President Trump has signed the Families First Coronavirus Response Act, which provides for a limited period of paid sick leave and expands the Family and Medical Leave Act to provide an extended period of unpaid or partially paid leave for a public health emergency (‘E-FMLA’). This Alert discusses the provisions of the Bill so employers can take quick action given the effective date.
Paid leave provision
The Emergency Paid Sick Leave Act (the paid leave provision) requires private employers who employ fewer than 500 employees (and government employers) to provide paid sick time to employees to the extent that the employee is unable to work (or telework) because:
EXCEPTION: Employers of health care providers or emergency responders may elect not to provide this leave to those employees.
Employers may require employees to follow reasonable notice procedures to continue to receive Paid Sick Leave after the first workday (or part of that day) an employee receives paid sick time.
How much leave will qualified employees be entitled to?
Paid sick time must be made available to all employees, no matter how long their tenure. Full-time employees are entitled to 80 hours of paid sick leave, while paid sick leave for part-timers is equal to the average number of hours the employee works over a two-week period. There is no carryover from year to year for this paid sick time, and once the employee returns to work the employer is not required to provide any further paid sick leave as required by the Act. Employers cannot require an employee to find a replacement before allowing the employee to take this paid sick time.
Pay during leave
If time off is taken for self-care, employees must be compensated at the higher of the employee’s regular rate of pay, federal minimum wage, or the local minimum wage. If time off is taken to care for a sick family member or a child who is not in school, employees must be compensated at two-thirds of their regular rate of pay.
There is a cap on the amount an employer is required to pay to employees receiving Paid Sick Leave. These caps differ depending on whether the employee is receiving full wages or two-thirds wages. There is a cap of USD 511 per day and an aggregate limit of USD 5,110 for those receiving full wages (categories 1, 2, and 3 above) For categories 4, 5, and 6 (where the employee would be paid at a two-thirds rate), there is a USD 200 cap per day, with USD 2,000 aggregate.
Employers will be required to post an approved notice regarding the Act once the Secretary of Labor makes it available.
Employee protections and employer penalties for non- compliance with the paid leave provisions
The Act prohibits employers from discriminating against an employee who takes this emergency paid sick leave and has filed any complaint, instituted or caused to be instituted any proceeding under the Act, or has testified or is about to testify in any such proceeding. Employers who fail to provide this paid sick time or who terminate an employee for discriminatory reasons as set forth above will be considered in violation of the Fair Labor Standards Act (FLSA) and subject to the FLSA’s penalties, including payment of back pay, liquidated damages and legal advisors’ fees.
Available tax credits
To ease some of the financial burden of compliance, the Act provides for a limited refundable employment tax credit equal to the amount that an employer pays to an employee under this provision, i.e., up to USD 511 for any day of absence for the reasons numbered 1, 2 or 3 above, or USD 200 for any day of absence for the reasons numbered 4, 5 or 6, above, to a maximum of ten days per employee for the year. Those amounts are increased by the amount of non-taxable health insurance premiums paid by the employer for employees who are out on Emergency Paid Sick Leave, for the days of leave, and further increased by the amount of Medicare tax owed by the employer with respect to the Emergency Paid Sick Time payments (generally 1.45%). The total credit amount is then also included in the employer’s income for income tax purposes.
Expansion of FMLA leave for public health emergencies
In addition to the Emergency Paid Sick Time Act, the Families First Coronavirus Response Act also contains an Emergency Family and Medical Leave Expansion Act (the ‘E-FMLA’). The E-FMLA expands the protections of the Family and Medical Leave Act to add Public Health Emergency Leave. These amendments are effective through 31 December 2020 and provide for leave due to a public health emergency qualifying need (i.e. coronavirus).
Qualifying reasons for leave
Emergency FMLA leave is available under these amendments if an employee is unable to work (or telework) due to a need for leave to care for the employee’s son or daughter who is under 18 because the child’s school or place of care has been closed or his or her childcare provider is unavailable due to a public health emergency.
An employee is eligible for E-FMLA if the employee seeking leave has been employed for at least 30 calendar days. Employers of health care provider or emergency responder employees may exempt those employees from coverage.
All employers with fewer than 500 employees will be required to provide this leave.
Pay during leave
The Act provides for a combination of unpaid and paid leave. The first ten days of E-FMLA may be unpaid, but an employee may elect (and an employer may require an employee) to substitute any accrued vacation, personal leave, or medical or sick leave for unpaid leave. For many employees, that leave period will be paid as a result of the Emergency Paid Sick Time Act. After ten days, employers must provide partial paid leave for each additional day of leave at an amount that is not less than two-thirds of an employee’s regular rate of pay for the number of hours the employee would otherwise be scheduled to work. For employees who have weekly working hours that fluctuate, the employer is allowed to take an average over a six-month period.
There are also caps in place on the amount an employer is required to pay to employees receiving E-FMLA. Paid E-FMLA may not exceed USD 200 per day and USD 10,000 in the aggregate.
FMLA’s standard job restoration requirements will apply to employers with 25 or more employees. For employers who employ fewer than 25 employees, job restoration is not required if all the following conditions are met:
Exemptions and special treatment
The Secretary of Labor has the authority to exempt certain employers, including health care providers, emergency responders, and businesses with fewer than 50 employees. Exemptions will be granted only if the leave requirement would jeopardise the business as an ongoing concern. Whether the Secretary of Labor will grant these exemptions is unknown. Importantly, employers with fewer than 50 employees cannot be sued for violations of the E-FMLA provisions. A signatory to a multi-employer collective bargaining agreement may fulfill its obligations by making contributions to a multi-employer fund, plan or programme equal to the paid leave to which its employees are entitled under these emergency leave provisions while working under the multi-employer CBA, if the fund, plan, or programme enables employees to secure pay based on the hours they have worked under the multi-employer CBA when taking paid leave under the amendments.
As with the Emergency Paid Sick Time Act, employers may claim a limited refundable employment tax credit equal to payments made to employees for E-FMLA leave, subject to a maximum per employee of USD 200 for each day of qualifying leave up to USD 10,000 per employee for the year. Also like the credit for Emergency Paid Sick Time benefits, those amounts are increased by the amount of nontaxable health insurance premiums paid by the employer for employees who are out on E-FMLA Leave, for the days of leave, and further increased by the amount of Medicare tax owed by the employer with respect to the E-FMLA leave payments. The employer’s total available credit amount is also added to its income for the year. Unlike the credit for Paid Sick Time, however, there is already a general business credit available to certain employers who provide paid FMLA leave, and the new E-FMLA credit is not allowed with respect to any wages for which the general business credit is allowed (that is, ‘double dipping’ is not permitted).
Effective and sunset dates
These amendments take effect not later than 15 days after the date the law is enacted and sunset at the end of the year.