Since we last reported on the recently enacted Families First Coronavirus Response Act (“FFCRA”), the U.S. Department of Labor (“DOL”) released Fact Sheets for employees and employers and a set of Questions and Answers (“Q&As”) clarifying several issues related to the paid leave and posting requirements. The DOL also issued guidance on its initial enforcement of the FFCRA. As the DOL noted, this is its “first round of published guidance.” While helpful, the DOL’s guidance is not binding law and leaves many questions unanswered. The DOL plans to publish official regulations on or before April 1, 2020.
A few notable takeaways from the DOL’s recently issued guidance on the FFCRA:
The FFCRA takes effect on April 1, 2020.
The DOL pushed up the FFCRA’s effective date. The FFCRA’s paid leave provisions are now effective on April 1, 2020, and are scheduled to expire on December 31, 2020. The FFCRA will not apply retroactively.
How to determine the coverage threshold.
The FFCRA applies to private employers with less than 500 employees. DOL says that employers should determine coverage at the time an employee takes paid leave under FFCRA. Employers should count all full-time and part-time employees within the United States, including:
- temporary employees who are jointly employed by the employer and another company (regardless of whether the jointly-employed employees are on only one employer’s payroll); and
- day laborers supplied by a temporary agency (regardless of whether the employer is the temporary agency or the client firm if there is a continuing employment relationship).
Workers who are properly classified as independent contractors under the Fair Labor Standards Act (“FLSA”) are not counted for determining coverage.
Related businesses can be combined for determining FFCRA coverage.
Typically, a company counts only its employees (at any facility or division within the U.S.) towards the FFCRA coverage threshold. Where separate companies are part of the same corporate family (such as subsidiaries or parents) or a company has ownership interest in another company, they will be considered separate employers under the FFCRA unless they can be considered joint employers under the FLSA or meet the “integrated employer test” under the Family and Medical Leave Act of 1993 (“FMLA”). The DOL’s recent joint employer final rule identifies various factors used to determine whether two entities are joint employers. The integrated entity test also considers several factors, including common management, interrelation between operations, centralized control of labor relations, and degree of common ownership or financial control.
Separate employers will need to determine whether they can (or even would want to) satisfy either of those tests for purposes of potentially exceeding the FFCRA threshold. When considering that issue, related companies should be mindful that determination of joint employer or integrated entity status can result in joint several liability for claims under the FLSA and FMLA.
Exemptions for small businesses.
Businesses with less than 50 employees may be able to obtain an exemption from the FFCRA when compliance would jeopardize the viability of the business as a going concern. Although employers can be reimbursed for FFCRA paid leave through a reimbursable tax credit, many small businesses may not have the liquidity to pay for the leave up front. Other than stating that these employers should document why the exemption should apply to them, the DOL essentially leaves it to small businesses to determine if the exemption might apply. DOL’s regulations may provide additional guidance.
FFCRA paid leave is not required for closures or furloughs.
The DOL clarifies that employers are not required to pay either type of FFCRA leave if they close the worksite or furlough employees. This is true whether the closure of the worksite or furlough was due to lack of business or because of a “Federal, State or local directive.” If an employee is on paid FFCRA leave when the employer closes the worksite, the employer only has to pay for the paid leave the employee used before the worksite closed.
Employees cannot use FFCRA paid leave for reduced hours they lost.
Employees whose work hours are reduced may not use either type of FFCRA leave for the hours they no longer are scheduled to work. The DOL said this is because those employees are not prevented from working those hours due to a COVID-10 qualifying reason, even if the reduced hours was “somehow related to COVID-19.”
Calculating hours for part-time employees.
Under the FFCRA, a part-time employee is entitled to leave for his or her average number of work hours in a two-week period. DOL instructs employers to calculate the hours of leave based on the number of hours the employee is normally scheduled to work. For example, if a part-time employee is regularly scheduled 25 hours per week, the employee would be eligible for up to 25 hours of paid leave per week (or 50 hours over a two-week period).
Where the normal hours scheduled are unknown or the part-time employee’s schedule varies, employers are allowed to either: (1) use a six-month average to calculate the average daily hours; or (2) if an employee is less than six months, use the number of hours that the company and the employee agreed upon at hiring or the average hours per day the employee was scheduled to work during their term of employment.
