Paid Leave and Coronavirus — Part VIII: Families First Act Debrief Following Senate Passage of Economic Relief Bill

Seyfarth Synopsis: The Families First Coronavirus Response Act (“FFCRA” or the “Act”) continues to evolve as we march closer to the Act’s April 1, 2020 effective date. Most recently, the Senate passed H.R. 748, its much-publicized $2 trillion economic relief bill known as the “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES Act,” by a 96-0 vote late yesterday evening.

In addition, and as we previously reported, earlier this week the Department of Labor (“DOL”) released a set of FAQs on the Act and a corresponding model notice. Further, on March 24, the DOL announced in a memorandum titled “Temporary Non-Enforcement Period Applicable to the Families First Coronavirus Response Act (FFCRA)” that it “will not bring enforcement actions against any public or private employer for violations of the Act occurring within 30 days of the enactment of the FFCRA, i.e., March 18 through April 17, 2020, provided that the employer has made reasonable, good faith efforts to comply with the Act.”[1]

As the country awaits the U.S. House of Representatives' vote on the CARES Act, which is expected as early as tomorrow, it makes sense to take a look at where the FFCRA currently stands on the topics of (A) paid sick time (“PST”), (B) paid family and medical leave (“PFML”), (C) tax credits for PFML and PST, and (d) medical plan components. Our summary of each topic follows.

Paid Sick Time and Paid Family and Medical Leave

The DOL clarified that the FFCRA’s paid leave provisions will take effect on April 1, 2020, and apply to leave taken between April 1 and December 31, 2020. The FFCRA’s new PST and PFML mandates are not applicable to private employers that employ 500 or more employees.[2]  

Here are highlights of the FFCRA’s PST and PFML mandates:

PST Mandate

Enforcement of PST and PFML Mandates

The Act’s PFML mandates will be enforced under the existing mechanisms of the federal FMLA. These include enforcement by the Department of Labor and through a private cause of action in court, with monetary and liquidated damages, depending on the underlying facts, with jury trials. As discussed above, in terms of PFML, there is an exemption from the private cause of action if an employer has less than 50 employees.

Similarly, the PST mandate is enforced under the mechanisms of the Fair Labor Standards Act, which also includes enforcement by the DOL and through a private cause of action in court, with monetary and liquidated damages depending on the underlying facts, with jury trials.

• Effective Date and Sunset Date: Effective April 1, 2020. Sunsets on December 31, 2020.
• Is there Preemption of State or Local Paid Sick Time Laws: No.[4]
• Who is eligible: “Employee” generally means any individual employed by an employer.

• Covered Employer: A private employer will be covered if it employs fewer than 500 employees.
• DOL FAQs: The DOL’s FAQs clarify that an employer has fewer than 500 employees if, when an employee’s leave is to be taken, it employs fewer than 500 full-time and part-time employees (excluding independent contractors) within the United States, including those employed in any Territory or possession of the United States. Despite open questions remaining, the FAQs provide additional information on which employees an employer should count in determining if it reaches this threshold and how multiple businesses should assess measure whether or not to combine their workforces for FFCRA coverage purposes.
• Small Employers: The DOL through good cause rule making can exempt employers of less than 50 employees from the paid sick time standards related to only the reason for use below dealing with caring for a son or daughter whose school or place of care has been closed due to COVID-19. We expect to receive further details on the small business exemption in forthcoming DOL regulations.
• Is there a CBA Exemption: No; however, there are special rules for multiemployer plans that appear to give employers subject to these plans more compliance flexibility than is provided to other employers.

