March 17, 2020

By: Robbins, Salomon & Patt, Ltd.

Employers with less than 500 employees would be required to provide up to 80 hours of paid sick leave for employees impacted by the coronavirus (COVID-19) but will be given a tax credit in return under an emergency bill passed by the U.S. House of Representatives this weekend. The Senate is now considering this bill along with other legislative initiatives President Trump has promised to sign this week.

Among the legislation under consideration is, “The Families First Coronavirus Response Act” (H.R. 6201), which passed by a 363 to 40 vote on March 14, 2020, which provides for the following relief:

  • free coronavirus testing;
  • expanded rights for employees under the Family and Medical Leave Act (FMLA);
  • additional unemployment insurance benefits;
  • expanded food-stamp type benefits; and
  • increased Medicaid benefits and funding.

From an employer standpoint, the most important sections are Division C- Emergency Family and Medical Leave Expansion Act, Division E-Emergency Paid Sick Leave Act, and Division G-Tax Credits for Paid Sick and Paid Family and Medical Leave.

Division C- The Emergency Family and Medical Leave Expansion Act

The Emergency Family and Medical Leave Expansion Act (“FMLA Expansion Act”) only covers government employers and employers with fewer than 500 employees. Under Division C,  employees who have been on the job for at least 30 days have the right take up to 12 weeks of job-protected leave under the FMLA under the following circumstances:

  • To comply with a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus, if the employee is unable to perform the [essential?] functions of the employee’s position while adhering to such requirement or recommendation;
  • To care for a family member who is complying with a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus; and
  • To care for a child under age 18 if the child’s school or place of care has been closed, or the child-care provider is not available, due to the COVID-19.

This leave right would expire on December 31, 2020, so it is only proposed as emergency.  The FMLA Expansion Act provides that the Secretary of Labor may exempt small businesses with fewer than 50 employees when these requirements would jeopardize the viability of the business as a going concern.  The Department of Labor is to come up with regulations that will address how a business requests an exemption, as well as other issues.

The first 14 days of leave is unpaid, but employees may elect to substitute paid leave for this emergency unpaid leave. Unlike other FMLA leave, employers may not require substitution.  After the first 14 days, leave is paid at 2/3 of the employee’s regular rate of pay for the number of hours that the employee would otherwise have been normally scheduled to work. Employers with less than 25 employees are not obligated to restore the employee to the same or equivalent position at the end of leave if the employee’s position no longer exists due to economic or operating conditions caused by the COVID-19 emergency and the employer makes reasonable efforts to reemploy the employee in an equivalent position.

Employers who do not have 50 or more employees are exempted from private lawsuits alleging violations, but such employers would still be subject to actions by the Secretary of Labor.  Individual liability and successor liability still apply.

Division E-The Emergency Paid Sick Leave Act

The Emergency Paid Sick Leave Act, another Act passed by the House on March 14, requires employers with fewer than 500 employees and government employers to provide full-time employees  80 hours of paid sick time paid at the employee’s regular rate, for the following reasons: to quarantine; to seek a diagnosis or preventive care for coronavirus; or to comply with a recommendation or order to quarantine due to exposure to or symptoms of coronavirus. The requirements to provide this paid leave expire on December 31, 2020.

This bill requires wages to be paid at 2/3 the employee’s regular rate for leave associated with care for a family member subject to self-isolation or quarantine or who needs to seek a diagnosis or preventive care for COVID-19 or who needs to care for a child whose school has closed, or whose child care provider is unavailable due to the COVID-19 crisis.

Part-time employees are also entitled to paid sick time based on the number of hours that the employee would otherwise be normally scheduled to work in a two-week period.

Employees under this bill would be immediately eligible for emergency paid sick time. Paid sick time under the bill is not required to be paid at termination of employment.

Employers must provide the paid sick time in addition to any other paid leave. Employers may not change their paid leave policies now to avoid paying leave in addition to emergency paid sick time. Employers may not require employees to use other paid leave before the employee uses emergency paid sick time but may require reasonable notice of leave after the first payment of paid sick time.

Employers also may not require that employees search for or find a replacement employee to cover the hours during the employee’s use of emergency paid sick time.

Model notices regarding emergency paid sick leave are to be promulgated and must be posted by employers.

Violations of emergency paid sick leave, including retaliation for taking leave or engaging in protected activity with respect to leave, are treated like violations of the Fair Labor Standards Act (FLSA), and are subject to the same penalties: damages, an equal amount as liquidated damages, attorneys’ fees, costs, and injunctive relief and/or reinstatement.

Finally, the bill provides that employees who work under a multi-employer collective bargaining agreement and whose employers pay into a multi-employer plan providing the above benefits are provided with both types of leave.

Unlike the Emergency FMLA Expansion Act, the Emergency Paid Sick Leave Act does not have a hardship exemption available for small employers. But, like the Emergency FMLA Expansion Act, the expanded availability of FMLA leave under this Act continues only through December 31, 2020.

Division G-Tax Credits for Paid Sick Leave and Paid Family and Medical Leave

Division G grants a quarterly credit against the employer portion of Social Security taxes for amounts paid under the FMLA Expansion Act (“family leave wages”) and the Emergency Paid Sick Leave Act (“sick leave wages”).  The credit for sick leave wages for each employee who must self-isolate, obtain a diagnosis, or comply with a COVID-19 self-isolation recommendation, is capped at $511 per day. For sick leave wages to each employee caring for a family member or for a child whose school or place of care has been closed, the credit is capped at $200 per day.  The credit for  family  leave wages is capped at $200 per day for each individual and $10,000 per individual for all quarters.

This credit is limited to the Social Security taxes imposed for the calendar quarter on wages paid for all employees. Any excess credits are treated as an overpayment to be refunded to the employer. The aggregate number of days per employee may not exceed the excess of 10 over the aggregate number of days taken into account for all preceding calendar quarters.

H.R. 6201 was the result of two full days of negotiation between House Democrats, Speaker Pelosi and Treasury Secretary Steven Mnuchin.