On March 18, 2020, the President signed the Emergency Family and Medical Leave Expansion Act (the “Emergency FML Act”) and the Emergency Paid Sick Leave Act (the “Emergency Sick Leave Act”), both of which are effective April 1, 2020.
These Acts only apply to employers of under 500 employees and require that such employers provide qualified employees with federally subsidized additional paid family leave and sick pay. Exceptions are limited to certain designated COVID-19 front-line employees and businesses under 50 employees who request and are granted a hardship exemption.[1] Employees must be notified of all new benefits and must be allowed to participate, if they qualify.
Due to the complexity of the rules under the Acts, this article is meant only as an overview. An additional summary may be found at:
https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave
The Emergency FML Act
While each Act operates independently, as outlined below, there is some overlap.
First, to understand the Emergency FML Act, one needs to know the currently existing law. Prior to this Act, an eligible employee was already entitled by federal law to take unpaid family care leave of up to 12 work weeks of leave within a 12-month period due to one of several events including: (i) child birth; (ii) child bonding; (iii) the care of oneself; and (iv) certain military deployments of a family member.[2]
The Emergency FML Act expands these provisions to separately grant both paid and unpaid leave for that same 12 work weeks to eligible employees for the care of a child under the age of eighteen (18), whose school or childcare provider has been closed and who is unable to work or telecommute due to the need to care for their child. The Emergency FML Act will allow this benefit through December 31, 2020. This Act further expands eligible leave by lowering the threshold from 1,250 hours of employment to 30-days prior employment.
Paid and Unpaid Leave. What is entirely new to the 12-weeks leave program, and limited to the school or childcare provider closures, is that a portion of the leave must be paid for by the employer. For an employee taking leave under the Emergency FML Act, the first 10 days (i.e., 2 days of family leave remain, with the current law, as unpaid family leave. However, an employee may elect instead to apply any and all of the: (i) existing accrued paid medical leave; and (ii) accrued paid sick leave, during this initial 10-day period).
During remaining 10 weeks, the employer must then offer paid leave, and provide as follows:
- Hourly Rate. The rate paid per hour to the employee of family leave, must be not less than two-thirds (2/3) of the employees’ regular pay-rate as defined by 29 U.S.C. 207(e). That pay-rate must be computed based on the average hourly rate, and covers the applicable overtime rate. Essentially it is the result of taking the total compensation in the typical workweek (except for statutory exclusions) ÷ the total hours worked in the work week.
- At this time, there is no additional guidance for determining the rate of pay for a full-time employee beyond the definition of regular rate of pay under 29 U.S.C. 207(e). However, not later than 15 days after the enactment of this Act the Secretary of Labor (“SOL”) is to issue guidelines to assist employers in calculating the amount of paid sick leave.
- Hours Per Week. The number of hours per week paid as family leave, must be the same as the average number of hours that an employee would normally work, and therefore it will include overtime, if the employee would normally undertake overtime hours.
Limitations. However, the total amount that must be paid over 10 weeks is limited to, and in no event is required to, exceed $200 a day or $10,000 in total over the 10 weeks (i.e., $200 x 50 days.) For example, for an employee typically working 8 hours a day, the hourly rate paid for family leave is capped at $25 per hour. On the other hand, there is no proration of the cap for an employee working part-time – this cap is a per-diem cap.
Variable and Part-Time. Where an employee works variable hours or part-time, pay is based on the employee’s average scheduled hours in the prior 6 months (including any hours while the employee was on leave). If the employee did not work over the 6-month period, the hours must be based on the hours that the employee reasonably expected to be scheduled to work when the employee was hired.
Integration with Existing Family Medical Leave Act. The provisions in this Act are integrated with the existing family care and medical leave provisions. Any employee who has already fully claimed 12 weeks of leave within the same 12-month benefit plan period may not claim additional leave under the Emergency FML Act. Whether such an employee may again qualify within a calendar year depends upon the employer’s specific benefit plan year.
Employee Taxes. As outlined below, there is a tax credit program wherein all qualifying amounts an employer pays under the Emergency FML Act and Family Sick Leave Act will be fully covered by tax credits against an employer’s portion of FICA taxes at the end of each quarter for all employees, assuming the employer retains proper substantiation documentation. In addition, payments if qualified are not subject to employer FICA taxes; but all other employment taxes, including all employee paid FICA taxes will apply. An employer may provide more generous benefits, however, enhancements (including benefits provided before April 1, 2020) will absolutely not qualify for a tax credit.
Right to Return to Work. For small employers, those with fewer than 25 employees, special rules will apply. In particular, the employee who takes leave under these provisions is not guaranteed a return to work or the same position as previously held, if at the end of the leave:
- The position held by the employee when the leave began no longer exists (whether due to economic conditions or other changes in operating conditions caused by a public health emergency); and
- The employer made reasonable efforts to restore the employee to an equivalent position, with equivalent employment benefits, pay, and other terms and conditions of employment.