• Amount of PST + Immediate Use: (a) Full-Time: 80 hours; (b) Part-Time: Amount is prorated based on number of hours that such employee works, on average, over a 2-week period. PST is available for immediate use regardless of length of employment.
• DOL FAQs: The DOL FAQs on the FFCRA provide some guidance and examples on counting hours worked for part-time employees.
• Is Year-End Carryover Required: No.
• Covered Reasons for Use:
• (1) they are subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
• (2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
• (3) The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
• (4) The employee is caring for an individual [note - need not be a family member] who is subject to an order as described in reason for use (1) or has been advised as described in reason for use (2) (as described above);
• (5) The employee is caring for a child of such employee if the school or place of care of the child has been closed, or the child care provider of such child is unavailable, due to COVID-19 precautions;
• (6) 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.
• No Definition of Family Member: The Act does not contain a definition of “family member” for PST or PFML purposes. However, the covered reasons for using PST now cover care for “an individual,” which is notably broader than family members.
• Payment of Sick Time:
• Percentage of Pay:
• Covered Absences Nos. 1 through 3 Above: 100% of employee’s regular rate of pay or applicable minimum wage, whichever is greater.
• Covered Absences Nos. 4 through 6 Above: Can be paid at 2/3 of employee’s rate of pay.
• Caps on Amount of Pay:
• Covered Absences Nos. 1 through 3 Above: $511 per day and $5,110 in the aggregate.
• Covered Absences Nos. 4 through 6 Above: $200 per day and $2,000 in the aggregate.
• Relation to Existing Employer-Provided Paid Leave: The Act states that (a) An employee may first use paid sick time under the Act for covered reasons before using employer-provided paid leave; (b) An employer may not require an employee to use other paid leave provided by the employer to the employee before the employee uses sick time under the Act.
• Replacements: Employer cannot require employee to search for or find a replacement to cover PST absence.
• Is Payout Upon Separation Required: No.
• Posting Requirement: Employers must display a model notice in a conspicuous place in the workplace. Yesterday, March 25, 2020, the DOL issued the anticipated mandatory notice for covered employers to use in satisfying this posting obligation.
• DOL FAQs: In addition to releasing the mandatory notice/poster, the DOL also issued FAQs for employers about the posting requirements for this notice.  In this FAQ, the DOL clarified that each FFCRA-covered employer must post this notice in a conspicuous place on its premises.  An employer may satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website.
• Special Rule for Healthcare Providers and Emergency Responders: As noted below for PFML, the Act states that an employer of an employee who is a health care provider or an emergency responder may elect to exclude such employee from receiving paid sick time under the Act.

PFML Mandate – Note that the below changes to the existing federal FMLA for employers with less than 500 employees would only apply to FMLA absences related to a new qualifying event involving “public health emergency leave,” as described below.

• Effective Date and Sunset Date: Effective April 1, 2020. Sunsets on December 31, 2020.
• New Covered Absence Under FMLA: “Public health emergency leave” for PFML absences covers the following: Instances where the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.[5]
• Who is Eligible: An employee who has worked for a covered employer for at least 30 calendar days.
• Note - Standard FMLA Eligibility Criteria: FMLA’s general “employee” eligibility standards involving length of employment, hours worked, and proper worksite do not apply to when an employee is absent for “public health emergency leave.”
• Note - Rehires: The CARES Act, if signed into law in its current form, would add a provision on PFML eligibility for rehires. Specifically, the provision states that an employee will be considered to have been “employed for at least 30 calendar days” if the employee (a) was laid off by that employer not earlier than March 1, 2020, (b) had worked for the employer for not less than 30 of the last 60 calendar days prior to the employee’s layoff, and (c) was rehired by the employer.
• Covered Employer: A private employer will be covered if it employs fewer than 500 employees. This replaces the general FMLA employer threshold of 50 or more employees for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year.
• DOL FAQs: The DOL’s FAQs on determining employer size mentioned in the above PST summary apply in the PFML context as well.
• Small Employers:
• Potential Exemption Through Rulemaking: The DOL through good cause rule making can exempt employers of less than 50 employees from the paid “public health emergency leave” requirements when the imposition of such requirements would jeopardize the viability of the business as a going concern. We expect to receive further details on the small business exemption in forthcoming DOL regulations.
• Ability to Avoid Private Cause of Action Under FMLA: An employer (a) with less than 500 employees, (b) that does not have 50 or more employees for at least 20 or more calendar workweeks in the current or prior year, and (c) violates the new “public health emergency leave” component of the FMLA will not be subject to the FMLA section on “civil action by employees.”
• Note - DOL Enforcement: While employers with less than 50 employees are exempt from the private cause of action under FMLA Sec. 107(a), which is certainly helpful, it appears that these employers would still be subject to potential investigation and lawsuit brought on by the Secretary of Labor under FMLA Sec. 107(b) if they violate the new “public health emergency leave” component of the FMLA. An open question is, because the Secretary of Labor provisions cross reference the damage provisions of 107(a), would the damage provisions still apply to a suit brought by the Secretary of Labor.
• Special Rule for Healthcare Providers and Emergency Responders: As with PST under the FFCRA, an employer of an employee who is a health care provider or an emergency responder may elect to exclude any such employee from receiving public health emergency leave.
• Is there a CBA Exemption: No; however, there are special rules for multiemployer plans that appear to give employers subject to these plans more compliance flexibility than is provided to other employers.
• Consists of Both Paid and Unpaid Leave:
• Unpaid Portion: Unpaid for the first 10 days. However, during this period an employee can receive PST under the Act at 100% or at least 2/3 of their regular rate of pay depending on nature of absence (see below for more details).
• Note: An employee may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for unpaid public health emergency leave.
• Paid Portion: Thereafter, the employer is required to pay the employee for up to 10 weeks of leave at not less than 2/3 of an employee’s regular rate of pay (under the FLSA).
• Note: It remains is unclear how much paid leave must be provided if some portion of that 10 weeks has already been used under existing FMLA obligations to provide unpaid leave before the bill is enacted. We expect to receive further details on this point in forthcoming DOL regulations.
• Caps on Amount of Pay: Paid leave can be capped at $200 per day and $10,000 in the aggregate
• Note: This update appears to be consistent with relevant aspects of the PFML tax credit; however, while an employer appears able to pay an employee an amount that is greater than the above caps, the employer would not receive any corresponding additional tax credit
• Intermittent Leave: No provision
• Note: Early pre-enactment versions of the FFCRA contained a provision making clear that such leave was not required. It is unclear if this omission means that PFML would be permitted on an intermittent basis under FMLA standards. We expect to receive further details in forthcoming DOL regulations.
• Employee Notice to Company: When an employee uses public health emergency leave related to school or child care closures (see above) and the leave is foreseeable, an employee must provide the employer with such advance notice of leave as is practicable.
• Reinstatement Requirement: Yes, but applicable standards depend on employer size.[6]

