Seyfarth Synopsis: As the country continues to adjust to new realities created by the 2019 Novel Coronavirus disease, also known as COVID-19, the U. S. House of Representatives passed the Families First Coronavirus Response Act (“HR 6201”) in the early hours of March 14, 2020. HR 6201 has many provisions related to addressing the COVID-19 crisis, including (a) paid family and medical leave (PFML), (b) paid sick time (PST), (c) tax credits for PFML and PST, (d) medical plan components, (e) unemployment insurance, and (f) several immediate public health related matters.
This alert focuses on HR 6201’s PST and PFML components. Click here for Seyfarth’s assessment of the bill’s medical plan components.
As cautioned below, bear in mind that as you read this alert, we await “technical corrections” to the House bill before it is sent to the Senate (and many anticipate substantial changes by the Senate). If changes are made, the bill will then have to be returned to the House for a re-vote or sent into conference. The situation is still fluid and therefore the requirements described here could very well change. We will track the situation as it evolves.
As Congress continues to contemplate HR 6201, we have summarized the potential PFML and PST mandates and corresponding tax credit, as currently drafted.
Paid Family and Medical Leave and Paid Sick Time
HR 6201 imposes new paid leave mandates on certain private employers of less than 500 employees1— an expansion of the federal Family and Medical Leave Act to include paid leave for certain COVID-19 related absences and mandatory paid sick time. As noted below, these mandates are not applicable to private employers that employ 500 or more employees. Both would go into effect no later than 15 days after HR 6201 is signed and would sunset on December 31, 2020. The covered reasons for use under the PST and PFML sections are similar, although not identical. Both sets of reasons for use do not rely on “serious health condition” as defined under the FMLA and instead are tied to various COVID-19 related absences. Tax credits are specified in HR 6201 and intended to offset the cost of providing the paid leave that would be required of these covered smaller businesses.
Here are some additional highlights of the new PFML and PST mandates:
PFML Mandate — Note that the below changes to the existing federal FMLA for employers with less than 500 employees would only apply to FMLA absences related to a new qualifying event involving “public health emergency leave,” as described below.
- New Covered Absence Under FMLA: HR 6201 would allow eligible employees to receive FMLA leave because of a qualifying need related to a public health emergency. This broadly includes:
- To comply with a recommendation or order by a public official having jurisdiction or a health care provider on the basis that (a) the physical presence of the employee on the job would jeopardize the health of others because of (i) the exposure of the employee to coronavirus; or (ii) exhibition of symptoms of coronavirus by the employee; and (b) the employee is unable to both perform the functions of the position of such employee and comply with such recommendation or order;
- Caring for a family member under similar circumstances (see below for definition); or
- Caring for the employee’s child under 18 years of age if the child’s school or place of care has been closed, or their child care provider is unavailable, due to a public health emergency.2
- Who is Eligible: The FMLA’s general “employee” eligibility standards involving length of employment, hours worked, and proper worksite3 do not apply to when an employee is absent for “public health emergency leave.” In such instances, an employee will be eligible if they have been employed for at least 30 calendar days by the employer.
- Covered Employer: HR 6201 does away with the FMLA’s general “employer” standard4 when an employee is absent for “public health emergency leave.” As noted above, in such instances a private employer will be covered if it employs fewer than 500 employees.
- Is there a CBA Exemption: No; however, there are special rules for multiemployer plans that appear to give employers subject to these plans more compliance flexibility than is provided to other employers.
- Consists of Both Paid and Unpaid Leave: Unpaid for the first 14 days (i.e., 2 weeks). However, during this period an employee can receive PST under HR 6201 at 100% of their regular rate of pay (see below for more details, including that employers can pay PST at less than 100% an employee’s regular rate for absences related to family members). The employer may not require an employee to substitute any employer-provided leave during this period. Thereafter, the employer is required to pay the employee for up to 10 weeks of leave at not less than 2/3 of an employee’s regular rate of pay (under the FLSA).
- Prior Use of FMLA Leave: It is unclear how much paid leave must be provided if some portion of that 10 weeks has already been used under existing FMLA obligations to provide unpaid leave before HR 6201 is enacted.
- New “Family Member” Definition: (A) A parent (which includes parent-in-law, parent of domestic partner, and legal guardian, among other categories); (B) A spouse; (C) A son or daughter, who is under 18 years of age; and (D) An individual who is a pregnant woman, senior citizen, individual with a disability, or has access or functional needs and who is (i) a son or daughter of the employee; (ii) a next of kin of the employee or a person for whom the employee is next of kin; or (iii) a grandparent or grandchild of the employee.
- Intermittent Leave: No provision; However, early versions of HR 6201 contained a provision making clear that such leave was not required. It is unclear if this omission in the version that passed the House means that PFML would be permitted on an intermittent basis under FMLA standards.
