Families First Coronavirus Response Act Signed into Law

In response to the growing health and economic crisis caused by the coronavirus (also referred to as COVID-19), on March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act (the “Act”).  This is “phase 2” of the federal government’s response to the Covid-19 pandemic.  Among others, the Act amends the Family and Medical Leave Act (“FMLA”) by including emergency provisions for paid sick leave, free testing and expanded unemployment benefits.  While most of you are familiar with the FMLA’s application to employers with 50 or more employees, with respect to these emergency provisions, that threshold is replaced by one which makes them applicable to all employers with fewer than 500 employees.  The Secretary of Labor is given the authority to exempt small businesses with fewer than 50 employees from the requirements of the Act when the imposition of the requirements would jeopardize the “viability of the business as a going concern,” and certain benefits relating to restoring employees to prior work positions appear to apply only to employers with 25 or more employees.  But for now, employers should assume that the key provisions below will apply to them.  The Act is limited to the coronavirus pandemic and goes into effect 15 days after enactment, or April 2, 2020, and expires on December 31, 2020.

The key provisions include:

Free Testing.  The Act makes free testing for coronavirus for everyone who needs a test, including the uninsured.

Paid Emergency Leave.  The Act creates a new emergency paid sick leave obligations and amends the FMLA as it relates to COVID-19 issues. Under the Act, an employee qualifies for paid sick time if the employee is unable to work (or unable to telework) because the employee:

1. is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
2. has been advised by a health care provider to self-quarantine related to COVID-19;
3. is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
4. is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
5. is caring for a child whose school or place of care is closed (or childcare provider is unavailable) for reasons related to COVID-19; or
6. is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretaries of Labor and Treasury.

Duration of Leave.  For reasons 1 through 4 and 6 above, full-time employees are to receive 80 hours of sick leave, and part-time workers are granted leave equivalent to their average hours worked in a two-week period, with the sick leave in either instance being available for immediate use regardless of the employee’s tenure at the employer.  Paid sick time does not carry over from 1 year to the next.

Use of Sick Time.  Paid sick time shall be made available to employees immediately for the purposes described above, regardless of how long the employee has been employed by an employer.  An employer may not require an employee to use other paid leave provided by the employer to the employee before the employee uses the paid sick time.

Closing of Business If an employer decides to close the business, employees will not be entitled to COVID-19 leave.

Notice to Employees.  Seven days after the Act was enacted, the Secretary of Labor is required to make publicly available a model of a notice relating to COVID-19 leave requirements. Employers are required to post and keep posted, in conspicuous places on the premises where notices are customarily posted, the notice.

Rate of Pay. If an employee takes leave for reasons relating to COVID-19, employers will be required to pay employees at least their normal wage or the applicable federal, state, or local minimum wage, whichever is greater. Employees taking time off to care for family members must be paid at two-thirds of the foregoing rate. Sick leave is capped at $511 per day and $5,110 in the aggregate for leave taken in categories (i) through (iii) described in the first bullet point above (i.e., on one’s own behalf), and capped at $200 per day and $2,000 in the aggregate for leave taken in categories (iv) through (vi) (i.e., to take care of another).

Wages required to be paid under the emergency sick leave provisions will not be subject to the 6.2 percent social security payroll tax typically paid by employers on employees’ wages.

If an employee is terminated, resigns, retires, or separates from employment for any other reason, the Act does not require financial or other reimbursement to an employee for unused paid sick time under this Act.

Penalties.  An employer who violates the Act shall be considered to have failed to pay minimum wages in violation of the Fair Labor Standards Act and will be subject to penalties related to the violation.  If an employer willfully violates the Act, employers will be subject to those penalties set forth in the FLSA, including an award of liquidated damages equal to the amount of any award for lost or unpaid wage

Tax Credits.  Employers would also receive a tax credit for qualified sick leave benefits paid under the bill.      The tax credit is allowed against the employer portion of the tax-imposed Social Security rate of 6.2 percent and the Medicare rate of 1.45 percent.  The amount is capped for each employee at $200 per day and $10,000 for all calendar quarters.   If the credit exceeds the employer’s total liability of the employer portion of Social Security and Medicare in any calendar quarter, the excess credit is refundable to the employer.  Specific rules apply that prevent a double tax benefit.

The COVID-19 situation is dynamic, with new governmental measures each day. We are available to assist employers to better understand what is permissible—and required—in confronting a public-health crisis in the workplace.  Should you have any questions, do not hesitate to contact us.