Tax Credit on PST and PFML

As noted above, the FFCRA provides for tax credits that are intended to offset the cost of providing the paid leave now required of smaller businesses under the FFCRA.  In general, an employer is required to withhold income, social security and Medicare taxes from wages paid to its employees, and to pay an amount of social security and Medicare taxes (collectively, “FICA Taxes”), commonly known as the employer’s portion, that is equal to the amount of FICA Taxes withheld from employees.

Section 7001 of the Act generally allows an employer to claim a credit against the employer’s portion of social security tax for a calendar quarter in an amount equal to PST wages paid by the employer during such quarter, plus the employer’s costs to maintain a group health plan that are allocated to such wages, plus the employer’s share of Medicare tax on such wages.  

The PST credit is subject to certain limitations.  First, the amount of wages that may be taken into account with respect to a particular employee in determining the amount of the credit is limited to (a) $511 per day in the case of PST described in the first three Covered Reasons for Use listed in the Paid Sick Time section above, or (b) $200 per day in the case of PST described in the last three Covered Reasons for Use listed in the Paid Sick Time section above.  Second, in determining the total amount of an employer’s qualified sick leave wages paid for a calendar quarter, the total number of days that the employer can take into account with respect to a particular employee for that quarter cannot exceed 10 days minus the total number of days taken into account with respect to such employee for all previous quarters (i.e., a maximum of 10 days for all quarters).

The amount of the PST credit that is allowed for any calendar quarter cannot exceed the total employer portion of social security tax imposed on all wages paid by an employer to all of its employees during such quarter. If the amount of the credit that would otherwise be allowed is so limited, the excess will be refunded to the employer.  Also, an employer who receives a credit for PST must include the amount of the credit in gross income. This is intended to prevent the employer from realizing a double benefit (i.e., a windfall) – one being the receipt of the credit and the other being a tax deduction for the PST wages. To clarify, this does not nullify the tax credit, but by adding the amount of the credit to gross income, it offsets the tax deduction. Finally, an employer must exclude any wages taken into account in determining the PST credit when determining the paid family and medical leave tax credit under Internal Revenue Code Section 45S.

Section 7003 of the Act provides a tax credit for PFML wages. This credit is essentially the same as the credit for PST wages discussed above, with three substantive differences. First, the amount of the credit is limited to the employer’s portion of social security tax for a calendar quarter less the amount of the credit for PST wages allowed for such quarter.  Second, the amount of wages that may be taken into account with respect to a particular employee in determining the amount of the credit is limited to $200 per day and an aggregate of $10,000 for all quarters. Third, the 10 day maximum limitation that applies to the PST wage credit does not apply to the PFML wage credit. 

On March 20, 2020, the Treasury, IRS and Labor issued a joint news release which clarifies how they believe an employer will be able to claim the tax credits and obtain refunds.  The news release states that under guidance to be issued the week of March 22, employers who pay PST or PFML wages will be able to claim the tax credits by retaining, rather than depositing with the IRS, an amount of the employer’s FICA Taxes and the withheld employee income and FICA Taxes with respect to wages paid by the employer to all of its employees (not only the employees who receive PST or PFML wages) equal to the PST and PFML wages  paid.  This basically provides the employer with an almost immediate tax credit. Further, the anticipated guidance is supposed to provide that if an employer’s payroll taxes are insufficient to cover the PST and PFML wages paid, the employer will be able to request an accelerated refund from the IRS, which the IRS expects to process within two weeks or less.

