UPDATED MARCH 26, 2020

On March 18, 2020, Congress passed (and the President signed into law) the Families First Coronavirus Response Act (the Act) requiring employers with less than 500 employees to provide family and paid sick leave related to the Coronavirus (COVID-19) outbreak to eligible employees. The law is set to take effect within 15 days and is set expire on December 31, 2020.

The Act provides the following benefits regarding paid family and sick leave:

  • Employees are entitled to at least 80 hours of paid sick leave for qualifying reasons related to COVID-19;
  • Up to 12 weeks of job-protected leave under the Family and Medical Leave Act (“FMLA”) for a “qualifying need related to a public health emergency;”
  • Free COVID-19 testing for all group health plans;
  • Relief to employers who are now required to provide paid leave through a federal tax credit.

The Act also provides various support and protection programs to help those impacted by the virus.

Which employers does the Act’s paid family and sick leave provisions apply to?

The Act applies to employers with less than 500 employees. The Department of Labor (DOL) has clarified that an employer has fewer than 500 employees if, at the time your employee’s leave is to be taken, you employ fewer than 500 full-time and part-time employees within the United States ( which includes the District of Columbia, or U.S. Territory).

In making this determination, employers must include employees on leave; temporary employees who are jointly employed by you and another employer (regardless of whether the jointly-employed employees are maintained on only your or another employer’s payroll); and day laborers supplied by a temporary agency (regardless of whether you are the temporary agency or the client firm if there is a continuing employment relationship). Workers who are independent contractors under the Fair Labor Standards Act (FLSA), rather than employees, are not considered employees for purposes of the 500-employee threshold.

The DOL guidance has also suggested that whether a subsidiary employer should count its parent organization’s employees toward the threshold depends on circumstances surrounding the joint employer relationship. If the parent organization is considered a joint employer under the FLSA or an integrated employer under the FMLA, then the subsidiary employer should count the parent organization’s employees toward the 500-employee threshold. This is a fact-intensive analysis and employers should consult with employment counsel as soon as possible if they have questions about whether or not they are covered.

The following summarizes the paid family and sick leave provisions of the Act:

1. Emergency Paid Sick Leave to All Employees, Regardless of Tenure

The Act requires employers with less than 500 employees, and public employers of any size, to provide emergency paid sick time to any employee, regardless of the length of their employment, for a qualifying emergency related to the coronavirus.

Covered employers must provide the following to employees who are unable to work (or telework) for qualifying COVID-19 reasons:

  • Full-time employees: Up to 80 hours (10 days) of paid sick time.

  • Part time employees: Paid sick time equal to the number of hours that the employee works, on average, over a two-week period.  The DOL has clarified that if the normal hours scheduled are unknown, or if the part-time employee’s schedule varies, you may use a six-month average to calculate the average daily hours. Such a part-time employee may take paid sick leave for this number of hours per day for up to a two-week period, and may take expanded family and medical leave for the same number of hours per day up to ten weeks after that.

The Act outlines the following qualifying reasons and associated paid sick leave benefits (as it relates to COVID-19):

  1. Employee subject to a Federal, State, or local quarantine or isolation order;
    • Paid at 100% and capped at $511 per day ($5,110 in the aggregate).
  2. Employee has been advised by a health care provider to self-quarantine due to concerns;
    • Paid at 100% and capped at $511 per day ($5,110 in the aggregate).
  3. The employee is experiencing symptoms of the virus and seeking medical diagnosis;
    •  Paid at 100% and capped at $511 per day ($5,110 in the aggregate).
  4. The employee is caring for an individual who is subject to, or advised by a healthcare provider to self-quarantine;
    • If assisting an individual who must quarantine, the employee is paid at 2/3 of their pay rate and capped at $200 per day ($2,000 in the aggregate).
  5. The employee is caring for a child if the school, place of care, or childcare provider, is closed or unavailable due to COVID-19 precautions;
    • If caring for a child due to school/childcare closure, the employee is paid at 2/3 of their pay rate and capped at $200 per day ($2,000 in the aggregate).
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary or the Treasure and Secretary of Labor.
    • The employee is paid at 2/3 of their pay rate and capped at $200 per day and $2,000 in the aggregate.

