The Families First Coronavirus Response Act Analysis (H.R. 6201)

The Families First Coronavirus Response Act H.R. 6201 (the “Act”) was signed into law on March 18, 2020. The Act, among other things, requires certain employers to provide public health emergency leave and paid sick leave, and provides tax credits for those employers. This outline summarizes key provisions of the Act relevant to employers.

Public Health Emergency Leave

The Act expands the Family and Medical Leave Act’s requirement that eligible employees are entitled to 12 weeks of job-protected paid leave.

Who is a Covered Employer?

Employers with fewer than 500 employees and covered government employers are covered by the Act.

Small businesses with fewer than 50 employees may be eligible for an exemption. Under the Act, the Secretary of Labor has the authority to exempt small businesses with fewer than 50 employees if requiring the employer to provide public health emergency leave would jeopardize the employer’s viability.

We reached the Department of Labor via telephone and were informed that the Secretary of Labor has not yet confirmed whether he will apply such exemption, and to date the Department has not issued any regulations or guidance regarding how such exemption will be applied. The Department of Labor Employment and Training Administration website (https://www.dol.gov/agencies/eta/) will provide updates as they become available in the “News” section of the homepage.

What Employees are Eligible?

Eligible employees must have been employed for at least 30 calendar days by their employer and require leave because they are unable to work (or telework) because they must care for their minor child (under 18) whose school or place of care has closed, or whose child care provider is unavailable, due to a coronavirus emergency declared by a Federal, State, or local authority.

Employers of healthcare providers or emergency responders may exclude these employees from eligibility for paid leave under the Act. In addition, the Secretary of Labor may exclude certain health care providers and emergency responders. The Act does not define the terms “healthcare provider” and “emergency responder.”

Is the Leave Paid?

Yes, after the first ten days, paid leave (capped at $200 per day or $10,000 in aggregate) equal to at least two-thirds of the employee’s regular rate of pay for the number of hours that the employee would otherwise have normally been scheduled to work is required. The first ten days of the public health emergency leave may be unpaid; however, the employee may voluntarily elect to use any accrued vacation, personal, medical, or sick leave during the first ten days (but employers may not require the employee to do so). The remaining leave must be paid subject to the caps and limits described below.

If an employee’s schedule varies from week to week, employers must use the average number of hours the employee was scheduled to work per day over the past six months, including hours for which the employee took leave of any kind. If the employee did not work over this six-month period, use the average number of hours per day that the employee reasonably expected at the time of hiring.

Does the Employee Have to Provide Notice to Take Leave Under the Act?

Yes, in cases where the necessity for leave is foreseeable, employees shall provide notice of leave as soon as is practicable.

Is the Employee’s Job Protected While on Leave?

Yes, an employee who takes public health emergency leave is entitled to be restored to the position the employee held when the leave commenced, or to an equivalent position with an exception for employers with less than 25 employees in certain circumstances as described below.

Job protection is not required for employers with less than 25 employees if all the following conditions are met:

(1) the position held by the employee when leave commenced no longer exists due to economic conditions or other changes in operating conditions that affect employment and were caused by a coronavirus emergency declared by a Federal, State, or local authority during the employee’s leave;

(2) the employer made reasonable efforts to restore the employee to an equivalent position; and

(3) the employer made reasonable efforts during the “contact period” to contact the employee if an equivalent position became available. The “contact period” lasts for one year following the date on which the qualifying need for the leave ends or the date that is 12 weeks after the leave began, whichever is earlier.

What Impact Is There on Collective Bargaining Agreements?

Employers with employees subject to multiemployer collective bargaining agreements may, if consistent with its bargaining obligations and collective bargaining agreement, fulfill their obligations under the Act by making contributions to a multiemployer fund, plan, or program based on the paid leave each of its employees is entitled to while working under the multiemployer collective bargaining agreement, provided that the fund, plan, or program enables employees to secure pay from such fund, plan, or program based on hours they have worked under the multiemployer collective bargaining agreement for paid leave taken under the Act.

What is the Effective Date of the Act?

This portion of the Act relating to public health emergency leave shall take effect on or before April 2, 2020 and expire on December 31, 2020.

Emergency Paid Sick Leave

The Act requires employers to provide their employees with up to two (2) weeks of paid sick leave if their employees are unable to work (or telework) for any of the following reasons:

The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;

The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19;

The employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis;

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);

The employee is caring for their child whose school or place of care has closed, or whose child care provider is unavailable, due to COVID-19 precautions; or

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.

What Employers Are Required to Comply?

This requirement applies only to employers with fewer than 500 employees and covered government and non-private entity employers. Small businesses with fewer than 50 employees may be eligible for an exemption. Under the Act, the Secretary of Labor has the authority to exempt small businesses with fewer than 50 employees if requiring the employer to provide public health emergency leave would jeopardize the employer’s viability of the business as a going concern. Additionally, the Secretary of Labor has the authority to exclude certain health care providers and emergency responders by allowing the employer of such health care providers and emergency responders opt out.

We reached the Department of Labor via telephone and were informed that the Secretary of Labor has not yet confirmed whether he will apply such exemption, and to date the Department has not issued any regulations or guidance regarding how such exemption will be applied. The Department of Labor Employment and Training Administration website (https://www.dol.gov/agencies/eta/) will provide updates as they become available in the “News” section of the homepage.

What Employees are Eligible?

An employee is eligible regardless of how long that employee has worked for the employer. Employers may elect to exclude an employee who is a health care provider or emergency responder.