- Employee Notice to Company: When an employee uses public health emergency leave related to school or child care closures (see above) and the leave is foreseeable, an employee must provide the employer with such advance notice of leave as is practicable.
- Reinstatement Requirement: Yes, but applicable standards depend on employer size.5
- Is there Preemption of State or Local Paid Sick Time Laws: No.6
- Who is eligible: “Employee” generally means any individual employed by an employer.
- Covered Employer: As noted above, a private employer will be covered if it employs fewer than 500 employees.
- Is there a CBA Exemption: No; however, as with the above PFML provisions, there are special rules for multiemployer plans that appear to give employers subject to these plans more compliance flexibility than is provided to other employers.
- Amount of PST: (a) Full-Time: 80 hours;7 (b) Part-Time: Amount is prorated based on number of hours that such employee works, on average, over a 2-week period.
- Immediate Use: PST is available for immediate use regardless of length of employment.
- Is Year-End Carryover Required: No.
- Covered Reasons for Use: Same three general reasons as PFML (with a few minor differences) plus the following (1) for the employee or the covered family member to self-isolate because they are diagnosed with coronavirus, or (2) for the employee or the covered family member to obtain a medical diagnosis or care if they are experiencing the symptoms of coronavirus.
- Covered Family Member: Family Member means: (A) A parent (includes parent-in-law and parents of a domestic partner, among other categories); (B) A spouse (includes domestic partner); (C) A son or daughter; or (D) An individual who is a pregnant woman, senior citizen, individual with a disability, or has access or functional needs and who is (i) a sibling of the employee; (ii) a next of kin of the employee or a person for whom the employee is next of kin; or (iii) a grandparent or grandchild of the employee.
- Payment of Sick Time: 100% of employee’s regular rate of pay or the applicable minimum wage, whichever is greater. Employers are only required to pay employees 2/3 of their regular rate of pay when their absence is to care for a covered family member, as described above.
- Relation to Existing Employer-Provided Paid Leave: If an employer provides paid leave on the day before the date HR 6201 is enacted, PST under HR 6201 must be made available to employees of the employer in addition to such paid leave. Employers also cannot (a) change such paid leave on or after such date of enactment to avoid having to provide HR 6201 PST in addition to company-provided paid leave, or (b) require an employee to use other paid leave provided by the employer to the employee before the employee uses HR 6201 PST.
- Replacements: Employer cannot require employee to search for or find a replacement to cover PST absence.
- Employee Notice to Employer: After the first workday (or portion thereof) an employee receives HR 6201 PST, an employer may require the employee to follow reasonable notice procedures in order to continue receiving PST. The term “reasonable notice procedures” is not defined in HR 6201.
- No Discipline, Discharge or Discrimination in Certain Situations: HR 6201 states that it is unlawful for any employer to discharge, discipline, or in any other manner discriminate against any employee who (1) takes leave in accordance with HR 6201, and (2) has filed any complaint or instituted or caused to be instituted any proceeding under or related to HR 6201 (including a proceeding that seeks enforcement of HR 6201), or has testified or is about to testify in any such proceeding.
- Is Payout Upon Separation Required: No.
- Posting Requirement: Employers must display a model notice in a conspicuous place in the workplace. The model notice will be released shortly after HR 6201 is signed.
Tax Credit on PFML and PST
As noted above, tax credits are specified in HR 6201 and intended to offset the cost of providing the paid leave now required of these smaller businesses. Generally speaking, an employer is required to withhold social security and Medicare taxes (collectively, “FICA Tax”) from wages paid to its employees. An employer is also required to pay an amount of FICA Tax, commonly known as the employer’s portion, that is equal to the amount of FICA Tax withheld. Section 7001 of HR 6201 generally allows an employer to claim a credit against the employer’s portion of FICA Tax for a calendar quarter in an amount equal to Emergency Paid Sick Leave Act wages paid by the employer during such quarter.
However, the credit is subject to certain limitations. First, the amount of wages that may be taken into account with respect to a particular employee in determining the amount of the credit is limited to (a) $511 per day in the case of PST with respect an event involving the employee (i.e., the first three reasons for use listed in Section II.2 above), or (b) $200 per day, in the case of PST with respect an event involving the employee’s family member (i.e., the fourth and fifth reasons for use listed in Section II.2 above). Second, in determining the total amount of an employer’s qualified sick leave wages paid for a calendar quarter, the total number of days that the employer can take into account with respect to a particular employee for that quarter cannot exceed 10 days minus the total number of days taken into account with respect to such employee for all previous quarters. Third, an employer is not allowed to claim this credit with respect to wages for which a credit for paid family and medical leave payments is allowed under Internal Revenue Code Section 45S.
