Families First Coronavirus Response Act: Planning Through Knowledge

By Rex P. Fennessey - McMahon Berger, P.C.

March 23, 2020

The “Families First Coronavirus Response Act” moved with breathtaking speed through Congress and was signed by the President on March 18; it will become effective April 2, 2020. Relevant to employers, the new law has two provisions related to employee leave: the Emergency Paid Sick Leave Act (“EPSLA”) and the Emergency Family and Medical Leave Expansion Act (“EFMLEA”).  The economic crisis created by the novel coronavirus (COVID-19) has already impacted many employers.  Given that these new laws impose significant new obligations on almost all small and medium-sized employers, business owners and human resources professionals will be faced with difficult decisions in the coming weeks.  Employers should arm themselves with as much information as possible to determine the best course of action going forward and continue to check for updates from federal, state, and local health agencies, as well as the EEOC, OSHA, NLRB and Department of Labor.

The Basics of EPSLA and EFMLEA

The basics of the two new leave laws are discussed in McMahon Berger’s blog post here.  In short, the EPSLA requires private employers with less than 500 employees and most public employers to provide employees up to 80 hours of paid sick leave (and leave for part-time employees proportional to their average hours worked over 2 weeks) for COVID-19-related reasons; including the need to care for children because of school closures or the unavailability of child care.  The amount of paid leave depends on the need for leave. The EFMLEA adds a provision to the Family and Medical Leave Act (“FMLA”) granting paid leave to certain employees who are unable to work (or telework) due to a need for leave to care for a child if the child’s school or place of care has been closed or a childcare provider is unavailable due to a public health emergency. To be eligible for this new leave, an employee need to have worked for an employer with less than 500 employees for only 30 days.

The Potential Impact on Employers

As of right now, the number of reported cases of COVID-19 infection in the United States continues to rise.  Forty-one states have already decided to close schools state-wide. Combined with district closures in other states, at least 95,000 U.S. public and private schools are closed, are scheduled to close, or were closed and later reopened, affecting at least 43.9 million school students.  Those numbers do not include those who lack other forms of child-care (daycare, babysitters, etc.) because of the virus.

As a practical matter, most employers will be faced with employees taking leave under these laws to care for children whose schools are closed, or whose caregivers are unavailable.  Under the EPSLA, those employees will be eligible for paid sick leave at two thirds of their regular rate for 80 hours (capped at $200 per day or $2,000 total).  Under the EFMLEA, employers must afford 12 weeks of job-protected leave to qualifying employees at two-thirds of their regular rate of pay after the first 10 days (capped at $200 per day and $10,000 in the aggregate).  Given that EPSLA leave can be used for the 10 unpaid days under EFMLEA, many employers will be forced to plan to pay many employees two-thirds of their salary for 3 months. (Note that the foregoing pertains to child-care leave)

Both the EPSLA and the EFMLEA authorize the Secretary of Labor to issue regulations that exempt “small businesses with fewer than 50 employees” from the requirements of these laws “when the imposition of such requirements would jeopardize the viability of the business as a going concern.”  However, there is no indication at present when those regulations might be issued, whether a request for an exemption will be required, how a request for an exemption can be submitted, or how long it will take to receive a response to the exemption request.  In the meantime, employers with fewer than 50 employees are presumably required to comply with these leave requirements.

These are potentially significant obligations for which an employer will have to find funds.  The legislation allows employers to claim a tax credit for the employer’s portion of Social Security taxes and a proportional share of health plan costs. However, forms for applying for the credit have not been issued, and, as a practical matter, some employers may not have sufficient cash-flow to “float” these costs until they can claim the credit.

Unanswered Questions

Questions about the scope and application of these new laws are legion.  Can an employer get “credit” for paid leave they provided prior to the effective date of these laws?  What if an employer has already furloughed, but not terminated, employees because of a slow-down in business (think restaurants, amusement establishments, etc.).  Are those furloughed employees entitled to EPSLA or EFMLEA leave even though they were not working when the laws took effect?  Similarly, what if, after these laws take effect, the employer experiences a business slow-down and furloughs employees.  Are those employees entitled to EPSLA or EFMLEA leave after they have been sent home for lack of work?  Ideally, forthcoming regulations will address many ambiguities, but given the imminent obligation to comply, employers are in a difficult position.

The Consequences of Failing to Comply

To prepare, employers must understand the consequences of failing to comply.  Under the EPSLA an employer who fails to pay the leave required will “be considered to have failed to pay minimum wages in violation of” the Fair Labor Standards Act and are subject to the FLSA’s penalties.  As many employers know, this includes potential fines and imprisonment, and (more likely) a lawsuit on behalf of all affected employees.  Such lawsuits often seek liquidated (double) damages and attorneys’ fees.  A significant concern for many employers is the potential for individual personal liability of owners and operators in such lawsuits.  The EPLSA also prohibits an employer from discriminating, disciplining, or discharging an employee who takes leave under the EPLSA.  Although, presumably, laying-off employees who may be taking EPLSA leave because of a business slow-down would not violate the EPLSA, it may require significant litigation and discovery before such a defense can be established.  Under the EFMLEA, the consequences of failing to comply would be the same as a violation of the FMLA itself, which include front-pay, back-pay, potential liquidated damages, and, of course, attorneys’ fees.

Given the uncertainty surrounding many aspects of these laws, and the potential for liability for violating them, employers have difficult decisions ahead.  The upcoming obligations of these laws will force employers to determine whether they can continue to employ current employees.  McMahon Berger is available to counsel employers on these and other issues in this difficult time.