Families First Coronavirus Response Act: What Businesses & Employers Need to Know

On Saturday, March 14, 2020, the United States House of Representatives passed the Families First Coronavirus Response Act, (FFCRA) designed to expand relief in response to the COVID-19 outbreak through access to free testing, enhanced food assistance, increased Medicaid funding, paid sick leave, and unemployment benefits to workers. The FFCRA will now be considered by the Senate, which is expected to pass a version to be signed into law within a week.

Because not all provisions of the proposed FFCRA impact businesses in general, this summary does not cover all of the divisions.

Division C – The Emergency Family Medical Leave Act (Section 3101)

The Emergency Family Medical Leave Act is an emergency expansion of the Family Medical Leave Act (FMLA) of 1993 (29 U.S.C. 2612(a)(1)) that sunsets on Dec. 31, 2020. It expands the FMLA to allow coverage for a new category: leave for a “qualifying need related to a public health emergency” with respect to COVID-19. This leave would only be available during the window of time beginning 15 days after the bill is enacted and ending on Dec. 31, 2020. 

Unlike other categories of leave under the FMLA that generally apply to employers with 50-plus employees, the FFCRA applies to private employers with fewer than 500 employees, with exemptions for health care providers, emergency responders and public agencies. Exemptions also may be sought by employers with fewer than 50 employees whose economic viability would be jeopardized by complying with the new category of leave, under criteria to be determined by the secretary of labor.

Under the proposed law, employers with more than 500 employees are exempt from the Emergency Family Medical Leave Act. However, there is no specific relief from the provisions for limited liability companies, subsidiary companies, or affiliates that may have fewer than 500 employees but are part of a multi-state or multi-national company whose overall employee count far exceeds 500 employees.

The following situations qualify for leave:

• To comply with an order or recommendation of a public health official or a health care provider that the employee’s physical presence on the job would jeopardize the health of others, either because of the employee’s exposure to COVID-19 or because the employee is exhibiting symptoms of it, and the employee is unable to perform the functions of his or her job and comply with the order/recommendation;

• To care for a family member of an eligible employee if a public official or health care provider made a determination the presence of the family member in the community would jeopardize the health of others in the community, either because of the exposure of the family member to COVID-19 or the family member’s own symptoms of COVID-19; or

• To care for the employee’s child under age 18 whose school/place of care is closed or whose caregiver is unavailable due to the public health emergency.

There are two significant amendments to the FMLA for this emergency leave. First, to be eligible for the emergency FMLA, an employee need only work for the employer for 30 calendar days. In addition, there is an amendment to the definition of “family member.” It has been expanded for this category of leave to include more individuals than the existing definition of “family member” applied to other categories. It now includes “an individual who is a pregnant woman, senior citizen, individual with a disability, or has access or functional needs and who is a son or daughter of the employee; a next of kin of the employee; or a grandparent or grandchild of the employee.”

The first 14 days of this emergency FMLA leave for a public health emergency are unpaid, unless an employee voluntarily elects to use existing accrued paid vacation leave, personal leave, or medical or sick leave to cover the unpaid leave; the bill specifically prohibits an employer from requiring an employee to use existing paid leave during this time period.  However, “emergency paid sick leave” in Division E of the Bill would apply to this initial 14-day period.

Importantly – and unlike any other type of FMLA leave – the remaining period of qualifying leave for a public health emergency is paid, up to the full 12 weeks of leave, at a rate of pay “at least two-thirds of the regular rate” the employee would have earned under a normal work schedule.

If the employer is part of a multi-employer collective bargaining agreement, the employer may, consistent with its bargaining obligations and current collective bargaining agreement, satisfy its obligations for paid leave by making contributions to the multi-employer fund based on the paid leave each of its employees is entitled to working under the multi-employer collective bargaining agreement. This option is available to employers so long as the multi-employer fund enables employees to secure pay from the fund based on the hours they have worked under the multi-employer collective bargaining agreement for paid leave taken under the expanded FMLA definition outlined above.

The bill states the employer will return the employee to the same position at the conclusion of the leave for public health emergency, as with other types of FMLA leave. However, if an employer is unable to immediately reinstate the employee to the same or equivalent position because no such position exists, the employer must make “reasonable efforts” to contact and reinstate the employee during the year following the conclusion of the leave period. 

Division D – Emergency Unemployment Insurance Stabilization and Access Act of 2020 (Section 4101)

This section provides $1 billion in emergency grants to states for activities related to processing and paying unemployment insurance (UI) benefits under certain conditions. Half of this amount ($500 million) will be allocated within 60 days after the enactment of this section to all states to provide immediate funding for administrating its unemployment compensation laws, if the following requirements are met:

• Employers provide notification of the availability of unemployment compensation to employees at the time of separation;

• Applications for unemployment compensation and assistance with the application process are accessible in at least two ways: in-person, by phone, or online;

• Applicants are notified when an application is received and is being processed, and if the application cannot be processed, they are provided information about how to ensure successful processing of the application.

The remaining $500 million would be reserved for emergency grants if the state’s UI claims increase by at least 10 percent compared to the same period in the previous calendar year. These states would be eligible to receive additional grants from this reserve if they meet the following additional requirements:

• Express commitment to maintain and strengthen access to the unemployment compensation system.

• Ease eligibility requirements and access to unemployment compensation by waiving work search requirements and waiting period during the period impacted by COVID-19.

This section will remain in effect until Dec. 31, 2020.

Division E – Emergency Paid Sick Leave Act (Section 5101)

In what appears to be a supplement to the expansion of FMLA, the FFCRA also incorporates a new Emergency Paid Sick Leave Act that also applies to employers of 500 or fewer employees and public agencies with at least one employee, but it does not appear to provide any specific way for employers of fewer than 50 employees to seek an exemption. There is no requirement of any kind under this division for employers of more than 500 employees. However, there is no specific relief from the provisions for limited liability companies, subsidiary companies, or affiliates that may have fewer than 500 employees but are part of a multi-state or multi-national company whose overall employee count far exceeds 500 employees.