Employees cannot carry-over COVID-19-related paid sick leave to any following year and are not entitled to payment for any unused COVID-19-related paid sick leave upon termination of employment. Notably, as discussed below, the Act was designed so that the amount of wages that employers are required to pay will not exceed the tax credit that is made available under the Act.

Can Employers Require Employees to Use Other Paid Leave?

The Act prohibits an employer from requiring an employee to use other paid leave available prior to using emergency paid sick leave under the Act. The Act also prohibits an employer from requiring as a condition of providing paid sick leave under the Act that an employee search for or find a replacement employee to cover the hours during which the employee is using paid sick leave.

What are the Notice Requirements?

Employers will be required to post a notice informing employees of their right to COVID-19-related paid sick leave under the Act in a conspicuous place.   An employer may satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website.

UPDATE – The Secretary of Labor released a model poster and FAQs on the posting requirement.

What Records Must Employers Keep When an Employee Takes Emergency Paid Sick Leave?

UPDATE – If one of your employees takes paid sick leave under the Act, you must require your employee to provide you with appropriate documentation in support of the reason for the leave, including: the employee’s name, qualifying reason for requesting leave, statement that the employee is unable to work, including telework, for that reason, and the date(s) for which leave is requested. Documentation of the reason for the leave will also be necessary, such as the source of any quarantine or isolation order, or the name of the health care provider who has advised you to self-quarantine.

UPDATE – The DOL has also clarified, that employers intending to claim a tax credit under the Act for your payment of the sick leave wages, should retain this documentation in your records and should consult Internal Revenue Service (IRS) applicable forms, instructions, and information for the procedures that must be followed to claim a tax credit, including any needed substantiation to be retained to support the credit.

2. Emergency Family and Medical Leave (Emergency FMLA) Available for COVID-19 Related Reasons

The Act amends the federal FMLA to require employers with less than 500 employees to provide leave for “a qualifying need related to a public health emergency” to certain eligible employees through the end of the year (December 31, 2020). The Act does not change the FMLA’s health benefit provisions.

Who is Eligible for this Leave?

Any full-time or part-time employee that has worked for the employer for at least 30 calendar days. It is important to note that the eligibility for emergency FMLA under the Act is different from the general FMLA eligibility requirements, which requires employees to be employed for one year, have worked for 1,250 hours, and to be working in a location where there are 50 or more employees within a 75-mile radius.

The DOL has clarified that for the purpose of the 30 calendar day count, if an individual was working for a company as a temporary employee, and the company subsequently hires them on a full-time basis, you may count any days previously worked as a temporary employee toward this 30-day eligibility period.  

What Leave Must be Provided?

Employers must provide eligible employees with up to 12 weeks of Emergency FMLA leave for a “qualifying need related to a public health emergency.” The Act describes  “qualifying need related to a public health emergency”  as an employee unable to work (or telework) to care for a child (under the age of 18) due to school or childcare closures as a result of a public health emergency. “Public health emergency” is defined by the Act as an emergency with respect to COVID-19 declared by a Federal, State, or local authority.

The Act provides that the first two weeks of the Emergency FMLA leave can be unpaid, while the following 10 weeks must be paid. The Act also provides that an employee may use emergency paid sick leave available under the Act for the first 10 days or use other paid leave otherwise available from the employer.

At what Rate are 10 weeks of Emergency FMLA paid?

The employer must pay 2/3 of the employee’s regular pay rate, up to $200 per day (and up to $10,000 total), for the number of hours the employee would otherwise be scheduled to work. Employers may be able to claim a tax credit for the amounts paid to employees. The Act was designed so that the amount of wages that employers are required to pay will not exceed the tax credit that is made available under the Act. The available employer tax credits are discussed further below.

Are there any Exceptions to the Emergency FMLA Requirements?

