Families First Coronavirus Response Act: Summary of the Employment Provisions of the New Law

By Kevin M. Brown, Audrey E. Chastain, Carlene Y. Lowry, Soheila Shahidi, Rebecca A. Winterscheidt, Elizabeth S. Wylie and Marian Zapata-Rossa

On March 18, President Donald Trump signed the Families First Coronavirus Response Act (“FFCRA” or the “Act”), taking a major step to provide paid leave to workers affected by COVID-19 and blunt the effects of the virus on the U.S. economy.

Overview: The Act contains two sections dealing with employee leave rights. Each has its own name, the Emergency Family Medical Leave Expansion Act (“EFMLEA”) and the Emergency Paid Sick Leave Act (“EPSLA”).  The EFMLEA requires employers to provide 12 weeks of job-protected leave, 10 of which are paid, to workers with children affected by coronavirus-related school and daycare closures.  The EPSLA requires employers to provide full-time employees with 80 hours of paid sick time, and part-time employees with a number of paid sick time hours equal to the average number of hours they worked over a two-week period in certain enumerated circumstances. 

Both of these laws will become effective on April 2, 2020, providing employers some limited time to plan for compliance.  The current law is only a temporary relief measure and the benefits provided by the EFMLEA and EPSLA will expire at the end of 2020. The key points of each section are described in more detail below.

Which Employers Are Affected:  Private employers with fewer than 500 employees are covered by the EFMLEA and EPSLA requirements.  The Department of Labor (“DOL”) has the authority to exclude from the EFMLEA and EPSLA certain health care providers and emergency responders.  The DOL may also exclude employers with less than 50 employees, under limited circumstances.  We expect that regulations and guidance will be forthcoming to clarify eligibility for these possible exemptions.

Cost to Employers:  The FFCRA provides employers with a refundable tax credit against the employer’s share of Social Security and Medicare Tax (FICA Tax) or excise tax for employers subject to the Railroad Retirement Tax Act (RRTA Tax), as applicable.  The credit is equal to 100% of the “qualified family leave wages” and “qualified sick leave wages” (collectively the “qualified wages”) required to be paid pursuant to the FFCRA for each calendar quarter.  Employers can also receive a credit for “qualified health plan expenses” (amounts paid or incurred by the employer to provide and maintain a group health plan), but only to the extent that such amounts are excluded from the gross income of employees under an employer-provided accident or health plan (i.e., excludable per Code Section 106(a)).  In addition, a credit may only be obtained for the portion of the qualified health plan expenses properly allocable to the qualified wages.  Generally, the allocation shall be pro rata among covered employees and pro rata on the basis of periods of coverage (relative to time periods of leave). 

The credit may be taken against the FICA Tax or RRTA Tax paid in relation to all employees of the employer (subject to reductions for certain credits against the FICA Tax).  If the FICA Tax or RRTA Tax owed is insufficient to cover total qualified wages, then the excess qualified wages shall be refunded to the employer. 

If an employer claims a credit for qualified wages, the amount claimed must be included in gross income of the employer.  In addition, if a credit is taken into account under this section with respect to wages, then such wages shall not be taken into account for the paid family and medical leave credit (Code Section 45S).

Regulations and/or other guidance are forthcoming, but it appears that the credit may be taken against the FICA Tax that would otherwise be owed on or after April 2, 2020.  This is based on a provision in the Act stating that regulations or other guidance shall be prescribed to provide for waiver of penalties for failure to deposit amounts in anticipation of the allowance of the credit.

Alternatively, employers may elect not to have the above provisions apply. The Act provides similar credits against self-employment tax for self-employed individuals. 

EFMLEA

Overview:  Private-sector employers with fewer than 500 employees, and covered public-sector employers, must provide up to 12 weeks of job-protected FMLA leave for “a qualifying need related to a public health emergency” to employees who have been on the payroll for 30 calendar days.  “Qualifying need” is limited to circumstances where an employee is unable to work (or telework) due to a need to care for a minor child if the child’s school or place of childcare has been closed or is unavailable due to a public health emergency.  

