Families First Coronavirus Response Act: What Employers Need to Know

On Wednesday, President Donald Trump signed legislation responsive to the COVID-19 pandemic. The legislation, known as the Families First Coronavirus Response Act (Act), contains employment provisions that have two primary effects — increasing an employee’s right to take protected leave under the Family and Medical Leave Act (FMLA) and requiring employers to provide paid leave in certain circumstances, both of which are reimbursable to some employers via payroll tax credits. The Act also requires coverage changes in employer-sponsored health plans, which are effective immediately. The employment provisions of the Act are effective no more than 15 days from enactment, and the Department of Labor is directed to issue guidance within that time to assist with implementation. Here is what employers need to know now:

NEW FMLA LEAVE ENTITLEMENTS

The provision in the Act, titled “Emergency Family and Medical Leave Expansion Act,” expands the FMLA to provide additional leave (COVID-19 FMLA Leave) related to COVID-19. This new COVID-19 FMLA Leave does not expand coverage for ordinary FMLA leave. Specifically, it requires:

• Leave to be granted to an employee to care for his/her child under 18 years of age in any area in which schools have closed, or for whom a childcare provider is unavailable, due to the coronavirus outbreak.
• COVID-19 FMLA Leave applies to public employers and all private employers with fewer than 500 employees, unless the Department of Labor exercises its power under the Act to exempt private employers with fewer than 50 employees.
• To qualify for leave, employees must have been employed with the employer for at least 30 days.
• Employers are not required to pay for COVID-19 FMLA Leave for the first 10 working days; however, an employee may be paid at the employee’s request for other unused paid leave or, in most instances, will be eligible for short-term Paid COVID-19 Sick Leave as described below.
• Payment for COVID-19 FMLA Leave is calculated according to the employee’s regular rate under the Fair Labor Standards Act. Employers must pay at least 2/3 of the regular FLSA rate multiplied by the employee’s normal working hours. Pay for employees with variable hours is calculated by taking an average of pay over the prior six months.
• Employers are not required to pay more than $200 per day for COVID-19 FMLA payments and may recoup up to $200 per employee per day, capped at $10,000 for the entire period of COVID-19 FMLA Leave, by taking a tax credit against employment taxes.
• Governmental employers are not eligible for the tax credit.
• Employers with 25 or more employees would be required to reinstate employees after their FMLA leave period ends.
• Employers with fewer than 25 employers do not have to reinstate an employee if they are experiencing significant economic hardship.

NEW PAID SICK LEAVE

The provisions requiring paid sick leave (Paid COVID-19 Sick Leave) are set forth in the section, titled “Emergency Paid Sick Leave Act". These provisions applies to public employers and all private employers with fewer than 500 employees, unless the Department of Labor exercises its power under the Act to exempt certain private employers, including health care providers, first responders and private employers with less than 50 employees. Here are the specifics:

• Paid COVID-19 Sick Leave may be used if (a) the employee is in federal, state or local quarantine or isolation, (b) a health care provider has advised the employee to self-quarantine, (c) the employee is caring for an individual described above, (d) the employee is experience symptoms of COVID-19 and is seeking a medical diagnosis, (e) the employee is caring for his or her child if the child’s school or child care facility has closed due to COVID-19, or (f) the employee is experiencing another, substantially-similar condition designated by the Secretary of Health and Human Services.
• Full-time employees are entitled to 80 hours of paid sick leave for use in connection with the COVID-19 outbreak, while part-time workers are entitled to payment for the number of hours that the employee works on average during a two-week period. For employees with a varying schedule, an average over the prior six months should be used.
• Employees must be paid for hours at the greater of (a) their regular rate of pay, or (b) the federal minimum wage for for the locality, if higher, subject to the limitations on tax credits set forth below.
• Amounts paid by an employer for Paid COVID-19 Sick Leave are also eligible for recoupment as a tax credit against the employer’s payroll taxes. The daily limits on recoverable pay are different and are based on the reason for the employee’s leave. Employees who are on leave due to a quarantine or isolation order, a self-quarantine recommendation, or experiencing symptoms and seeking a medical diagnosis may be paid up to $511 per day. The maximum payment for all other Paid COVID-19 Sick Leave is $200 per day.
• Governmental employers are not eligible for the tax credit.
• Notably, in the event the employee is caring for a child or family member as opposed to taking the sick leave for him/herself, pay is further limited to 2/3 the rate described above.
• For employers and employees who operate under a collective bargaining agreement which provides for payment to a sick fund from which the employee may draw a benefit, said provision satisfies the required sick leave.
• The paid leave provisions expire on December 31, 2020.

NEW GROUP HEALTH PLAN COVERAGE

All group health plans, insured and self-insured, must cover FDA authorized COVID-19 testing at no cost-sharing and with no medical management requirements, such as prior authorizations. The testing must be provided without application of any deductible, co-insurance, or co-pay. The coverage must also include items that result in an order for COVID-19 testing. There is a great deal that is uncertain about how these rules will be applied to employer health plans. It is important that employers contact their insurers and third party administrators to discuss how this provision will be implemented since it is effective immediately.