The Act provides an exception to the job restoration requirements that are generally required under Emergency FMLA for employers with less than 25 employees, if certain requirements are met. Job restoration will not be required for employees returning from Emergency FMLA if their position “does not exist due to an economic downturn or other changes in operating conditions of the employer” and“are caused by a public health emergency during the period of leave.”  In order to invoke this exception under the Act, the employer must:  

  • Make reasonable attempts to return the employee to an equivalent position with equivalent benefits, pay, and terms and conditions; and
  • Make reasonable efforts to contact the displaced employee for up to a year if an equivalent position becomes available.

In addition, the Secretary of Labor is authorized to issue regulations exempting businesses with less than 50 employees from the Emergency FMLA requirements when the imposition of the requirements would “jeopardize the viability of the business as a going concern.”

What are the Notice Requirements?

Employers will be required to post a notice informing employees of their right to COVID-19-related family medical leave under the Act in a conspicuous place.   An employer may satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website.

UPDATE – The Secretary of Labor released a model poster and FAQs on the posting requirement.

What Records Must Employers Keep When an Employee Takes Emergency Family Medical Leave?

UPDATE – If one of your employees takes Emergency Family Medical Leave under the Act, you must require your employee to provide you with appropriate documentation in support of the reason for the leave, just as you would for conventional FMLA leave requests. The DOL provides the following examples: a notice that has been posted on a government, school, or day care website, or published in a newspaper, or an email from an employee or official of the school, place of care, or child care provider. This requirement also applies when the first two weeks of unpaid leave run concurrently with paid sick leave taken for the same reason.

UPDATE – The DOL has also clarified, that employers intending to claim a tax credit for the expanded family and medical leave under the Act, should retain this documentation in your records and should consult Internal Revenue Service (IRS) applicable forms, instructions, and information for the procedures that must be followed to claim a tax credit, including any needed substantiation to be retained to support the credit.

3. Penalties and Enforcement for Emergency Paid Sick and Family Medical Leave

An employer who fails to provide required sick leave, or who engages in discrimination, including retaliation, faces enforcement actions under the Fair Labor Standards Act (FLSA). An enforcement action can be brought by a single employee or as a collective action, or by the US Secretary of Labor. Penalties would include payment of the unpaid wages plus an equal amount as liquidated damages, equitable relief (such as reinstatement), injunctive relief, and even criminal prosecution for willful violations. Attorney’s fees and costs can also be awarded. An employer who fails to provide proper family leave faces the enforcement provisions as described under the current FMLA provisions.

UPDATE – On March 24, 2020 the DOL issued Field Assistance Bulletin No. 2020-1 regarding a temporary non-enforcement period applicable to the Act.  The DOL will not bring enforcement actions against any public or private employer for violations of the Act occurring within 30 days of its enactment (i.e. March 18 through April 17, 2020), provided that the employer has made reasonable, good faith efforts to comply with the Act.  

4. Employer Tax Credits

The Act authorizes a refundable tax credit that employers can utilize to offset costs associated with providing benefits under the Act. The tax credit is only available to those employers required to provide benefits under the Act. The Act provides for a number of employer payroll tax credits as it relates to the mandated paid leave: 

  • Emergency Paid Sick Leave Tax Credit: Employers will be able to receive the following tax credits for payments associated with emergency paid sick leave:
    • for each calendar quarter, a tax credit for the amount the employer paid for qualified paid emergency sick leave wages, including the following:   
      • a tax credit of up to $511 per employee, per day, for paid leave taken by an individual for qualifying reasons (as discussed above); and/or  
      • a tax credit of $200 per employee, per day, for paid leave taken to care for an individual subject to quarantine/self-isolation or to care for a child whose school or child care provider is closed, or if the employee is experiencing any other “substantially similar condition.”

The tax credit is permitted to offset the tax imposed by section 3111(a) of the Internal Revenue Code (the employer portion of Social Security taxes) or 3221(a) (employer Medicare (FICA) taxes). If the credit exceeds the employer’s total liability under section 3111(a) for all employees for any calendar quarter, the excess credit is refundable to the employer.

