Families First Coronavirus Response Act Is Signed Into Law, Providing Paid Family and Sick Leave for Many Affected Employees

I. INTRODUCTION

On March 18, 2020, President Trump signed the Families First Coronavirus Response Act, H.R. 6201 (the “Act”), an economic stimulus plan aimed at addressing the impact of COVID-19. Specifically, the Act amends the Family and Medical Leave Act (“FMLA”) to establish a temporary additional reason for leave that is related to the coronavirus and provides reduced pay for leave beyond two weeks. It also provides eighty (80) hours of paid sick leave to employees affected by COVID-19. The changes will take effect on April 1, 2020 and remain in place until December 31, 2020. These provisions only apply to employers with less than five hundred (500) employees, so many American workers will not be eligible for the expanded emergency benefits. Additionally, the Secretary of Labor may issue regulations exempting employers with less than fifty (50) employees from the expanded FMLA requirements if adhering to them would jeopardize the business’s viability.

II. BACKGROUND

H.R. 6201 passed on a 363-40 vote in the House of Representatives the morning of March 14. Treasury Secretary Steven Mnuchin has stated that his agency would advance funds to businesses so that they can meet the paid sick leave requirements of the new law. A “corrected” version of the Act was approved by the House on March 16, and was thereafter sent to the Senate. On March 18, the Senate passed the Act on a 90-8 vote. President Trump signed the bill into law on March 18, 2020.

III. THE ACT’S FAMILY AND MEDICAL AND PAID SICK LEAVE PROVISIONS

A. Family and Medical Leave

The Act expands the FMLA on a temporary basis. Employees who have worked for the employer for at least thirty (30) days are eligible. The FMLA typically requires that employees work for the employer for twelve (12) months before being eligible for leave and excludes employees at worksites where the employer has less than fifty (50) employees within a seventy-five (75) mile radius. Under the temporarily amended FMLA, an employee may take up to twelve (12) weeks of job-protected leave to allow the employee to care for the employee’s child if the child’s school or place of care has been closed due to a public health emergency.

The first ten (10) days of FMLA leave for the above-stated reasons are unpaid, but an employee can elect to substitute any accrued paid time off to cover some or all of the ten (10) day unpaid period. Notably, an employer may not require any such substitution. After ten (10) days, the employer must pay all full-time employees two-thirds the employee’s regular rate for the number of hours the employee would normally be scheduled. Employees with a part-time or irregular schedule are entitled to pay based on the average number of hours per week they worked during the six months prior to taking emergency FMLA leave. Paid leave cannot exceed two hundred dollars ($200) per day or ten thousand dollars ($10,000) in the aggregate.

Additionally, employers with fewer than twenty-five (25) employees are excluded from the obligation to provide an employee who has taken emergency leave with the same or similar position, so long as the employer makes reasonable attempts to return the employee to the prior position Finally, the Act provides some exemptions for small businesses. The Secretary of Labor can exempt businesses with fewer than fifty (50) employees when the imposition of the expanded FMLA’s requirements would jeopardize the viability of the business.

B. Paid Sick Leave

Pursuant to the Act, covered employers will also be required to immediately provide employees with up to eighty (80) hours of additional paid sick leave (or the equivalent of two weeks of hours for all part time employees). The additional sick leave may be used in the following circumstances: (1) the employee is subject to a federal, state, or local quarantine order related to COVID-19; (2) the employee has been advised by a health care provider to quarantine; (3) the employee is experiencing symptoms of COVID-19 and is seeking diagnosis; (4) the employee is caring for an individual who is subject to a federal, state, or local quarantine order related to COVID-19 or has been advised by a health care provider due to a concern related to COVID-19; (5) to care for a child of the employee if the school or place of care has been closed due to coronavirus; and (6) the employee experiences “any other substantially similar condition” specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and Secretary of Labor. In circumstances (1), (2), and (3), paid sick leave must be provided at an employee’s regular rate of pay. In circumstances (4), (5), and (6), paid sick leave must be provided at two-thirds the employee’s regular rate. Paid sick leave wages are capped at $511 per day up to $5,110 total per employee for circumstances (1), (2), and (3) and $200 per day up to $2,000 total per employee for circumstances (4), (5), and (6). The sick time will be available for immediate use regardless of how long an employee has been employed. Any paid sick leave accrued due to coronavirus will not carry over to the following year. An employer may not require an employee to use other accrued paid leave before the employee uses the emergency leave under the Act. Notably, a section that had existed in earlier versions of the bill stating that paid sick leave under the Act was in addition to existing paid leave provided by the employer was deleted and does not appear in the Act.

C. Payroll Tax Credits for Family and Medical Leave and Paid Sick Leave

For wages paid starting within fifteen (15) days of enactment and ending December 31, 2020, the Act provides employers a refundable quarterly tax credit that may offset certain employment tax liabilities payable for old age, survivors, and disability taxes (commonly known as OASDI taxes) or taxes imposed as part of 3222(a) of the Internal Revenue Code for an amount up to 100% of qualified family leave wages and qualified sick leave wages paid pursuant to the Act. Subject to certain limitations, the excess of the credits payable for the qualified family leave wages and qualified sick leave wages (capped as described in subsections A and B above) over such employment tax liabilities will be refunded to the taxpayer. The tax credit for paid sick leave will equal the qualified sick leave wages based on the employee’s leave circumstances ($511 per day for circumstances (1), (2), or (3) or $200 per day for circumstances (4), (5), or (6), multiplied by up to ten (10) days). The tax credit for family and medical leave is limited to $200 per day or $10,000 in the aggregate. In addition, the amount of refundable tax credits will be increased by (a) the employer’s qualified health plan expenses as properly allocable to the qualified leave wages; and (b) the employer’s portion of Medicare tax withheld for such family leave wages and sick leave wages. Employers may elect to not apply these tax credits for any calendar quarter. The Act also provides similar relief for self-employed individuals.

IV. TAKEAWAYS

Employers should keep the following in mind:

• Employers with over five hundred (500) employees do not have to comply with the obligations in the Act. However, these employers should track local developments carefully as some states or localities may adopt their own family leave and paid sick leave policies in response to coronavirus.
• The Act allows the Secretary of Labor to issue regulations exempting employers with less than fifty (50) employees, to the extent that the Act’s requirements “would jeopardize the viability of the business as a going concern.”
• The changes to the FMLA and federal paid sick leave law are temporary and only relate to the effects of the coronavirus public health emergency. Any obligations end on December 31, 2020.
• The FMLA expansion does not apply to employees who need to be quarantined because of exposure to or symptoms of coronavirus nor to employees who aid family members who need to be quarantined or are symptomatic. Only employees who need to care for children as a result of a school or place of care closure are eligible for the emergency additional leave.
• The Act does not cover employees who are unable to work solely due to business determinations or closures.
• Employers who pay sick leave required by the Act are entitled to a limited quarterly tax credit that will help defray the added cost of mandated sick pay.

If you have any questions regarding the Act or how it may impact your company’s policies or practices, please contact the authors of this alert or your O’Melveny advisor.