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DOL Clarifies Response Act Paid Leave Questions

The Families First Coronavirus Response Act provides for paid sick leave and expanded family or medical leave benefits to employees, and payroll tax credits to employers in respect of such benefits. The US Department of Labor is issuing rolling guidance regarding the Response Act that includes information regarding, among other things, whether furloughed employees are eligible for such benefits.

For further information, please visit the White & Case Coronavirus Resource Center.

Pursuant to the federal Families First Coronavirus Response Act (the “Response Act”), effective April 1, 2020 through December 31, 2020, all employers with under 500 employees must provide eligible employees within the US with up to two (2) weeks (80 hours) of paid sick leave (“PSL”) and up to 12 weeks of expanded family and medical leave (“FMLA+”), in each case, for qualifying leave. The Secretary of Labor can exclude certain healthcare providers and emergency responders, and can also exempt employers with less than 50 employees if the imposition of the requirements would jeopardize the viability of their business.

PSL: PSL is available to all employees regardless of tenure if, due to COVID-19, such employee is: (1) required to quarantine; (2) advised to self-quarantine by a healthcare provider; (3) experiencing symptoms and seeking a medical diagnosis; (4) caring for an individual required to quarantine or advised to self-quarantine by a healthcare provider; (5) caring for a child due to school closure or unavailability of the childcare provider; or (6) a substantially similar condition specified by the Secretary of Health and Human Services. PSL is available to all employees regardless of tenure and is paid at one hundred percent (100%) of the employee’s regular rate of pay if for reasons (1), (2) or (3) (capped per employee at  US$511 per day or  US$5,110 in the aggregate), or sixty-seven percent (67%) of the employee’s regular rate of pay if for reasons (4), (5) or (6) (capped per employee at  US$200 per day or  US$2,000 in the aggregate). There is no waiting period required before an employee can use PSL. PSL not used before December 31, 2020 will not carry over to the following year. Employees who work part-time are entitled to paid time based on the average number of hours that the employee works over a two (2)-week period.

FMLA+: FMLA+ is available to all employees employed by an employer for at least 30 calendar days, and regardless of the size of the employer, so long as the employer has fewer than 500 employees—i.e., FMLA+ is not subject to the 50 employee threshold to which the regular federal Family and Medical Leave Act (“FMLA”) is and continues to be subject. FMLA+ provides for up to 12 weeks of leave but only to allow an employee, who cannot work or telework, to care for the employee’s child if the school or place of childcare, or the childcare provider, is unavailable due to the COVID-19 emergency. The first 10 days of leave are unpaid (but an employee may use PSL or regular accrued but unused paid time off for the first 10 days). After the first 10 days (for the remaining up to 10 weeks), FMLA+ is paid under this provision is at sixty-seven percent (67%) of employee’s regular rate of pay (capped per employee at  US$200 per day and  US$10,000 in the aggregate). Employers with 25 or more employees remain subject to the same job protection requirements as under the FMLA. Employers with less than 25 employees are not subject to the job protection requirements if an employee’s position no longer exists due to economic or operating conditions due to COVID-19 reasons and affecting employment, subject to the employer making reasonable efforts to restore the employee to the same or an equivalent position, and making reasonable efforts to contact the employee if an equivalent position becomes available for up to one (1) year following the leave.

Payroll Tax Credit: The Response Act provides employers with an offsetting payroll tax credit against its portion of payroll tax obligations (the “Payroll Tax Credit”). The Payroll Tax Credit is equal to (i) one hundred percent (100%) of qualified PSL and FMLA+ wages (subject, in each case, to the above-noted caps) that are paid by an employer for each calendar quarter, plus (ii) the costs to maintain health insurance coverage for the eligible employee during the applicable leave period. Employers may retain the full amount of the Payroll Tax Credit from the payroll taxes that they are otherwise required to withhold and/or pay to the Internal Revenue Service (IRS) (i.e., withheld federal income taxes, employee share of Social Security and Medicare taxes and employer share of Social Security and Medicare taxes, in each case, with respect to all employees (and not just employees who have taken PSL or FMLA+)). If there are insufficient payroll taxes to cover the Payroll Tax Credit, employers will be eligible to receive a refund from the IRS by filing a request for an accelerated payment from the IRS for the difference. The IRS expects to process these requests within two (2) weeks or less.