Part-time employees may take paid sick leave for the calculated number of hours per day for up to a two-week period, and may take expanded family and medical leave for the same number of hours per day up to 10 weeks after that.
Overtime hours are included in calculating the amount FFCRA paid leave.
The DOL said that employers must include overtime in calculating the amount to pay employees for both types of FFCRA paid leave, but overtime premiums do not need to be included. For the FMLA expansion leave, employers are required to pay an employee for hours the employee would have normally scheduled to work even if that is more than 40 hours a week. The emergency paid sick leave, however, requires that paid sick leave be paid only up to 80 hours over a two-week period. For example, an employee who is scheduled to work 50 hours a week may take 50 hours of paid sick leave in the first week and 30 hours of paid sick leave in the second week, but the total number of hours paid is capped at 80.
Calculating the regular rate.
DOL states that the regular rate of pay used to calculate both types of FFCRA paid leave is the average of an employee’s regular rate over a period of up to six months prior to the date on which they took leave. For employees who have worked for their employer for less than six months, the regular rate used to calculate their leave is the average of their regular rate of pay for each week that they have worked for their current employer. Commissions, tips, and piece rates must be incorporated into determining the regular rate.
FFCRA leave may be taken intermittently only with the employers agreement.
Although the DOL encourages employers to allow employees to take FFCRA paid leave intermittently, it does not require it.
Required records for FFCRA paid leave.
Employers wanting to obtain a tax credit for providing paid leave under FFCRA must maintain the following records:
- Paid sick leave: Employers must require employees taking paid sick leave to provide appropriate documentation in support of the reason for the leave, including: the employee’s name, qualifying reason for requesting leave, statement that the employee is unable to work, including telework, for that reason, and the date(s) for which leave is requested. Documentation of the reason for the leave will also be necessary, such as the source of any quarantine or isolation order, or a copy of the Federal, State or local quarantine or isolation order related to COVID-19 applicable to the employee.
- Paid FMLA Expansion Leave: Employers must require employees taking paid FMLA expansion leave to provide appropriate documentation similar to a conventional FMLA request, such as a notice that has been posted on a government, school, or day care website, or published in a newspaper, or an email from an employee or official of the school, place of care, or child care provider.
The DOL advises employers to consult with the Internal Revenue Service (“IRS”) for applicable forms, instructions, and information on the procedures obtaining the tax credit for FFCRA paid leave.
Employees cannot collect unemployment while on FFCRA leave.
Employees who are on FFCRA leave are not eligible for unemployment insurance. The DOL, however, notes that partial unemployment benefits may be available to employees whose hours or pay have been reduced under certain state law.
The DOL provided a FAQ on posting requirements.
The DOL issued model notices of requirements for both types of FFCRA paid leave. The DOL indicates that all covered employees (including small businesses) must post the notice in a conspicuous place where employees can easily see it. A covered employer can satisfy the posting requirement by emailing or direct mailing the notice to employees, or posting this notice on an employee information internal, or external, website. The notice does not have to be posted in multiple languages or shared with recently laid-off individuals.
The DOL will not bring enforcement actions against employers before April 17, 2020, so long as they act “reasonably” and “in good faith.”
In order to enable covered employers to come into compliance with the FFCRA, the DOL said it will not enforce the FFCRA from March 18 through April 17, 2020, and would not pursue enforcement actions against covered employers, so long as the employer has made reasonable, good faith efforts to comply with the FFCRA. The employer will be found to have acted “reasonably” and “in good faith” when all of the following facts are present:
- The employer remedies any violations, including by making all affected employees whole as soon as practicable.
- The violations of the FFCRA were not “willful” based on the criteria set forth in McLaughlin v. Richland Shoe, 486 U.S. 128, 133 (1988) (the employer “either knew or showed reckless disregard for the matter of whether its conduct was prohibited . . .”).
- The DOL receives a written commitment from the employer to comply with the FFCRA in the future.
The DOL noted that after stay of enforcement is lifted on April 17, 2020, it intends to fully enforce any violations of the FFCRA.
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