ALERT: New federal law provides paid leave for COVID-19 absences

Alert: New federal law provides paid leave for COVID-19 absences
President Trump has signed the Families First Coronavirus Response Act, an economic stimulus package that offers employees certain emergency protections for absences related to the coronavirus (COVID-19). This new law will have a major impact on employers throughout 2020, as it expands the federal Family and Medical Leave Act (FMLA) and provides paid sick leave for employees who miss work due to certain COVID-19 related reasons. The bill takes effect on April 1, 2020, and will impact all employers with fewer than 500 employees. The Department of Labor (DOL) will be developing regulations in the next 15 days to provide further guidance on this significant new piece of legislation. Vigilant will keep our members updated.

Emergency Family and Medical Leave Expansion Act (EFMLA)
The bill adds a temporary new category of FMLA that is available to employees through December 31, 2020. While the FMLA applies to employers with at least 50 employees, the EFMLA temporarily expands coverage to all employers with fewer than 500 employees for purposes of a new category of leave (school closures related to COVID-19). The EFMLA also expands which employees are eligible to take leave for that reason. Perhaps most significantly, employees who take EFMLA are eligible to receive paid leave from their employers during that time (FMLA is typically an unpaid leave of absence). Here are the major sections of the new EFMLA:

Temporary duration: EFMLA is only available through December 31, 2020.

Covered employer: Employers with fewer than 500 employees must provide EFMLA.

Eligible employee: Employees are eligible to take EFMLA if they have been employed with a covered employer for at least 30 calendar days.

Reasons for leave: An employee can take EFMLA when the employee is unable to work or telework due to the need for leave to care for their child who is under 18 years of age when their child’s school or place of care has been closed, or the care provider is unavailable, due to a public health emergency. This includes not only elementary and high schools, but also preschools, daycares, and individual childcare providers. “Public health emergency” means an emergency with respect to COVID-19 as declared by the Federal, State, or local authority. There’s no stated requirement for the COVID-19-related closure to be ordered by a government official. The inclusion of “telework” is significant in this section; if an employer is able to provide an employee with the ability to work remotely, the employee may not be eligible for EFMLA.

Entitlement to leave: Since the EFMLA is part of the FMLA, the employee’s total entitlement to leave is 12 weeks for all EFMLA and FMLA related reasons, within the employer’s 12-month period.

First 10 days of EFMLA: The first 10 days of EFMLA are unpaid, but an employee can choose to use any accrued paid vacation, personal leave, or sick leave to cover that time. An employer cannot require an employee to use paid leave during the 10-day window. (Note: Although the first 10 days of EFMLA are unpaid, see below for our discussion of the new federal paid sick leave law, which would likely apply to the employee’s first 10 days of EFMLA).

After the first 10 days of EFMLA: After the first 10 days of EFMLA, the employer must provide the employee with paid EFMLA leave. The employee is entitled to receive two-thirds of their regular rate of pay while taking EFMLA.

• For employees with a fixed workweek: Pay is based on the number of hours the employee would otherwise normally be scheduled to work.
• For employees with a fluctuating workweek: If the employer is unable to determine the number of hours the employee would have worked, then pay is based on the average number of hours the employee was scheduled per day over the 6-month period prior to taking leave (including hours for which the employee took any other type of leave). If the employee didn’t work over the 6-month period prior to taking leave, their pay is based on the reasonable expectation of average hours worked per day at the employee’s time of hire.
• Limit on pay: Paid EFMLA is capped at $200 per day and $10,000 in total, per employee.

Notice: An employee must provide an employer with notice as soon as practicable when their need for leave is foreseeable; there’s no provision about giving notice of the need for unforeseeable leave. However, since any government-mandated closures of schools or daycare facilities will be in the news, most employers will be aware of significant closures in areas impacting their employees.

Reinstatement: An employee’s entitlement to reinstatement after returning from EFMLA depends on the size of their employer.

• Employers with at least 25 employees: An employee has the same right to reinstatement as under the FMLA. With limited exceptions, the employee must be returned to the same position, or an equivalent position with similar pay, benefits, and working conditions. See Vigilant’s Legal Guide, FMLA: Reinstatement Requirements for more information.
• Employers with fewer than 25 employees: Generally, employers with fewer than 25 employees have the same reinstatement requirement as under the FMLA, but there are conditions under which an employer may not need to reinstate an employee returning from EFMLA. The employer has no reinstatement obligation if all of the following criteria are met: (1) The employee’s job no longer exists due to economic or operational conditions caused by a public health emergency while the employee was on leave; (2) The employer made reasonable efforts to reinstate the employee to an equivalent position; and (3) If the employer is unable to reinstate the employee at the end of their leave, the employer made reasonable efforts to reinstate the employee to an equivalent position for one year after the public health emergency concluded or 12 weeks after the employee’s leave started, whichever occurs first.

No retaliation or discrimination: Since EFMLA is incorporated as part of the FMLA, employers are prohibited from retaliating or discriminating against employees who use this protected leave.