Notice: By April 1, 2020, employers are required to post, and keep posted, in conspicuous places on the premises of the employer, a notice, to be prepared or approved by the Secretary of Labor, of the requirements described in the Response Act. Since many employees are now teleworking due to COVID-19, employers may satisfy this posting requirement by emailing or direct mailing the notice to employees, or posting the notice on an employee information internal or external website. The model notice is available here.

DOL Guidance: The US Department of Labor (“DOL”) issued a temporary rule on April 1, 2020 with respect to the Response Act, along with rolling Q&A guidance regarding the Response Act on its website. The following is a summary of relevant portions of the regulations and guidance as of this date:

  1. How does an employer know if it is under 500 employees and therefore subject to the Response Act? If the employer has 500 or fewer employees within the United States at the time the leave is to be taken, it will not be subject to the Response Act with respect to such leave. In general, two (2) or more entities are separate employers unless they meet the integrated employer test under the FMLA. If two (2) or more entities are an integrated employer under this test, then employees of all entities making up the integrated employer will be aggregated in determining employer coverage for purposes of PSL and FMLA+.
  2. If an employee is home with his or her child because the school or place of care is closed, or childcare provider is unavailable, does the employee get PSL, FMLA+, or both? The employee may be eligible for both types of leave, but only for a total of 12 weeks.
  3. Can an employer deny an employee PSL if it already provided such leave to an employee before April 1, 2020 or if the employee uses other types of paid sick leave under state or local law or under the employer’s policy? No, PSL is a new leave requirement that is effective beginning on April 1, 2020 and is in addition to other leave provided under federal, state or local law, an applicable collective bargaining agreement or an employer’s existing policy.
  4. What records must an employer keep when an employee takes PSL or FMLA+? An employer is required to retain all documentation provided by employees for four (4) years, regardless of whether leave was granted or denied. If an employee provides oral statements to support a request for PSL or FMLA+, the employer is required to document and retain such information for four (4) years. Additionally, if the employer intends to claim a Payroll Tax Credit, the employer should retain appropriate documentation and consult IRS applicable forms, as specified in recent IRS FAQs (an employer is not required to provide leave if materials sufficient to support a Payroll Tax Credit have not been provided). If an employee takes FMLA+, the employer may also require the employee to provide the employer with any additional documentation in support of such leave, to the extent permitted under the FMLA, including notice of the school closure from a government, school or day care website.
  5. May the employee take PSL intermittently? If the employee is teleworking and the employer allows it, then yes. If the employee is not teleworking and the PSL is taken in connection with a school closure or unavailability of child care and the employer agrees, then yes. If the employee is not teleworking and takes PSL for any other reason, then PSL cannot be taken intermittently; in such event, the employee must continue to take PSL until the employee either (1) uses the full amount of PSL or (2) no longer has a qualifying reason for taking PSL.
  6. If the employer closed the worksite on, before or after April 1, 2020, does it have to provide PSL and FMLA+? No (but see Q&A 7). If the employer sent the employees home and stops paying them because it does not have work for them to do, the employees will not get PSL or FMLA+, but the employee may be eligible for unemployment insurance benefits (unless the employer is paying the employees pursuant to a paid leave policy or State or local requirements). This is true whether the employer closes the worksite for lack of business or because it is required to close pursuant to a Federal, State or local directive.
  7. If the employer closes the worksite while an employee is on PSL or FMLA+, what happens? The employer must pay for any PSL or FMLA+ used by the employee before the employer closed. As of the date the employer closes the worksite, the employee is no longer entitled to PSL or FMLA+, but the employee may be eligible for unemployment insurance benefits (unless the employer is paying the employees pursuant to a paid leave policy or State or local requirements).
  8. If the employer is open, but places employees on furlough on, before or after April 1, 2020, can the employees receive PSL or FMLA+?  No. If the employer furloughs employees because it does not have enough work or business for the employees, the furloughed employees cannot take PSL or FMLA+.  The furloughed employees may be eligible for unemployment insurance benefits (unless the employer is paying the employees pursuant to a paid leave policy or State or local requirements).
