On March 18^th the Senate passed, and the President signed, the Families First Coronavirus Response Act, which among other things will provide paid family and sick leave to individuals in the U.S. affected by the COVID-19 coronavirus.  The new law has a significant future impact on businesses with fewer than 500 employees.  The law is effective April 1, 2020 and ends December 31, 2020.

Employers must post a notice about leave entitlements in a conspicuous location; the Department of Labor is expected to publish a model notice for positing by March 26. In addition, small businesses with fewer than 50 employees, may be exempt from the new provisions. Any exemptions would be granted by the Secretary of Labor, who will likely communicate those guidelines, and how businesses may request an exemption, prior to the law taking effect on April 1.

The act consists of two parts – the “Emergency Family and Medical Leave Expansion Act” and the “Emergency Paid Sick Leave Act.”

Emergency Family and Medical Leave Expansion Act

Beginning April 1, the new law will require employers with fewer than 500 employees, with some exceptions, to provide 12 weeks of protected leave to eligible employees who are unable to work, including telework.  A “qualifying need” is defined as being unable to work, or telework, due to a need for leave to care for the employee’s minor child if the child’s elementary or secondary school or place of care has been closed, or a child care provider is unavailable, due to a public health emergency.  Significantly, the provisions in the original version of the law allowing for FMLA leave due to an employee exhibiting symptoms of COVID-19 or to care for a family member exhibiting symptoms of COVID-19 were removed from the final legislation.

The 500-employee threshold under the emergency FMLA is a significant change from the current FMLA threshold of 50 or more employees.  An “eligible employee” is any employee who has been employed for at least 30 days.  This is a significant change from the required 12 months and minimum 1,250 aggregate hours under the current law.

The first two weeks of the employee’s emergency FMLA leave may consist of unpaid leave, but the employee may choose to substitute any accrued, unused vacation, PTO or paid sick leave benefits for the unpaid leave. The remainder of emergency FMLA pay must be provided by the employer. Therefore, a covered employer must provide at least 10 weeks of qualifying paid emergency FMLA leave to a covered employee.  The remaining 10 weeks of paid leave must be at least 2/3rds of an employee’s regular rate of pay (or average rate of pay for last 6 months for employees without regular schedules) and reflect the number of hours an employee would otherwise be normally scheduled to work. The paid leave is capped, however, at $200 per day and $10,000 in the aggregate.

Employees taking leave would be entitled to job restoration.  Smaller employers (i.e., those with less than 25 employees) may be able to deny reinstatement under certain very limited circumstances provided they make reasonable efforts to offer the employee an equivalent alternative position.  The Families First Act did not change the FMLA’s health benefit continuation provisions, which requires an employer to continue group health coverage for an employee on FMLA leave.  Whether an employee’s other benefits will continue if the employee takes leave for a public health emergency depends on the terms of the benefit plan documents and leave policies.

Emergency Paid Sick Leave Act

Also beginning April 1, the new law will require employers with fewer than 500 employees to provide all employees paid emergency sick leave under the Emergency Paid Sick Leave Act, even new hires and part-time employees, regardless of the length of time they have been employed. Employees are not required to first use other available paid leave before using paid sick leave under the Act. This leave is in addition to any paid sick leave, vacation or PTO currently provided by employers under State law.  Significantly, for Michigan businesses this means that the federal sick leave is in addition to the Michigan Paid Medical Leave Act enacted in 2019.

An eligible employee may take paid sick leave if they are unable to work (including telework) due to one of the following six reasons:

19. The employee is subject to a federal, state or local quarantine or isolation order related to COVID-19.
20. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
21. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
22. The employee is caring for an individual who is subject to an order or quarantine.
23. The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed or the childcare provider of such son or daughter is unavailable due to COVID-19 precautions.
24. 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.

If an employee uses emergency paid sick leave to care for themselves for reasons A, B, or C listed above, employers must pay the employee their regular compensation up to a maximum of $511 per day or $5,110 in the aggregate.

If an employee uses emergency paid sick leave to care for a family member or for reasons D, E, or F listed above, employers must pay the employee either two-thirds of their regular compensation or the minimum wage, whichever amount is greater, up to a maximum of $200 per day or $2,000 in the aggregate.

For full-time employees, an employee is entitled to 80 hours of sick leave.  For part-time employees, the number of hours that employee usually works, on average, over a two-week period. For example, if the employee works 20 hours per week, they would be entitled to 40 hours of sick leave.  Emergency paid sick leave does not carry over into the following calendar year, and employers are not required to pay out unused leave upon an employee’s termination from employment.

Exclusions and Tax Credit Support

The Secretary of Labor has the authority to exempt employers with fewer than 50 employees from the requirements of the paid leave mandates if providing the paid leave would jeopardize the business’s viability.  At this point in time no exclusion has been published.

In addition, under the new federal law, employers will receive quarterly tax credits for paid FMLA or sick leave, allowing credits against the employers’ portion of Social Security taxes. Employers are entitled to credit for qualified family leave wages, up to $200 per day for each individual and $10,000 total with respect to all calendar quarters.

Please contact Shinners & Cook P.C.’s business and employment law attorneys at any time for additional information and support.