Pay:  The EFMLEA would provide up to 12 weeks of job-protected family and medical leave for the number of hours that would normally be scheduled, 10 of which weeks must be paid, generally at 2/3 the employees’ normal rate up to $200 per day or $10,000 total. 

Key points:

• The EFMLEA adopts a different definition of "employer" than that used by the FMLA. Under the EFMLEA, all companies that employ fewer than 500 employees will be subject to the Act. The current definition of "employer" under the FMLA covers companies with 50 or more employees.
• Employees will be eligible for EFMLEA leave if they have been employed by their company for at least 30 calendar days.  Currently, employees are not eligible for FMLA leave until they have worked for their employer for at least one year and completed 1,250 hours of service within the prior 12-month period.
• The DOL will have the authority to issue regulations that exclude from the definition of “eligible employee” certain health care providers and emergency responders.  The DOL will also have the ability to exempt employers with less than 50 employees if offering the leave would “jeopardize the viability of the business.” Employers are also authorized to exclude their own employees who are health care providers or emergency responders from this EFMLEA entitlement.
• The emergency leave will be available if the employee has a qualifying need related to a public health emergency.  An employee would meet this standard if the employee requested leave to care for the employee’s son or daughter under 18 years of age if the school (elementary or secondary) or place of care has been closed, or the childcare provider is unavailable due to a public health emergency.
• The first 10 days of EFMLEA leave could be unpaid.  An employee may, but cannot be required to, substitute any accrued vacation, personal, medical or sick leave for this period of unpaid EFMLEA leave.
• Unused EFMLEA time automatically expires December 31, 2020, and cannot be carried over to the following year.

EPSLA

Overview: The EPSLA requires private employers with fewer than 500 employees, and covered public employers, to provide full-time employees with 80 hours of paid sick time, and part-time employees with a number of paid sick time hours equal to the average number of hours they worked over a two-week period.  An employee may use paid sick time if they are unable to work or telework because: (1) the employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19; (2) the employee has been advised by a health care provider to self-quarantine because of COVID-19; (3) the employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis; (4) the employee is caring for an individual subject to a quarantine or isolation order by a governmental entity, or advised by a healthcare provider to quarantine; (5) the employee is caring for a son or daughter whose school or place of care is closed, or childcare provider is unavailable, due to COVID-19 precautions; or (6) the employee is experiencing substantially similar conditions as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.

Pay:  The EPSLA limits an employer’s paid leave requirement to $511 per day ($5,110 in the aggregate) where leave is taken for reasons (1), (2), and (3) noted above (generally, an employee’s own illness or quarantine), and 2/3 the regular rate of pay up to $200 per day ($2,000 in the aggregate) where leave is taken for reasons (4), (5), or (6) (care for others or school closures).  Read together with the EFMLEA, employees may use EPSLA payments to fill in the gap left by the 10-day unpaid leave period in the EFMLEA and ensure that workers taking EFMLEA leave receive a full 12 weeks’ pay.

Key points:

• The DOL is authorized to issue exemptions to employers of health care providers and emergency responders, and to issue a more limited exemption from the obligation to provide sick leave due to child care obligations, reason (5), to businesses with fewer than 50 employees if offering the leave would “jeopardize the viability of the business.” 
• Employers may require employees to follow reasonable notice procedures, but only after the first workday (or portion thereof) that the employee receives emergency paid sick time.
• Within seven days of the date of enactment, or by March 25, 2020, the U.S. Secretary of Labor is expected to have a model notice available, which employers will be required to post in a conspicuous place in the workplace where employee notices are customarily posted. 
• Unused EPSLA time automatically expires December 31, 2020, and cannot be carried over to the following year.
• An employer may terminate an employee’s paid sick time beginning with the employee’s next scheduled work-shift immediately after the employee’s need for emergency paid sick time ceases. 
• Employers may not require employees to use their existing paid leave before they may use the EPSLA leave.  However, the corrected EPSLA, as passed into law, does not prohibit employers from revising their existing paid leave policies after passage of the Act.
• Employers cannot require employees to find a replacement to cover a shift when taking EPSLA leave.