  9. If the employer reduces the scheduled work hours of employees, can the employees use PSL or FMLA+ for the hours that the employees are no longer scheduled to work? No, because the employees are not prevented from working the hours due to a COVID-19 qualifying reason, even if the reduction in hours was somehow related to COVID-19. An employee may, however, take PSL or FMLA+ if a COVID-19 qualifying reason prevents the employee from working his or her full-time schedule; in such case, the amount of leave will be based on the work schedule before it was reduced.
  10. May employees use an employer’s preexisting leave entitlements to ‘top-up’ PSL and FMLA+ payments by taking both the preexisting leave and either PSL or FMLA+ concurrently? With regard to PSL, no, unless both the employer and the employee agree to permit such usage. Even if both the employer and employee agree, the employer will not receive a Payroll Tax Credit for any such ‘top-up’ payments. With regard to FMLA+, an eligible employee may elect to use, or an employer may require that an employee use, such FMLA+ concurrently with any leave offered under the employer’s policies that would be available for the employee to take to care of a child, such as vacation or personal leave or paid time off. If FMLA+ is used concurrently with another source of paid leave, then the employer has to pay the employee the full amount to which the employee is entitled under the employer’s preexisting paid leave policy for the period of leave taken, even if that amount is greater than $200 per day or $10,000 in the aggregate. However, as with PSL, the employer will not receive a Payroll Tax Credit for any such ‘top-up’ payments.
  11. Do employees have a right to return to work after taking PSL or FMLA+? Generally, yes (but special rules apply for employers with fewer than 25 employees as discussed below). The Response Act requires employers to provide the same (or a nearly equivalent) job to an employee who returns to work following leave. The employer is prohibited from firing, disciplining, or otherwise discriminating against employees because they used PSL or FMLA+. The employee is not protected, however, from employment actions, such as layoffs, that would have affected the employee regardless of whether the employee took PSL or FMLA+. This means, the employer can lay off employees for legitimate business reasons. Employers also may refuse to return employees to work if they are highly-compensated “key” employees as defined under the FMLA.
  12. Do employees have a right to return to work after taking PSL or FMLA+ if they work for an employer with fewer than 25 employees? Generally, yes, unless the employee’s position no longer exists due to economic or operating conditions due to COVID-19 reasons and affecting employment, and the employer makes reasonable efforts to restore the employee to the same or an equivalent position, and makes reasonable efforts to contact the employee if an equivalent position becomes available for up to one (1) year following the leave.
  13. Do employees qualify for PSL or FMLA+ even if they have already used some or all of the FMLA leave to which they were entitled under the FMLA?  Eligible employees are entitled to take PSL regardless of how much leave the employee has taken under the FMLA. If the employer was subject to the FMLA before April 1, 2020, then the employee’s FMLA+ may be limited depending on how much regular FMLA leave the employee has taken during the 12-month period the employer uses for FMLA leave. The employee may only take a total of 12 weeks of leave between FMLA and FMLA+.
  14. How do employers qualify for the small business exemption from PSL and FMLA+? Employers with fewer than 50 employees may qualify for an exemption if doing so would “jeopardize the viability of the business” as a going concern. A small business may claim this if an authorized officer of the business determines that: (1) leave would cause expenses and financial obligations to exceed available business revenue and cause the small employer to cease operating at a minimal capacity; (2) the absence of the employee requesting leave would pose a substantial risk to the financial health or operational capacity of the small employer because of his or her specialized skills, knowledge of the business, or responsibilities; or (3) the small employer cannot find enough other workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services the employee requesting leave provides, and these labor or services are needed for the employer to operate at a minimal capacity.  This small business exemption only provides an exemption to employers as to leave requested to care for a child because a child’s school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons.  As a result, FMLA+ requests would be subject to the exemption but only PSL requests relating to the need to care for a child for the above reasons would be subject to the exemption.  There is no application or submission process for this exemption, but employers must keep sufficient records for their own files when assessing the applicable criteria.
  15. Will the DOL start enforcing PSL and FMLA+ requirements on April 1? No, the DOL will observe a temporary period of non-enforcement through April 17, 2020, according to a Field Assistance Bulletin, so long as the employer has acted reasonably and in good faith to comply with the Response Act.  For purposes of non-enforcement, “reasonable” and “good faith” efforts exist when violations are remedied and the employee is made whole as soon as practicable by the employer, the violations were not willful, and the DOL receives a written commitment from the employer to comply with the Response Act in the future.

 

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