- If the employee is not returned to work due to the foregoing, then the employer must make reasonable efforts to contact the employee about vacancies in equivalent positions for a 1-year period beginning on the date when the employee’s need for the leave under the Act concluded, or the date that is 12 weeks after the date on which the employee’s Emergency FML Act leave began, whichever is earlier.
In enacting these provisions, Congress was concerned about excess litigation by lawyers that could result in costly litigation adverse to retaining employees. Accordingly, an employee cannot sue an employer for not providing leave and pay under the Emergency FML Act, and must instead seek help through a government agency. On the other hand, while the violation is reportable to the SOL, the Department of Labor has granted a 30-day “no enforcement” policy to April 17, 2020, to give employers time to implement.
Employers with greater than 25 employees must look to The Family and Medical Leave Act of 1993 for right to return to work requirements which require that an employer must restore an employee that takes qualified leave to their position or an equivalent position unless:
– An employee was hired for a discrete project and that project has since ended or the employment term had expired;
– When the restoration of a highly salaried eligible employee threatens severe economic injury to the operations of the employer; and
– If the employee has surpassed the allotted 12-week leave and is thereby no longer protected by The Family and Medical Leave Act (under this circumstance, employees must look to applicable workers’ compensation statutes or the Americans with Disabilities Act for other potential protections that may apply).
Emergency Paid Sick Leave Act
Under the existing law, with limited exceptions, federal law did not provide for paid sick leave, leaving most of the provisions to state law.
The Emergency Sick Leave Act requires employers through December 31, 2020 to provide to every employee (regardless of how long they have worked for the employer) the opportunity to claim paid sick leave if the employee cannot come to work (or telecommute) due to either of the following six very specific circumstances:
- A Federal, State, or local quarantine or isolation order related to COVID-19 –California’s stay-at-home order has not been addressed, and until clarified, it might not qualify; (See footnote 4 on the last page)
- The employee is advised by a healthcare provider to self-quarantine due to concerns related to COVID-19, as where a doctor would give a note recommending quarantine;
- 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 subparagraph (1) or has been advised as described in subparagraph (2);
- The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the childcare provider of such son or daughter is unavailable, due to COVID-19 precautions; or
- 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.
These 6 items break into two parts, items 1 through 3 and 4 through 6, wherein obviously item 5 contains some overlap with the new Emergency FML Act. Because, given current position of the DOL (See Question 24: https://www.dol.gov/agencies/whd/pandemic/ffcra-questions), California’s stay-at-home order will likely not qualify as a quarantine or isolation order under subparagraph 1, above, we are requesting direct clarification from the Department of Labor as to whether they are willing to expand the concept of “quarantine” beyond “quarantine orders.”
Basic Benefit. The basic benefit is to grant an immediate right to 10 days of sick leave. Accordingly, the provision for full-time employees is to provide up to 80 hours, regardless of actual hours typically worked. For part-time employees, the number of hours allowed for paid sick leave will equal the number of hours that such employee works on average over a 2-week period.
Under categories “4” through “6”, the benefit cap reflects the same limit as child care discussed above. While not less than 2/3 of the employee’s regular rate of pay (per the Fair Labor Standards Act) based on the employee’s regularly scheduled hours of work, the cap is a maximum of $200 per day and $2,000 in the aggregate.
Special rules apply if the employee worked variable hours, in which case pay is based on the employee’s average scheduled hours in the prior 6 months (including any hours while the employee was on leave). If the employee did not work over the 6-month period, the hours must be based on the hours that the employee reasonably expected to be scheduled to work when the employee was hired.
Other Provisions.
Understanding that employers may determine that they want to terminate employees, rather than comply, the Emergency Sick Leave Act makes it unlawful for any employer to discharge, discipline, or in any other manner discriminate against any employee who takes leave in accordance with this Act; and has filed any complaint or instituted, or caused to be instituted, any proceeding under or related to this Act (including a proceeding that seeks enforcement of this Act), or has testified or is about to testify in any such proceeding.
These provisions are not meant to prevent an employer from terminating or laying off employees who would otherwise be terminated to continue operations. Such employees may make claims for unemployment. Accordingly, in deciding to undertake any lay-off, it is important to document sound business reasons, including cash flow and loss of profits, wherein providing a subsidized sick leave is inadequate.
Other provisions include:
- The employer cannot require that the employee to search for or find a replacement employee to cover for the employee while the employee is using leave under the Emergency Sick Leave Act.
- The employer cannot require the employee to use some other kind of paid leave before using leave under the Emergency Sick Leave Act (i.e., vacation, PTO, other paid sick leave, or paid Emergency FML Act leave).
- An employee can sue an employer for unpaid wages and penalties under the Fair Labor Standards Act if the employer fails to comply with the Emergency Sick Leave Act.