The CARES Act provides for other tax credits and taxpayer friendly provisions not related to the FFCRA, which will be covered in future alerts.

Medical Plans

The FFCRA requires insured and self-funded group health plans to provide coverage for COVID-19 screenings, as well as any items and services furnished during the office visit (including telehealth visit), urgent care center visit, and emergency room visit that results in an order for or administration of a COVID-19 screening.  Plans may not impose any cost-sharing (deductibles, copays, coinsurance, etc.) for such screening or associated visit. 

The CARES Act would amend the Families First Act to clarify that plans must also cover such services in the non-network setting at the rate of reimbursement publicized by the provider on its website (the Act requires providers to do so). 

To be clear, the Act does not mandate plans to cover (with or without cost-sharing) related services following a COVID-19 diagnosis.

Next Steps

As the CARES Act marches toward enactment and the FFCRA’s April 1, 2020 effective date looms in less than a week, employers should consider taking the following steps:

• Monitor House activity for developments and updates regarding the CARES Act.
• Review existing workplace policies relating to a wide host of issues, including travel, work from home, and other policies as well as existing leave policies, and assess the potential effect of the FFCRA on those policies. If necessary, implement additional policies specifically tailored to FFCRA compliance.
• Consult Seyfarth’s COVID-19 Resource Center for updated information regarding the rapidly evolving COVID-19 situation and its impact on the workplace.

With the COVID-19 and paid leave landscape continuing to expand and grow in complexity, companies should reach out to their Seyfarth contact for solutions and recommendations on addressing compliance with the FFCRA and paid leave requirements generally. To stay up-to-date on COVID-19 developments, click here to sign up for our daily digest. To stay up-to-date on Paid Sick Leave developments, click here to sign up for Seyfarth’s Paid Sick Leave mailing list. Companies interested in Seyfarth’s paid sick leave laws survey should reach out to sickleave@seyfarth.com.

 

[1] Despite this announcement and although unlikely, the DOL’s enforcement grace period does not preclude private causes of action against employers.

[2] Certain public employers would also be subject to the paid leave mandates.

[3] For more information on the FFA and its developments over the last few weeks, please see our prior alerts here, here, here, and here.

[4] Today, across 42 federal, state, and local jurisdictions, there are 44 private employer-provided paid time off mandates either in effect or scheduled to go into effect in the coming months (this list includes the new Colorado and New York COVID-19 emergency paid sick leave mandates): (1) The Federal Contractor PSL law; (2) Arizona; (3) California; (4) Colorado (temporary law in response to COVID-19) (5) Connecticut; (6) Maine (PTO law); (7) Maryland; (8) Massachusetts; (9) Michigan; (10) Nevada (PTO Law); (11) New Jersey; (12) New York (law in response to COVID-19); (13) Oregon; (14) Rhode Island; (15) Vermont; (16) Washington; (17) San Francisco, CA; (18) Washington, D.C.; (19) Seattle, WA; (20) Long Beach, CA (hotel-specific law); (21) SeaTac, WA (hospitality and transportation industry-specific law); (22) New York City, NY; (23) Los Angeles, CA (1 general law 1 hotel-specific law); (24) Oakland, CA; (25) Philadelphia, PA; (26) Tacoma, WA; (27) Emeryville, CA; (28) Montgomery County, MD; (29) Pittsburgh, PA (effective date was March 15, 2020); (30) Austin, TX (delayed; ongoing litigation); (31) Santa Monica, CA; (32) Minneapolis, MN; (33) San Diego, CA; (34) Chicago, IL; (35) Berkeley, CA; (36) Saint Paul, MN; (37) Cook County, IL; (38) Duluth, MN; (39) San Antonio, TX (delayed; ongoing litigation); (40) Westchester County, NY (1 sick leave law, 1 safe leave law); (41) Dallas, TX; and (42) Bernalillo County, NM (PTO law). This list does not include state and local paid family and medical leave programs.

[5] The term “public health emergency” means an emergency with respect to coronavirus declared by a Federal, State, or local authority.

[6] Under the Act, employers with fewer than 25 employees can avoid the regular FMLA reinstatement requirements if the following conditions are met: (A) The employee takes public health emergency leave; (B) the position held by the employee when the leave commenced does not exist due to economic conditions or other changes in operating conditions of the employer (i) that affect employment; and (ii) are caused by a public health emergency during the period of leave; (C) the employer makes reasonable efforts to restore the employee to a position equivalent to the position the employee held when the leave commenced, with equivalent employment benefits, pay, and other terms and conditions of employment; and (D) If the reasonable efforts of the employer under point (C) fail, the employer makes reasonable efforts during a designated one year period to contact the employee if an equivalent position described in point (C) becomes available.