Below we summarize several legal developments that affect many of our clients. Please review them and contact any of the MMB attorneys with whom you have worked if you have questions and wish to discuss issues in greater detail. Be sure to return frequently to the News & Resources page of our website for further updates.
The new federal leave legislation
The Families First Coronavirus Response Act (“FFCRA”) is the recently-signed federal law that creates two new types of paid leave: (1) Public Health Emergency Leave (“Emergency FMLA”) and (2) Emergency Paid Sick Leave (“Emergency PSL”). The FFCRA applies to all employers with less than 500 employees. The new leave provisions go into effect on April , 2020 and provide leave rights to those persons who are employed as of April 1, 2020.
The DOL is required to provide employer guidance regarding their duties under the FFCRA before the April 1 effective date. The guidance should be available here.
Emergency FMLA
The FFRCA expands the Family and Medical Leave Act of 1993 (“FMLA”) to provide up to 12 weeks of protected leave, 10 of those weeks with pay, to any individual employed for at least 30 days (before the first day of leave). The Emergency FMLA covers a considerably broader set of employees than the FMLA because it protects all employees who were employed for at least 30 days, regardless of how many hours they worked.
Employers must provide 12 weeks of job-protected leave to allow an employee who is unable to work or telework to care for the employee’s child (under 18 years of age) if the child’s school or place of care is closed or the childcare provider is unavailable due to a public health emergency. This is the only qualifying need for Emergency FMLA and a significant change from the prior version of the proposed law. Employees may begin to use the leave starting immediately; the leave may be used up through December 31, 2020.
Under the Emergency FMLA, the first 10 days are unpaid. An employee may use other accrued paid leave, including Emergency PSL, during the first ten days. For the remaining 10 weeks, eligible employees will receive two-thirds pay. This leave that is capped at $200 per day ($10,000 total over 10 weeks). The employer’s costs of complying with the Emergency FMLA are to be offset by refundable payroll tax credits described below.
The labor department can exempt employers with fewer than 50 workers from having to pay these benefits if it would jeopardize the business. Further, employers who employ fewer than 25 employees may be exempt from holding open an employee’s position, but this is a fact specific analysis.
Emergency PSL
Under the FFCRA, all employers must provide all full-time employees with 80 hours of Emergency PSL on April 2, 2020. Part-time employees must receive a prorated amount of hours based on the average number of hours worked over a 2-week period. There is no waiting period for use of Emergency PSL.
Employees may use Emergency PSL for any of the following reasons:
- The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
- The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19
- The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
- The employee is caring for an individual who is subject to an order as described in reason for use (1) or has been advised as described in reason for use (2) (as described above).
- 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 child care provider of such son or daughter is unavailable, due to COVID-19 precautions.
- 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.
The amount of Emergency PSL must be equal to the employee’s regular pay for reasons 1-3 and is capped at $511 per day (total of $5,110 for 80 hours). If caring for a child or family affected by coronavirus (reasons 4-6), it must be two-thirds of the employee’s regular pay and capped at $200 per day (total of $2,000). Emergency PSL is in addition to any other paid sick leave to which the employee may be entitled.
The labor department can exempt employers with fewer than 50 workers from having to pay these benefits if it would jeopardize the business.
Employees on FMLA leave are entitled to the continuation of group health insurance coverage under the same conditions as coverage would have been provided if the employee had been continuously employed during the leave period.
Employers of health care providers or emergency responders may elect to exclude employees from the Emergency FMLA and Emergency PSL provisions.
Employers with 500+ employees
Employers with more than 500 employees do not need to provide Emergency FMLA and Emergency PSL. These employers, however, still must comply with the FMLA. The FMLA entitles eligible employees (those that have worked for at least 1,250 hours in the last 12 months) of covered employers to take up to 12 weeks of unpaid, job-protected leave in a designated 12-month leave year for specified family and medical reasons. This may include the coronavirus where complications arise that create a “serious health condition” as defined by the FMLA. The cold or flu may be a serious health condition for FMLA purposes if the individual is incapacitated for more than three consecutive calendar days and receives continuing treatment by a health care provider. However, leave taken by an employee for the purpose of avoiding exposure to the virus likely would not be protected under the FMLA.
How to count employees
Although the FFCRA provisions do not specify how employees are counted for purposes of the FFCRA, we suggest relying on definitions utilized by the FMLA. Thus, any employee whose name appears on payroll will be considered employed each working day and must be counted regardless of whether or not compensation is received. Employees who are on paid or unpaid leave (including FMLA leave) or disciplinary suspension are counted as long as the employer has a reasonable expectation that the employee will later return to active employment. If there is no employer/employee relationship (as when an employee has been terminated or laid off), such individual is not counted as an employee. Part-time employees, like full-time employees, are considered to be employed each working day of the calendar week, as long as they are maintained on the payroll.