The amount of the paid sick leave credit that is allowed for any calendar quarter cannot exceed the total employer portion of FICA Tax imposed on all wages paid by an employer to all of its employees during such quarter. If the amount of the credit that would otherwise be allowed is so limited, the amount of the limitation is treated as an overpayment of tax by the employer, the same as if the employer had actually overpaid the employer’s portion of FICA Tax. Accordingly, the IRS will pay or credit to the employer the amount of the deemed overpayment. Finally, an employer who receives a credit for PST must include the amount of the credit in gross income. This is intended to prevent the employer from realizing a double benefit (i.e., a windfall) -- one being the receipt of the credit and the other being a tax deduction for the paid sick leave wages. To clarify, this does not nullify the tax credit, but by adding the amount of the credit to gross income, it offsets the tax deduction.
Section 7003 of the Act provides a tax credit for Emergency Family and Medical Leave Expansion Act wages. This credit is essentially the same as the credit for Paid Sick Leave Act wages discussed above, with two substantive differences. First, the amount of wages that may be taken into account with respect to a particular employee in determining the amount of the credit is limited to $200 per day and an aggregate of $10,000 for all quarters. Second, the 10 day maximum limitation that applies to the sick leave wage credit does not apply to the qualified family leave wage credit.
It should be noted that a major criticism by outside groups has been that the money available through the credit would be available too late to offset the cost of current operations. This area appears ripe for reconsideration.
As HR 6201 continues towards consideration in the Senate, employers should consider taking the following steps:
- Monitor House and Senate activity for developments and updates regarding HR 6201, including potential changes to the above substantive standards.
- Review existing workplace policies relating to a wide host of issues, including travel, work from home, and other policies as well as existing leave policies, and assess the potential effect of HR 6201 on those policies.
- Consult Seyfarth’s COVID-19 Resource Center for updated information regarding the rapidly evolving COVID-19 situation and its impact on the workplace.
1 Certain public employers would also be subject to the paid leave mandates.
2 The term “public health emergency” means an emergency with respect to coronavirus declared by a Federal, State, or local authority.
3 To currently be eligible for FMLA leave, the employee must (1) have worked for that employer for at least 12 months, (2) have worked at least 1,250 hours during the 12 months prior to the start of the FMLA leave, and (3) work at a location where at least 50 employees are employed at the location or within 75 miles of the location.
4 The FMLA currently only applies to employers who employ 50 or more employees for at least 20 workweeks in the current or preceding year.
5 Under HR 6201, employers with fewer than 25 employees can avoid the regular FMLA reinstatement requirements if the following conditions are met: (A) The employee takes public health emergency leave; (B) the position held by the employee when the leave commenced does not exist due to economic conditions or other changes in operating conditions of the employer (i) that affect employment; and (ii) are caused by a public health emergency during the period of leave; (C) the employer makes reasonable efforts to restore the employee to a position equivalent to the position the employee held when the leave commenced, with equivalent employment benefits, pay, and other terms and conditions of employment; and (D) If the reasonable efforts of the employer under point (C) fail, the employer makes reasonable efforts during a designated one year period to contact the employee if an equivalent position described in point (C) becomes available.
6 Today, across 41 federal, state, and local jurisdictions, there are 43 private employer-provided paid time off mandates either in effect or scheduled to go into effect in the coming months: (1) The Federal Contractor PSL law; (2) Arizona; (3) California; (4) Colorado (temporary law in response to Coronavirus) (5) Connecticut; (6) Maine (PTO law); (7) Maryland; (8) Massachusetts; (9) Michigan; (10) Nevada (PTO Law); (11) New Jersey; (12) Oregon; (13) Rhode Island; (14) Vermont; (15) Washington; (16) San Francisco, CA; (17) Washington, D.C.; (18) Seattle, WA; (19) Long Beach, CA (hotel-specific law); (20) SeaTac, WA (hospitality and transportation industry-specific law); (21) New York City, NY; (22) Los Angeles, CA (1 general law 1 hotel-specific law); (23) Oakland, CA; (24) Philadelphia, PA; (25) Tacoma, WA; (26) Emeryville, CA; (27) Montgomery County, MD; (28) Pittsburgh, PA (effective date was March 15, 2020); (29) Austin, TX (delayed; ongoing litigation); (30) Santa Monica, CA; (31) Minneapolis, MN; (32) San Diego, CA; (33) Chicago, IL; (34) Berkeley, CA; (35) Saint Paul, MN; (36) Cook County, IL; (37) Duluth, MN; (38) San Antonio, TX (delayed; ongoing litigation) (39) Westchester County, NY (1 sick leave law, 1 safe leave law); (40) Dallas, TX; and (41) Bernalillo County, NM (PTO law). This list does not include state and local paid family and medical leave programs.
7 This amount was decreased from 112 hours to 80 hours between the 3/13/2020 at 5:29 pm version of HR 6201 and the 3/13/2020 at 11:45 pm version of HR 6201.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.