Over the past month, COVID-19 has caused significant damage to U.S. businesses and workers. In response, the federal government has sought to stem the tide with measures designed to keep companies solvent, workers retained and compensated, and unemployed individuals above water. Measures of this scale, however, are complicated and have left many business owners and employees with more questions than answers. This article will focus on a top-line summary of the Families First Coronavirus Response Act (“FFCRA”) and the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) and what they may mean for you or your business.
Government Promotes Paid Leave and Employee Retention in Effort to Protect Economy
On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (“FFCRA”), requiring paid leave for employees who are unable to work for reasons related to the pandemic emergency. That was quickly followed by the Coronavirus Aid, Relief, and Economic Security Act (“CARES”), enacted on March 27, 2020, which expands unemployment compensation benefits while offering financial incentives for businesses to retain and continue paying their workers during the burgeoning economic slowdown.
Families First Coronavirus Response Act (FFCRA)
Among other provisions, the FFCRA establishes the Emergency Paid Sick Leave Act (“Paid Leave Act”) and the Emergency Family and Medical Leave Expansion Act (“FMLEA”), both of which seek to protect employees who are forced to take leave for specific reasons related to COVID-19.
The Paid Leave Act
Under the Paid Leave Act, companies with less than 500 employees must provide paid leave to employees who are unable to work for any of the following reasons:
- The employee is subject to a federal, state, or local quarantine or isolation order related to the coronavirus;
- The employee has been advised by a healthcare provider to self-quarantine due to concerns related to the coronavirus;
- The employee is experiencing symptoms of the coronavirus and is seeking a medical diagnosis;
- The employee is caring for an individual who is subject to an order as described in category (1) or has been advised as described in category (2);
- The employee is caring for his or her son or daughter if the son or daughter’s school or place of care has been closed, or the childcare provider is unavailable; or
- The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretary of the Treasury and the Secretary of Labor.
Covered employers must provide up to 80 hours (i.e., two weeks) of paid sick leave to full-time employees who require leave for one of the above-referenced reasons. Part-time employees, on the other hand, are entitled to paid leave for up to the average number of hours that they would normally work over a two-week period. For example, a part-time employee who works two eight-hour shifts per week (i.e., 16 hours per week) would be entitled to up to 32 hours of paid sick leave.
An employee who takes leave on the basis of Categories 1, 2 or 3 above must be paid at his or her regular rate of pay, capped at $511 per day or $5,110 in the aggregate. On the other hand, an employee who takes leave on account of Categories 4, 5 or 6 above must be paid at two-thirds his or her regular rate of pay, capped at $200 per day or $2,000 total. Employers who provide paid sick leave under the Act are entitled to a tax credit for the full amount of paid leave given, subject to the applicable caps.
The FMLEA covers employees who have been employed for at least 30 calendar days by employers with fewer than 500 employees. This constitutes a significant expansion from the original FMLA, which only applies to employees who have been employed for at least one year, have worked for at least 1,250 hours, and work in a location where the employer has at least 50 employees within a 75-mile radius.
Under the FMLEA, an employee is entitled to partially paid and job-protected leave in order to care for a son or daughter (under 18 years of age) whose school or place of care has been closed, or whose childcare provider is unavailable, in connection with the coronavirus-related state of emergency. Readers will note that this is also the fifth category for leave under the Paid Leave Act.
Employees who qualify for leave under the FMLEA are entitled to two weeks of unpaid leave, followed by ten additional weeks of paid leave at two-thirds of their regular rate of pay, capped at $200 per day and $10,000 in the aggregate. As with the Paid Leave Act, employers who provide paid leave under the FMLEA will be entitled to tax credits up to the capped amounts.
In addition to providing partial paid leave, the FMLEA obligates employers to reinstate employees to their existing positions once the basis for leave concludes. However, employers with fewer than 25 employees may be eligible for an exemption from this requirement if they can demonstrate that the employee’s position was eliminated during the leave period because of deteriorating economic conditions or other changes in operations caused by the pandemic emergency.
Finally, the FMLEA authorizes the U.S. Department of Labor to issue future regulations exempting small businesses (fewer than 50 employees) from the requirements of both the Paid Leave Act and the FMLEA, upon a determination that the law’s obligations would threaten the ability of such companies to remain a going concern. Although it is currently unclear how the DOL will administer the exemption process, that topic is expected to be covered in the implementing regulations, which are forthcoming.
The DOL is expected to issue interpretive regulations for the FFRCA’s employment provisions shortly. In the meantime, it has issued the following guidance to covered employers:
- Answers to frequently asked questions about the FFRCA;
- Answers to frequently asked questions about Covid-19 and the Fair Labor Standards Act; and
- Answers to frequently asked questions about Covid-19 and the Family and Medical Leave Act.
The CARES Act (CARES)
While the FFCRA establishes a right to paid and/or protected leave in connection with the COVID-19 health emergency, employers may still avoid or lessen those pay obligations through layoffs, furloughs, and wage reductions. The CARES Act establishes a number of financial incentives to dissuade companies from choosing those options. Some of the key incentives are as follows:
Through the Paycheck Protection Program, the Act calls for the issuance of advantageous loans (carrying potential subsidies and deferment relief) to small businesses that are struggling to maintain business operations in the coronavirus-related economic downturn. Recipients must use the loans for expenditures that promote employee retention and the continuation of business operations, including: payroll costs, employee health care costs, employee compensation, mortgage interest payments, rent, utilities, and interest on other existing debt obligations.
The Program further offers a sliding scale of loan forgiveness, up to the full principal amount of the loan, depending on the extent to which a company maintains its full workforce at existing wage rates. Companies applying for these loans must certify in good faith that the loans are necessary to support continuing operations during the downturn.
The Act directs the Small Business Administration to award grants of up to $10,000 to small businesses negatively impacted by COVID-19. The grants may be used for the following purposes: payment of sick leave to employees who cannot work for coronavirus-related reasons; maintenance of payroll to retain employees during business interruptions; payment of additional costs caused by supply chain interruptions; payment of rent or mortgage; and avoidance of default on existing unmet debt obligations.
The Act offers a social security tax credit – amounting to 50% of “qualified wages” paid to employees between March 13, 2020 and December 31, 2020 — to businesses that encounter a full or partial suspension of business operations for reasons related to COVID-19. For companies with 100 employees or less, “qualified wages” are defined as all wages paid to employees during the relevant time period. For larger employees, on the other hand, “qualified wages” only include wages paid to employees during time periods in which they are not working, or when gross receipts are reduced by 50 percent or more.
In addition to the financial incentives offered to businesses, the CARES Act also provides significant increases in unemployment compensation benefits to employees who either lose their jobs or become partially employed in connection with the COVID-19 emergency. Among other things, the Act provides thirteen additional weeks of unemployment compensation benefits to eligible individuals, including an additional $600 in compensation per week between now and July 31, 2020.
This article constitutes a top-line summary of the FFCRA and CARES Act, and there are numerous additional provisions and details within the laws that relate to employee workplace issues. Jimerson Birr will be providing an updated assessment of coronavirus-related workplace legal issues in a webinar next week, which will include a question and answer session with participants. Employers are encouraged to send their questions in advance using the links below. Employers with questions regarding employment-related legal matters, including those related to COVID-19, are additionally encouraged to reach out for guidance and assistance.
For expansion on this topic, the author hosted a live webinar on April 8, 2020.