Separate business and affiliated entities may make up a single employer for purposes of counting the number of employees for FMLA purposes if they are an integrated employee. Factors to be considered in determining if separate businesses are an integrated employer include:
- Common management,
- Interrelation between operations,
- Centralized control of labor relations, and
- Degree of common ownership or financial control.
For purposes of determining employer coverage under the FMLA, the employees of all entities making up the integrated employer must be counted.
Tax relief
The FFCRA provides employers a tax credit for each calendar quarter in an amount equal to 100% of the qualified leave paid by the employer pursuant to Emergency FMLA and Emergency PSL (subject to the limits noted below). The Emergency FMLA credit is limited to a maximum wage of $200 per day and a maximum total of $10,000 per employee. The Emergency PSL credit is limited to a maximum wage of $511 per day ($200 per day if the sick leave is taken to care for another individual or a minor child as permitted Emergency PSL) for 10 days for a maximum total of $5,110 per employee. These limits are an aggregate limit for all calendar quarters. For example, if an employer pays Emergency PSL for an employee for 5 days during Q3, the employer will receive a credit for Emergency PSL for all 5 days. If the same employer pays Emergency PSL for the same employee for 10 days during Q4, they will receive a credit for Emergency PSL for only 5 days for Q4. This tax credit comes in the form a refundable credit against the employer portion of Federal payroll taxes, meaning if the amount of the credit exceeds the employer’s portion of the Federal payroll taxes the excess is refunded to the employer.
Employment separation events
Layoff
A layoff is a separation from employment and payroll without an expectation of return on a particular date. A layoff is treated like other employment termination situations. A layoff is a COBRA triggering event for the health benefits (medical, dental, vision, etc.) upon termination for those covered. Employers can choose but are not required to subsidize COBRA for terminated employees. Laid off employees are generally entitled to unemployment benefits. Laid off employees should be paid all of their earned wages and their accrued but unused vacation or paid time off if the employer’s policy is to pay out the cash equivalent of vacation time or PTO upon employment separation.
Furlough
A furlough is an alternative to a layoff in which the employer requires employees to work fewer hours or take a specified amount of unpaid time off. Generally, furloughs are shorter in length (e.g., work only 32 hours rather than 40 hours per week, not work on Fridays, not to report to work for 30 days) than layoffs and have a defined end date. Furloughed employees remain on payroll, albeit on non-pay status. Employees might be eligible to continue receiving health insurance or other employee benefits while on furlough. However, some employers’ benefit plan may require employees to be “actively at work” and working full time hours (e.g. 30 hours per week) to be covered by the benefit plans. As a result, some furloughed employees might be able to continue under their employer’s health insurance plan while others may need to elect continued coverage under COBRA.
Although there are many unknowns regarding the FFCRA, it appears that furloughed employees are more likely entitled to Emergency FMLA and Emergency PSL than laid off employees because furloughed employees have higher expectations of future work than laid off employees. By contrast, laid off employees will generally qualify for unemployment benefits while it is less clear whether furloughed employees would qualify in all states.
Unemployment benefits
Qualification for unemployment benefits varies by state. Minnesota’s Governor issued an executive order making applicants eligible for unemployment benefits if:
- A healthcare professional or health authority recommended or ordered them to avoid contact with others.
- They have been ordered not to come to their workplace due to an outbreak of a communicable disease.
- They have received notification from a school district, daycare, or other childcare provider that either classes are canceled or the applicant’s ordinary childcare is unavailable, provided that the applicant made reasonable effort to obtain other childcare and requested time off or other accommodation from the employer and no reasonable accommodation was available.
Although unemployment benefits typically would not be available merely because an employee’s hours have been reduced, the Minnesota Department of Employment and Economic Development’s website states that individuals whose work hours have been “substantially reduced” because of COVID-19 may be eligible for unemployment insurance benefits.
Paid leave policies
Generally, whether the employer must pay out accrued but unused PTO, vacation, or other accrued leave is dictated by the employer’s policy. We encourage employers to follow the policies they currently have in place regarding payment of accrued but unused leave if an employment separation event occurs. If an employee is furloughed, employers should allow the employee to use accrued paid time off during the furlough.
While employers may change their paid leave policies going forward (eliminate it entirely, impose additional conditions on when an employee could use paid leave), we recommend that employers do not make retroactive changes to their policies. Employers should review their benefit plans/policies to determine how the plans/policies treat rehired employees and ensure that they have clear policies in place regarding rehired employees that are applied consistently.
Local sick and safe leave ordinances
A number of cities have adopted ordinances in recent years regarding safe and sick time. Under both the Minneapolis and St. Paul sick and safe leave ordinances, employers generally do not have to pay out accrued but unused sick and safe leave upon employment termination. Minneapolis has indicated that employers are required to allow employees to use accrued sick and safe leave if the business is closed due to an official order and the employee remains employed. An employer, however, does not have to pay out accrued but unused sick and safe leave if the employee is laid off or terminated.