Under this Emergency Paid Sick Leave Act, there is no waiting period for eligibility. Employees who work full time are entitled to 80 hours of paid sick leave at their regular rate of pay and employees who work part time are entitled to a number of hours equal to the number of hours that employee works, on average, over a two-week period. This sick leave is mandated for all employees and is in addition to whatever other sick leave or paid time off (PTO) the employer has provided under its existing policies.

If the FFCRA’s Emergency Paid Sick Leave Act is enacted, the employer may not change its existing paid leave policies on the day before, the day of, or any time after the date of enactment without violating the Fair Labor Standards Act (FLSA) as if it had failed to pay minimum wages due and is subject to suit and penalties. Moreover, an employer cannot mandate that employees use their other sick leave or PTO first before this emergency sick leave, thereby ensuring an employee will be able to use this sick leave, then the expanded FMLA paid leave and still have paid PTO later in the year.

Use of this emergency paid sick leave is restricted in its use to the following cases:

• Self-isolation because of a COVID-19 diagnosis;

• To obtain a diagnosis due to symptoms of COVID-19;

• To comply with a recommendation of a public health official with jurisdiction or a health care provider on the basis that the physical presence of the employee on the job would jeopardize the health of others because of exposure to COVID-19 or symptoms;

• To care for a family member of the employee who meets all of the above-mentioned criteria; or

• To care for a child if his or her school or place of care has been closed or the child care provider is unavailable due to COVID-19. 

The paid sick leave is paid at the employee’s regular rate for the first three categories and at two-thirds of the employee’s regular rate to care for a family member or a child whose school or place of care has closed or whose child care provider is unavailable due to COVID-19.

As a cautionary note for employers, the Emergency Paid Sick Leave Act carries its own definitions as to what types of relationships trigger eligibility for leave that may be different than what would trigger eligibility for paid sick leave or PTO under a company’s own PTO policies. For example, caring for a child can include caring for the child of a domestic partner and a domestic partner need not be a spouse; a family member can include an individual who is pregnant, a senior citizen, or a person with a disability and who is also a sibling of the employee, a next of kin of the employee, or a grandparent or grandchild of the employee.

The employer may not require the employee involved to search for a replacement to cover the hours during which the employee is using paid sick time. The time is immediately available, with no waiting period. The Emergency Paid Sick Leave Act has a sunset provision of Dec. 31, 2020 and does not permit any carryover of this particular paid sick leave. Finally, it should be noted that the Emergency Paid Sick Leave Act refers to definitional terms in both the FLSA and the FMLA. 

If the employer is part of a multi-employer collective bargaining agreement, the employer may, consistent with its bargaining obligations and current collective bargaining agreement, satisfy its obligations for paid sick leave by making contributions to the multi-employer fund based on the hours of paid sick time the employees are entitled to working under the multi-employer collective bargaining agreement. This option is available to employers so long as the multi-employer fund enables employees to secure pay from the fund based on the hours they have worked under the multi-employer collective bargaining agreement.

Division G – Tax Credits For Paid Sick and Paid Family and Medical Leave

The FFCRA provides tax credits for employers to assist with covering wages paid to employees who take time off under the sick or family leave programs. 

Sick Leave Program – Payroll Tax Credit. Subject to certain limitations, employers would be eligible for a refundable tax credit to be applied against the employer’s payroll tax liability equal to wages of up to $511 per day paid to an employee making use of the sick leave program to care for the employee, or wages of up to $200 per day paid to an employee making use of the sick leave program to care for a child or family member. The aggregate amount of days per employee eligible for this tax credit is 10 total. 

Emergency Family Leave Program – Payroll Tax Credit. Employers would also be eligible for a refundable tax credit to be applied against the employer’s payroll tax liability equal to wages, per employee, of up to $200 per day (or a total of $10,000) paid to an employee making use of the family leave program, again subject to certain limitations. 

With respect to these family leave payroll tax credits, an employer who is otherwise allowed a credit for family and medical leave under Internal Revenue Code 45S cannot get a double benefit. Employers may opt out on a quarter-by-quarter basis. Presumably, this election would be made to take other tax benefits.

Self-Employment Tax Credits

Self-Employment Sick Leave Tax Credit. A similar refundable tax credit would also be available for certain self-employed individuals under the FFCRA, to be applied against such individuals’ self-employment tax. With certain restrictions on the number of days an individual may claim the credit, the self-employment sick leave tax credit would cover 100 percent of a self-employed individual’s “qualified sick leave equivalent” (if using the sick leave program to care for the individual), or 67 percent of the qualified sick leave equivalent (if using the sick leave program to care for a child or family member). The “qualified sick leave equivalent” would be the lesser of (a) the average daily self-employment income for the individual for the taxable year, per day, or (b) (i) $511 per day paid to an employee while caring for the employee, or (ii) $200 per day while caring for a child or family member. The taxpayer can take advantage of the self-employment tax credit for an aggregate of 10 days.

Self-Employment Emergency Family Leave Tax Credit. Self-employed individuals could also be eligible for a family leave tax credit of the lesser of (a) the average daily self-employment income for the individual for the taxable year, per day, or (b) $200. This family leave tax credit would be available for up to 50 days.

The tax credit will be available for employers on wages paid through Dec. 31, 2020, and state and local government employers are not eligible for the tax credits mentioned. 

The U.S. Treasury Department is expected to issue regulations to help guide employers on how to use the tax credits following the enactment of the FFCRA.