Multi-employer bargaining agreements: An employer under a multi-employer bargaining agreement may fulfill its obligation to provide paid leave under the EFMLA by making contributions to a multiemployer plan, fund, or program for paid leave. There’s no other exemption or exclusion for employers who are subject to a collective bargaining agreement.

Exclusion for employees who are health care providers or first responders: An employer of an employee who is a health care provider or an emergency responder may elect to exclude the employee from eligibility for EFMLA. However, the DOL will issue regulations to clarify who might be covered under this exclusion.

Possible small business exemption: The DOL has authority to issue regulations that exempt small businesses with fewer than 50 employees from the requirements of providing paid EFMLA if it would jeopardize the viability of the business as a going concern. Vigilant will keep you informed if the DOL issues regulations that provide this relief for small employers.
 
Emergency Paid Sick Leave (EPSL)
The bill requires all employers with fewer than 500 employees to provide paid sick leave to employees for certain types of absences related to COVID-19.

Temporary duration: EPSL is only available through December 31, 2020.

Covered employer: Employers with fewer than 500 employees must provide EPSL.

Eligible employee: All employees; there are no eligibility requirements for an employee to receive EPSL.

Reasons for leave: Employers must provide EPSL when their employees are unable to work or telework due to any of the reasons listed below. As with the EFMLA discussed above, the inclusion of “telework” is significant; if an employer is able to provide an employee with the ability to work remotely, the employee may not be eligible to use EPSL.

• The employee is subject to a Federal, State or local quarantine or isolation order related to COVID-19 (“Quarantine Order”).
• The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19 (“Healthcare Provider Order”).
• The employee is experiencing symptoms of COVID-19 and seeking medical diagnosis (“COVID-19 Symptoms”).
• The employee is caring for an individual who is under a Quarantine Order or Healthcare Provider Order (“Caring for an Individual”). The bill doesn’t define who would qualify as an “individual,” but it’s likely that the DOL will provide further guidance about this term when it issues regulations.
• The employee is caring for their child when their child’s school or place of care has been closed, or the care provider is unavailable, due to a public health emergency (“School or Daycare Closure”).
• 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 (“Substantially Similar Condition”). The legislation doesn’t define what qualifies as a “substantially similar condition,” but the DOL (and other agencies) has authority to issue regulations on this issue. Vigilant will keep you informed if the DOL (or another agency) issues regulations that define this term.

Entitlement to paid sick leave: Employers must provide EPSL for the reasons listed above, but the amount of pay depends on the employee’s normal schedule and their reason for taking leave.

• Full-time employees: Full-time employees are entitled to receive 80 hours of paid sick time, but pay may be limited to two-thirds their regular rate depending on their reason for taking leave (see explanation below).
• Part-time employees: Part-time employees are entitled to receive paid sick leave based on the average number of hours they work in a 2-week period. Pay may be limited to two-thirds their regular rate depending on their reason for taking leave (see explanation below).
• Employees with a fluctuating workweek: If the employer is unable to determine the number of hours the employee would have worked, then pay is based on the average number of hours the employee was scheduled per day over the 6-month period prior to taking leave (including hours for which the employee took any other type of leave). If the employee didn’t work over the 6-month period prior to taking leave, their pay is based on the reasonable expectation of average hours worked per day at the employee’s time of hire. Pay may be limited to two-thirds their regular rate depending on their reason for taking leave (see explanation below).
• Pay when reason for leave is Quarantine Order, Healthcare Provider Order, or COVID-19 Symptoms: When an employee needs leave due to a Quarantine Order, Healthcare Provider Order, or COVID-19 Symptoms, they’re entitled to receive their full regular rate of pay (i.e. pay isn’t prorated or reduced).
• Pay when reason for leave is Caring for an Individual, School or Daycare Closure, or Substantially Similar Condition: When an employee needs leave due to Caring for an Individual, School or Daycare Closure, or Substantially Similar Condition, they’re entitled to receive two-thirds their regular rate of pay.

Limit on pay: Paid sick leave is capped per employee, depending on their reason for needing EPSL leave.

• Leave for Employee’s own Quarantine Order, Healthcare Provider Order, or COVID-19 Symptoms: Pay is capped at $511 per day and $5,110 in total, per employee.
• Leave for Caring for an Individual, School or Daycare Closure, or Substantially Similar Condition: Pay is capped at $200 per day and $2,000 in total, per employee.

Use of other paid leave: An employer cannot require an employee to use other paid leave before the employee uses EPSL. Vigilant interprets this section to mean that EPSL is paid leave that employers must provide in addition to any other paid leave that employees are entitled to receive. We hope the DOL regulations will further clarify an employer’s obligation to provide EPSL when the employer may already be legally required to provide paid sick leave (e.g. under state laws in California, Oregon, and Washington).

Notice: After the first workday or partial workday that an employee uses EPSL, the employer can require the employee to follow reasonable notice procedures when needing time off for EPSL.

Cannot require replacement: An employer cannot require an employee to find their own replacement when using EPSL.

No carryover: EPSL doesn’t carry over from one year to the next and won’t be available after December 31, 2020.

No payout of EPSL: Employers aren’t required to pay out EPSL upon termination of employment.