Employers of healthcare providers or emergency responders may exclude these employees from eligibility for paid leave under the Act. In addition, as noted above, the Secretary of Labor may exclude certain health care providers and emergency responders. The Act does not define the terms “healthcare provider” and “emergency responder.”

How Much Paid Sick Leave is Required?

Full-time employees are entitled to 80 hours of paid sick leave.

Part-time employees are entitled to paid sick leave equal to the number of hours that employee works, on average, over a two-week period. For an employee whose schedule varies from week to week, use the average number of hours the employee was scheduled to work per day over the past six months, including hours for which the employee took leave of any kind. If the employee did not work over this six-month period, use the average number of hours per day that the employee reasonably expected at the time of hiring. Paid sick leave will not carry over from one year to the next.

The amount that must be paid by the employer varies depending on why the employee is taking the paid sick leave.

If the employee must take paid sick leave due to any of the following reasons that directly impact the employee on an individual level: the employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19; or the employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19; or the employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis.

Then the paid sick leave rate shall be the greater of the following: the employee’s regular rate of pay; the minimum wage rate in effect under the Fair Labor Standards Act; or the minimum wage rate in effect in the applicable State or locality,

Paid sick leave in these circumstances is capped at $511 per day or $5,110 in the aggregate.

If the employee must take paid sick leave due to any of the following reasons that require the employee to care for others who are impacted by COVID-19 quarantines, isolation orders, or school/childcare closures: the employee is caring for an individual who is subject to Federal, State, or local quarantine or isolation order related to COVID-19 or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or the employee is caring for their child whose school or place of care has closed, or whose childcare provider is unavailable, due to COVID-19 precautions; or 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, then the paid sick leave rate shall be two-thirds (2/3) of the greater of the following: the employee’s regular rate of pay; or the minimum wage rate in effect under the Fair Labor Standards Act; or the minimum wage rate in effect in the applicable State or locality. Paid sick leave in these circumstances is capped at $200 per day or $2,000 in the aggregate. The Act requires the Secretary of Labor to issue guidelines to assist employers in calculating the amount of paid sick time.

Does the Paid Sick Leave under the Act Carryover to the Next Year?

No, paid sick time under the Act does not carryover from one year to the next.

What If the Employer Has an Existing Paid Sick Leave Policy?

The paid sick leave under the Act cannot be construed to diminish any other paid sick leave right or benefit currently granted under applicable Federal, State, or local law, collective bargaining agreement, or existing employer policy. The employer may not require the employee to use other paid sick leave before using the paid sick leave provided for in the Act.

The employer also may not require the employee to search for or find a replacement employee to cover the hours during which the employee is using paid sick leave. However, the employer may require the employee to follow reasonable notice procedures in order to continue receiving paid sick leave.

Are Employers Required to Cash-Out Unused Paid Sick Leave under the Act at Separation of Employment?

No. The Act expressly states that it shall not be construed to require financial or other reimbursement upon termination, resignation, retirement, or other separation from the employer for paid sick leave granted under the Act that has not been used by the employee.

What Prohibitions Are Included in the Act?

Employers are prohibited from retaliating against employees. It shall be unlawful for the employer to discharge, discipline, or otherwise discriminate against any employee who takes leave in accordance with the Act, or who files any complaint or institutes or causes to be instituted any proceeding under or related to the Act, or who testifies or is about to testify in any such proceeding.

Any employer who violates the paid sick leave requirements of the Act or discharges, disciplines, or discriminates against an employee in violation of the Act will be found to have violated the Fair Labor Standards Act and will be subject to penalties.

What Notice Must Employers Provide?

Each employer shall post and keep posted, in conspicuous places where notices to employees are customarily posted, a notice of the requirements described in the Act, to be prepared or approved by the Secretary of Labor. The Act requires the Secretary of Labor, within seven (7) days of enactment, to make publicly available a model notice that meets the necessary requirements.

What Impact Is There on Collective Bargaining Agreements?

Employers with employees subject to multiemployer collective bargaining agreements may, if consistent with its bargaining obligations and collective bargaining agreement, fulfill their obligations under the Act by making contributions to a multiemployer fund, plan, or program based on the paid sick time each of its employees is entitled to while working under the multiemployer collective bargaining agreement, provided that the fund, plan, or program enables employees to secure pay from such fund, plan, or program based on hours they have worked under the multiemployer collective bargaining agreement for paid leave taken under the Act.

What is the Effective Date of the Act?

The paid sick leave requirements under the Act shall take effect on or before April 2, 2020 and expire on December 31, 2020.

Tax Credits for Public Health Emergency Leave and Paid Sick Leave

Refundable quarterly tax credits are provided for in the Act to use against the employer’s quarterly payroll tax liability subject to the caps based on the reason for the leave and the maximum amount of leave allowed under the specific circumstances. Employers are permitted to receive up to 100% of the paid qualified paid sick leave wages and qualified public health emergency leave wages in tax credits. The Treasury Department is expected to release regulations on the tax credits.

The tax credit is increased to cover a portion of the employer’s qualified health-plan expense as are properly allocable to the qualified sick leave wages or qualified family leave wage for which the credit was allowed. Subject to certain limitations, excess credits over the employment tax liabilities will be refunded. For purposes of chapter 1 of the Internal Revenue Code, the gross income of the employer shall be increased by the amount of the tax credit.

Any wages taken into account in determining the credit allowed shall not be taken into account for purposes of determining the credit allowed under section 45S of the Code. The beginning date of the tax credits will be designated by the Secretary of Treasury and must be a date during the 15-day period beginning on the date of the enactment of the Act. The ending date of the tax credits is December 31, 2020. The Act has relief for self-employed individuals that are subject to different rules.