  • Emergency FMLA Leave Tax Credit: Employers will be able to receive the following tax credits for payments associated with Emergency FMLA leaves:
    • for each calendar quarter, a tax credit for the amount the employer paid for qualified family leave wages. For example, a credit of up to $200 per employee, per day, for any paid Emergency FMLA leave provided to employees. This credit is capped at an aggregate of $10,000 for all calendar quarters per employee. 

The tax credit is permitted to offset the tax imposed by section 3111(a) (the employer portion of Social Security taxes) or 3221(a) (employer Medicare (FICA) taxes).  If the credit exceeds the employer’s total liability under section 3111(a) for all employees for any calendar quarter, the excess credit is refundable to the employer. 

  • Health Coverage Continuation Tax Credit: Employers who continue to provide health coverage to employees who take Emergency FMLA or Emergency Paid Sick Leave. Employers may receive a credit for the amount paid toward maintaining the health plan, for the amounts excluded from an employee’s gross income as it related to federal income tax. This is in addition to wages paid for qualifying leave, but it cannot exceed the credit available for Emergency FMLA and Emergency Paid Sick Leave.

The Act empowers the Internal Revenue Service (IRS) to expressly issue guidance implementing these changes and additional guidance is anticipated.

UPDATE – On Friday, March 20, 2020, the Department of Treasury, IRS and the U.S. Department of Labor (DOL) announced that employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing COVID-19 related leave to their employees. In the same announcement, the DOL clarified that it would be “issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, [DOL] will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. [DOL] will instead focus on compliance assistance during the 30-day period.”

We will update this article as soon as new information or guidance is available.

Employers should maintain records on employees who qualify for leave, which includes the reason for the leave, and the days taken in order to substantiate qualifications for the credit. As always, employers should consult with tax professionals on questions related to these tax credits.

5. Coverage of COVID-19 Testing Related Services

The Act requires most group health plans to extend coverage at no cost to plan participants and without application of any medical management requirements (such as prior authorization or utilization review) for the following services:

  •  Certain COVID-19 testing: specifically, in vitro diagnostic products for the detection of SARS-CoV-2 or the diagnosis of the virus that causes COVID-19 (“COVID-19 testing”) that are approved, cleared or authorized under sections 510(k), 513, 515 and 564 of the Federal Food, Drug and Cosmetic Act, and the administration of such in vitro diagnostic products;
  • Items and services furnished to a plan participant during a health care visit: including in-person, telehealth, urgent care, or emergency room visits that result in an order for or administration of covered COVID-19 testing;

This new coverage requirement will be effective immediately, but will only apply to covered items and services that are provided both on or after the date of enactment and before the end of the public health emergency period declared by the secretary of the Department of Health and Human Services (HHS).

The following summarizes the Act’s mandates as it relates to COVID-19 testing:

  • Private Group Health Plans: All private group health plans, regardless of employee count (including fully insured, self-insured, and grandfathered plans), must provide coverage for COVID-19 testing and the associated provider, urgent care, or emergency visit associated with the testing to plan participants without cost-sharing (including deductibles, co-payments, and coinsurance).
  • Government Plans: Medicare, Medicare Advantage, Medicaid, CHIP, TRICARE, and Indian Health Service plans must waive cost-sharing for COVID-19 testing and provider, urgent care, or emergency visits associated with that testing.
  • Uninsured Individuals: States will have the option to extend Medicaid eligibility to uninsured individuals for the purpose of COVID-19 testing. The Federal government will cover the cost of this extension. The National Disaster Medical System will reimburse uninsured individuals for costs associated with COVID-19 laboratory testing.

For more on the COVID-19 testing provisions, please see our blog.  Please note that our compliance team continues to monitor this legislation (and any additional released guidance) closely and will update this article accordingly as we learn more.

Additional Resources:

DOL – COVID-19 And the American Workplace

The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog.

Lizet Ramirez – Lizet is a Client Compliance Manager for Sequoia One, where she works with our clients to optimize and streamline benefits compliance. In her free time, Lizet enjoys live music, travel, hiking and spa days.