Exclusion for employees who are health care providers or first responders: An employer of an employee who is a health care provider or an emergency responder may elect to exclude the employee from eligibility for EPSL. However, the DOL will issue regulations to clarify who might be covered under this exclusion.

Possible small business exemption: The DOL has authority to issue regulations that exempt small businesses with fewer than 50 employees from the requirements of providing paid EPSL if it would jeopardize the viability of the business as a going concern. Vigilant will keep you informed if the DOL issues regulations that provide this relief for small employers.

Posting requirement: Employers will be required to post a notice in a conspicuous place in their workplace about an employees’ entitlement to use EPSL. The DOL will develop a poster within the next seven days that employers can use. Vigilant will update members when the poster is available.

No discrimination or retaliation: Employers cannot discriminate or retaliate against an employee for use of EPSL.

Violations: A violation of an employer’s obligation to pay EPSL pursuant to this law will be considered a wage violation under the federal Fair Labor Standards Act (FLSA).

Employer Tax Credits for EFMLA and EPSL
Employers who are required to pay employees for either EFMLA or EPSL are eligible for a credit against their Federal Insurance Contributions Act (FICA) taxes (i.e., Social Security and Medicare taxes) owed for the employee in a calendar quarter. The eligibility and amount of credit depends on the type of paid sick leave used by the employee and the reason for taking such leave. Below is a brief summary, but we urge you to consult with your tax adviser for specific guidance. The information contained in the bill is highly technical as it relates to payroll taxes and the employment attorneys at the Vigilant Law Group may not be able to assist you with specific questions about the legislation’s tax implications.

When an employee uses EFMLA: The employer is eligible to receive 100 percent credit against FICA taxes owed for the employee who used EFMLA. The credit is capped at $200 per day and $10,000 in total, per employee for all calendar quarters.

When an employee uses EPSL: The employer is eligible to receive 100 percent credit against FICA taxes owed for an employee who uses EPSL, but the credit is capped. The amount of the cap will vary for each employee, depending on their reason for using EPSL. The amount of the cap is also subject to an overall limitation, as described below.

• EPSL for Quarantine Order, Healthcare Provider Order, or COVID-19 Symptoms: The wages taken into account to determine the credit are capped at $511 per employee per day.
• EPSL for Caring for an Individual, School or Daycare Closure, or Substantially Similar Condition: The wages taken into account to determine the credit are capped at $200 per employee per day.

Overall limitation on number of days taken into account: For each employee, there’s a 10-day maximum limit on the number of EPSL days that the employer can use to receive the FICA tax credit.

Credit and refund of FICA tax obligation: An employer cannot receive a credit if it exceeds the total FICA taxes owed by the employer. However, if the EPSL portion of the credit is limited because it does exceed the FICA taxes, the amount of the limitation is treated as a FICA overpayment and will be refunded to the employer.

Credit for qualified health plan expenses: The employer will also be credited for qualified health plan expenses that are allocated to pay EPSL (e.g. for the employer portion of health coverage premiums while an employee is on EPSL).

EFMLA and EPSL aren’t wages for FICA purposes: An employer who pays wages under EFMLA or EPSL won’t owe additional FICA taxes for the payment of those wages.

Paid leave given prior to effective date doesn’t count: Employers won’t receive the EPSL tax credit for any paid leave granted prior to a date to be selected by the Secretary of the Treasury (which must be on a date after the bill was signed by the President), including paid leave granted under state law or voluntarily granted by the employer.
 
Emergency Unemployment Stabilization and Access
The bill provides for emergency grants to states that are paying unemployment insurance benefits for COVID-19 related reasons. The bill also allows states to alter or amend their unemployment criteria with regard to job search, good cause, waiting week, and employer experience rating, on a temporary basis, without conflicting with regulations under the Social Security Act or Internal Revenue Code. However, each state has individual discretion to alter or amend its own unemployment criteria, so each state may have different unemployment eligibility requirements.
 
Employment departments in California, Washington, Oregon, Idaho, and Montana, have developed resources for both employers and employees to navigate through the unemployment process as job losses, shutdowns, and furloughs for COVID-19 related reasons begin to mount. For more information on what unemployment benefits your employees may be entitled to, Vigilant encourages you to work directly with your state employment agency.
 
Health Provisions
Finally, the bill provides several health provisions that require insurance companies to cover testing and treatment for COVID-19, with no cost-sharing to the employee. If you have additional questions about how your health insurance contract may be impacted, you should contact your insurance broker or plan administrator for additional discussion.

Tips for Employers: The Families First Coronavirus Response Act represents a major piece of federal legislation, with sweeping implications for employers of all sizes. In the coming weeks, Vigilant will be developing resources for employers to help you understand your obligations under this new landscape. Please review our alerts and newsletters, as they’re the most efficient way to receive information from us. Vigilant Law Group attorneys have received many questions from employers as COVID-19 has continued to disrupt the workplace. We’re here to help.

Vigilant is committed to keeping our members informed during this difficult time. As a member of Vigilant or Vigilant’s Retro group you would have access to ongoing help from an employment attorney for help with critical matters such as COVID 19 and much more.