Families First Coronavirus Bill, H.R. 6201 - Updates Employers Need to Know

On March 18, 2020, the President signed the Second Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020. Two of its eight divisions impose new paid leave obligations on employers of fewer than 500 employees, with certain exclusions and exemptions.  Another division offers extra federal support of state unemployment compensation programs, if states make certain changes. This memo summarizes those three divisions and the applicable tax credits enacted in a separate division.

The Emergency Unemployment Insurance Stabilization and Access Act of 2020

This Act increases federal support of state unemployment compensation programs starting 60 days after enactment, if states make required program changes.  Those changes include –

• Requiring employers to provide notification of the availability of unemployment compensation to employees at the timer of separation from employment (consistent with a DOL model notice);
• Waiving work requirements;
• Waiving the waiting week;
• Non-charging employers directly impacted by COVID-19 due to an illness in the workplace or direction from a public health official to isolate or quarantine workers.

The Emergency Family and Medical Leave Expansion Act

Effective from April 2 through December 31, 2020, this Act covers employers of less than 500 employees and employees who have been on the payroll for at least 30 calendar days.  FMLA regulations count and cover employees who are part time and those who have not worked recently because they are on leave, but do not apply to former employees or employees laid off.  See 29 CFR §105(b), (c).  FMLA regulations also treat separate corporations as separate employers, despite common ownership or financial control, unless they are joint employers or have a significant degree of common management, operational interrelation, and central labor relations control. See 29 CFR §825.104(c)(2).  Since that “single employer” finding usually expands employer obligations, many controlled groups have taken care for decades to preserve subsidiary labor relations and operational independence, but that could have the opposite effect under this new law.

DOL has authority to issue two narrowing regulations – (a) exempting businesses with fewer than 50 employees and (b) excluding “certain health care providers and emergency responders from the definition of “eligible employee.”  Whether or not DOL does that, “An employer of an employee who is a health care provider or an emergency responder may elect to exclude such employee from the application of [these amendments].”

To access this new benefit, the employee must give the employer advance notice, if the need is foreseeable and if it is practicable to give advance notice, and must be “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 if the child care provider of such son or daughter is unavailable, due to a public health emergency.”  Any COVID-19 related emergency declaration by any federal, state or local authority will suffice.  However, “child care provider” includes only those who receive compensation for providing child care services on a regular basis.

The first ten days of this new class of FMLA leave need not be paid, unless the employer already has a paid leave benefit that covers it.  After the tenth day, and up to a maximum of $200 per day and $10,000 total, the employer must pay the remaining leave time at “two-thirds of [the] employee’s [FLSA] regular rate of pay …,” counting all hours that the employee “would otherwise be normally scheduled to work ….”  If the employee does not have a fixed work schedule, the employer must average the number of hours that the employee worked during the six months ended on the first day of leave.  New hires’ hours are to be based on “the reasonable expectation of the employee at the time of hiring of the average number of hours per day that the employee would normally be scheduled to work.”  Employers who contribute to multi-employer leave funds under their union contracts may satisfy their obligations by making those contributions, if the fund provides the required benefits.

A very small employer (fewer than 25 employees) need not restore the employee’s job following this new leave if the job has been eliminated because the public health emergency caused adverse economic changes, and if the employer made a reasonable effort to restore the employee to an equivalent position and, failing that, makes reasonable efforts to contract the employee if an equivalent position becomes available during a one-year “contact period” which begins on the earlier of (a) the date on which the qualifying public health emergency need for leave ends or (b) the date that is 12 weeks after the date on which the employee’s FMLA leave began.

The Emergency Paid Sick Leave Act

Also effective from April 2 through December 31, 2020, this Act borrows most of its definitions and its enforcement provisions (as if this violation were a minimum wage payment failure) from the Fair Labor Standards Act, 29 U.S.C. §201, et seq., but includes its own notice posting requirement (DOL model notice to be published by March 25, 2020), and prohibition of related discrimination and retaliation.

Government employers are covered regardless of size but private employers of 500 or more are not covered.  To access this new benefit, the employee must be unable to work (or telework) due to a need for leave for at least one of six reasons:

(1) The employee is subject to a federal, state or local quarantine or isolation order;

(2) The employee has been advised by a health care provider to self-quarantine due to COVID-19 concerns;

(3) The employee is experiencing COVID-19 symptoms and is seeking medical diagnosis;

(4) The employee is caring for someone who is covered under reason (1) or (2);

(5) 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 child care provider of such son or daughter is unavailable, due to COVID-19 precautions;

(6) The employer is experiencing any other substantially similar condition specified in rules to be written by DOL, HHS and Treasury.

Even new hires may use this leave, immediately, and employers may not require employees to use other paid, employer-provided leave first.

Full-time workers are entitled to take 80 hours of paid sick leave. Part-timers may take the average number of hours that they work over “a two week period.”  As with the FMLA expansion, the pay is rate multiplied by hours during the paid leave period.  The rate is the greater of the employee’s FLSA “regular rate” or the minimum wage rate (federal, state or local).  The hours are those that the employee normally would have been scheduled to work during the leave period. For those on a varied schedule, the employer determines the average daily hours the employee worked during the six months before leave.  For those more recently hired, the reasonable expectation of the employee at time of hire controls.  Required pay is capped but the cap depends on the reason for leave.  For reasons (1) – (3), the caps are $511 daily and $5,100 total.  For reasons (4) – (6), the caps are $200 daily and $2,000 total. Employers that have multi-employer labor agreements may satisfy their sick leave pay obligations by making fund contributions, if the funds pay the required benefits.  This Act does not require that employers allow employees to cash-in their unused sick leave pay on termination. DOL is directed to publish sick leave pay calculation guidelines by April 2, 2020.

As with the FMLA expansion law, DOL must make rules exempting small (fewer than 50 employees) employers and excluding health care provider and emergency response workers.  DOL also must adopt rules that “ensure consistency between” this Act, the FMLA expansion law, and the tax credit scheme described below.  Those rules will be needed to understand, for example, what Congress meant when it allowed employers to insist that employees taking this paid sick leave “follow reasonable notice procedures in order to continue receiving such paid sick time.”

Tax Credits

Employers pay Social Security taxes under Code §3111(a) and railroads pay railroad retirement contributions under Code §3221(a).  Under each Act, employers need not treat the new paid leave as wages for purposes of those taxes and may take refundable credits against those taxes equal to the total amount (up to the caps) of the new benefits paid.

Under the paid sick leave law, the per-employee credit taken in any quarter ls limited to “the excess (if any) of (A) 10, over (B) the aggregate number of days so taken into account for all preceding calendar quarters.”  The amount of that credit is increased “by so much of the employer’s qualified health plan expenses as are properly allocable to the qualified sick leave wages for which such credit is sol allowed.”  The amounts that the employer paid to provide and maintain its group health plan are “qualified health plan expenses” to the extent that they are excludable from employee gross income under Code 106(a).  Treasury is to write the allocation rules.  Self-employed individuals are granted a credit against self-employment taxes.

Under the FMLA expansion law, the payroll credit is taken against the same retirement taxes, but is capped at $200 daily and $10,000 total per employee or the amount of such tax owed by the employer for that quarter, whichever is less.  Qualified health plan expenses increase this credit, as with the sick pay tax credit. Self-employed individuals are granted tax credits, as with sick leave wages paid.  Treasury is directed to write rules needed to “minimize compliance and record-keeping burdens under this section.”