COVID-19 Ushers in Mandatory Paid Leave – What Employers Need to Know
Stites & Harbison Client Alert, March 20, 2020
On March 18, Congress passed the Families First Coronavirus Response Act. This legislation addresses emergency workforce issues brought about by COVID-19.
The law imposes two new requirements upon private employers with 500 or fewer employees and certain public employers: temporary and narrow expansion of traditional federal Family and Medical Leave and mandatory paid sick leave.
Employees of healthcare providers and emergency responders are excluded from these requirements. Additionally, employers with less than 50 employees may be exempt if the leave requirements would jeopardize the viability of the business as a going concern.
Temporary FMLA expansion (E-FMLA)
The first component of the relief package requires covered employers to provide paid leave to a narrow group of employees: those who cannot work or telework because they must care for their underage child due to COVID-19 school closings or childcare provider unavailability.
The new law constricts and expands core concepts of the FMLA:
- E-FMLA applies to employers who weren’t previously covered by the FMLA because they have less than 50 employees. Instead, E-FMLA applies to all employers with 500 or fewer employees. (Note: Congress may be considering similar legislation for larger employers).
- E-FMLA eliminates standard employee eligibility requirements. Employees are eligible for E-FMLA so long as they have been employed by a covered employer for at least 30 calendar days.
- Traditional FMLA covers a broad array of serious health conditions and caretaker responsibilities that may qualify an employee for leave. E-FMLA is limited to government-declared public health emergencies related to COVID-19 and available only to employees who need care for their underage children as a result of COVID-19 school and childcare closures.
Unlike the FMLA, E-FMLA imposes a paid leave requirement. The 10 days of E-FMLA leave are unpaid; however, employees may substitute any accrued vacation leave, personal leave, or medical or sick leave already provided by the employer or required by state law during that period.
Beginning on day 11, employees must receive no less than two-thirds of their regular rate of pay for the number of hours they are normally scheduled to work. E-FMLA paid leave is capped at $200 per day and $10,000 in the aggregate. The formula for calculating the E-FMLA rate varies for employees who work part-time or have fluctuating schedules.
Employees taking E-FMLA leave are generally entitled to the same restoration rights provided by the FMLA. They must be restored to the same position they held when the leave began, or to an equivalent position with equivalent employment benefits, pay, and other terms and conditions of employment.
Employers with less than 25 employees may be excluded from the E-FMLA restoration requirements by meeting strict conditions.
Emergency paid sick leave
The second component of the relief package requires covered employers to provide paid sick leave to all employees, regardless of their tenure, who are unable to work or telework for any of the following six reasons:
- The employee is subject to a federal, state, or local quarantine isolation order related to COVID-19;
- A health care provider advised the employee to self-quarantine due to COVID-19 related concerns;
- The employee is experiencing symptoms of COVID-19 and seeks a medical diagnosis;
- The employee is caring for an individual who is subject to an order described in subparagraph (1) or has been advised as described in subparagraph (2);
- The employee is caring for their child because the child’s school or place of care has been closed or the childcare provider is unavailable due to COVID-19; and
- The employee is experiencing any other substantially similar conditions specified by the Secretary of Health and Human Services, in consultation with the Secretary of the Treasury and the Secretary of Labor.
Full-time employees are entitled to 80 hours of paid sick leave, and part-time employees are entitled the equivalent of their average hours worked over two weeks. Notably, employers cannot require their employees to exhaust any other available paid leave before utilizing emergency paid sick leave.
The formula for calculating the sick leave rate varies based on the reason for leave. Employees who are subject to a quarantine or isolation order, advised by a health care provider to self-quarantine, or experience symptoms of COVID-19 and seek a medical diagnosis must be paid at their regular rate, subject to caps of $511 per day and $5,110 in the aggregate.
Sick leave is otherwise capped at $200 per day and $2,000 in the aggregate for other qualifying reasons.
The same restoration provisions applicable to the E-FMLA apply to the paid sick leave requirements.
Notably, employees who are home with a child because the child’s school or place of care is closed may be eligible for both types of leave, but only for a total of twelve weeks.
Private employers can take immediate advantage of payroll tax offsets and refunds designed to fully reimburse them, dollar-for-dollar, for the cost of providing coronavirus-related leave under the Act. Covered private employers may retain an amount of payroll taxes equal to the amount of qualifying sick and child care leave that they pay pursuant to the Act, rather than deposit them with the IRS. The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes.
If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released soon. Equivalent child care leave and sick leave credit amounts are available to self-employed individuals; these credits will be claimed on their income tax return and will reduce estimated tax payments.
Information from the IRS related to the tax relief provisions can be found here.
Employers should prepare for the changes by determining whether they are covered and identifying employees who may qualify for paid leave. The Department of Labor issued two fact sheets and a question and answer document to address critical questions, available here. Formal agency regulations that elucidate further the Act’s requirements are forthcoming.
In the interim, the Department of Labor is focusing its efforts on compliance assistance. The Department will also observe a short period of non-enforcement that enables employers to adjust and fulfill the Act’s requirements without penalty.
The Act becomes effective on April 1, 2020 and sunsets on Dec. 31, 2020.