a public health emergency” [e.g., Covid-19 pandemic].

Breaking Down the Benefits: What Can Employees Expect?

For the first two weeks of leave (10 work days), a “qualifying need” arises when an employee is unable to work (in office or remotely) because he or she is (1) an individual advised or required to quarantine or self-isolate, (2) experiencing coronavirus symptoms and seeking a medical diagnosis, (3) caring for an individual in categories 1 or 2 above, or (4) caring for a child whose school or child care provided has been closed due to coronavirus precautions.  For the first two weeks of the paid leave, the rate of pay is the employee’s normal wage for categories 1 and 2, capped at $511 per day (so, the benefit caps out at an employee with an annual salary of about $132,860, with 10-day benefit capped at $5,110), and two-thirds of the employee’s normal wage/salary for categories 3 and 4, capped at $200 per day (so, the benefit maxes out at an employee with an annual salary of about $78,000, with the 10-day benefit limited to $2,000).  After weeks 1-2, Employees falling into category 4 above are also eligible for up to an additional ten weeks of paid leave (essentially expanded FMLA) at the rate of 2/3rds of pay capped at $200/day (so, up to $10,000 benefit per full-time employee).  

Financing the Benefits: How Do Employers Cover Costs?

You are reasonably asking how employers can afford this?  The solution in the Families First Coronavirus Response Act is to provide a refundable tax credit which is expected to fully offset the amount of Covid-19 paid leave expended.  Note that there is a cash flow/timing issue for employers, because the tax credit is claimed on the business’ next quarterly payroll tax return, resulting in a mismatch between actual payroll outlays and corresponding tax benefits.  This leave is provided in addition to any other leave that may be available under company policies. Employer’s cannot require workers to use other leave before exercising the FFCRA-leave.  At least with Covid-sick leave, employers will realize a reimbursement, unlike other forms of PTO.  We expect regulations to be issued by the Treasury Department as to how the tax credits will work.  The paid sick leave is exempt from Social Security tax.  We hope the tax credits to employers will be grossed-up to also include employer’s share of group health benefits for employees taking the leave.

Unpacking The Families First Coronavirus Response Act

• As with other uses of FMLA, the law includes employee job protections by providing same or equivalent position on an employee’s return from leave. Employers with less than 50 employees may apply for an exemption to the expanded FLMA benefit, but until we receive further guidance from the Treasury Department, small employers should assume the new law applies to them.
• Somewhat curiously, if an employee is actually sick with Covid-19, they would get the max benefit for weeks 1-2, but none of the expanded FMLA benefit for weeks 3-12 since that only covers employees caring for at-home children. Covid-positive employees can use other available PTO (if they have it) and would be eligible to take unpaid FMLA like any other medical issue.  Employers that offer disability coverages to employees should contact their insurance providers to investigate Covid-related coverage availability, waiting periods, etc.
• The leave does not address businesses that are shut down or otherwise affected due to business closure or shelter-in-place orders. Employees that are forced to stay at home during such orders, who do not have a telework option, and who do not otherwise fall into categories 1-4 above would seem NOT to qualify for the paid Covid-leave.  As things change on a day-to-day basis, we will look for further legislation to address this.  Likewise, the Families First Coronavirus Response Act paid leave does not necessarily apply to Covid-related lay-offs.  Employees who are laid off due to Covid-related business slowdowns/shutdowns are presumably eligible for unemployment compensation benefits (and those UI benefits have been fortified by separate Covid-related legislation).
• Finally, the Families First Coronavirus Response Act is scheduled to expire on December 31, 2020. Here’s hoping the pandemic has subsided by then!

Key Takeaways and Next Steps

It goes without saying that things are rapidly evolving and aspects of this summary may indeed be obsolete by the time they are read.  As I write this, Congress is working on a new coronavirus relief bill to include a massive economic-stimulus package and tax law changes. States will likely also enact laws that have additional impacts on employers. This is only a summary, not a full recitation of the law. Employers should consult with their legal counsel before revising or implementing Covid-19 adjustments to their PTO and leave policies. Bosshard | Parke Ltd. is committed to responding to the needs of its clients and community during this emergency.  Please contact Bosshard | Parke Ltd. for further information.