Again, 100% of the amounts paid under the Emergency Sick Leave Act may be taken as a tax credit against the amounts paid by the employer for Social Security and Medicare taxes, subject to certain limitations and “double benefit” restrictions. While FICA taxes are not deducted from the amounts paid to the employee under the Act, all other employer taxes and employee withholding taxes will apply.
California Unemployment Law Short Summary
Employers will undoubtedly also have to consider layoffs in this situation and will need to consider the benefits a terminated employee has available to them in California. If an employee is terminated, an unemployed individual actively seeking employment in California may file with the Employment Development Department (“EDD”) for unemployment.
While generally there are limits on unemployment benefits, and these may be considered “low” for higher income employees, federal legislation is expected to increase these benefits.
Discussion and Examples
In short summary, pursuant to the Emergency FML Act and the Emergency Sick Leave Act, an employee is eligible for the following employer paid benefits:
First, if the employee must stay home to take care of a child whose school or childcare facility is closed due to the COVID-19 pandemic, then the employer must pay the employee in an amount no less than 2/3 of their salary for up to 12 weeks. Amounts paid under this section shall not exceed $200 a day or $10,000 in total. (Note: employers with less than 50 employees may be exempt from such payment if such payment would make their business non-viable, but the application of how this exemption works will not be clear until further regulations are issued).
Second, any employee that: (i) is subject to a Federal, State, or local quarantine or isolation order related to COVID-19; (ii) has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19; or (iii) is experiencing symptoms of COVID-19 and seeking a medical diagnosis shall receive paid sick leave from the employer for their daily salary up to $511 per day and up to a maximum of $5110.
Third, any employee that is: (i) caring for an individual who is subject to an order of quarantine; (ii) caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the childcare provider of such son or daughter is unavailable, due to COVID-19 precautions; or (iii) 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 shall receive paid sick leave from the employer for 2/3 of their salary up to $200 per day and up to a maximum of $2000.
Most payments made under both the Emergency FML Act and the Emergency Sick Leave Act will be a credit for the employer against any FICA amounts due on these payments.
If an employer terminates an employee before April 2, 2020, the employee will be eligible for the following government paid benefits, if the employee is eligible for California unemployment benefits:
EDD will pay 60% to seventy 70% (depending on income) of wages earned 5 to 18 months for up to 52 weeks. For claims beginning on or after January 1, 2020, weekly benefits range from $50 to a maximum of $1,300. To qualify for the maximum weekly benefit amount of $1,300, the unemployed individual must earn at least $28,145.01 in a calendar quarter during the base period.[3]
Other Considerations
In light of the CARES Act (which provides for business loans) for which the outstanding loan may be forgiven to provide for payroll and certain other expenses, it is important to consider all options available to determine whether it is in the best interests to retain employees, even if underproductive, and offer these benefits, or to terminate employees and claim unemployment.
For further employment and tax law guidance, as well as guidance on how to protect your business during the COVID-19 epidemic, our office is prepared to assist you with all of your needs. For further questions, contact our employment and tax law team, and ask for Belan Wagner, Minna Yang, Douglas Youmans, Robin Klomparens or Cameron Hess.
[1] The Secretary of Labor will have the ability to exempt businesses with fewer than 50 employees if the imposition would jeopardize the viability of the business. However, it is unclear what the procedure for this exemption will be. It will remain unclear until the Secretary of Labor issues clarifying regulations.
[2] Family and Medical Leave Act of 1993.
[3] However, the Act is silent as to former employees who were no longer employed, including by layoff, before April 2, 2020. It is uncertain if regulations will address the effect of employees terminated before the Act goes into effect. It is impossible to advise an employer whether the layoff of employees prior to April 2, 2020 will void the applications of the Act and it is impossible to be sure that such layoff will not carry some consequence to be determined at future time be regulation.
4 Quarantine, as it is currently understood, means an order issued to particular groups of persons who might suffer COVID-19. These usually are for certain groups like the Diamond Princess passengers, healthy or not, who might be infected, such as those landing by air or ship, and returning into the United States (think Ellis Island at the turn of the century), wherein they are immediately ordered to go into quarantine. An example of a CDC quarantine order may be found at https://www.cdc.gov/quarantine/pdf/Public-Health-Order_Generic_FINAL_02-13-2020-p.pdf. Stay-at-home orders, if violated, carry similar penalties, and carry the same public safety goals, but are more expansive. The current Department of Labor position is that an employee whose business is closed due to a Federal, State or local stay-at-home directive is not entitled to sick leave even if they had requested such sick leave prior to the business closure (See Question 24 https://www.dol.gov/agencies/whd/pandemic/ffcra-questions). New York State’s stay-at-home order is currently under federal review for whether it constitutes quarantine. Further, Ohio has issued guidance that its state stay-at-home order does not constitute a quarantine order and does not, alone, qualify an employee for emergency paid sick leave (See https://www.ccj.com/blog/2020/03/24/employers-seek-clarity-of-paid-sick-leave-applicability-to-stay-at-home-orders.)
