On March 18, the US Senate passed a bill to address the coronavirus (COVID-19) public health emergency, imposing a mandate on all employers with fewer than 500 employees, and on all federal and state employers, to provide paid time off to employees who need leave for reasons connected to the public health emergency. Employers will receive a tax credit equal to 100% of the money they spend on the paid leave.
The bill is expected to be passed shortly by the Senate and signed by the president. Although employers with 500 or more employees are exempt from the mandate in this bill, it is useful for all employers to understand the approach taken by Congress since additional legislation may still be introduced to cover larger employers.
When the Mandate Starts
All employers with fewer than 500 employees, and all federal and state employers, must offer a certain amount of paid time off to their employees, for certain reasons, within 15 days after enactment of the law.
Structure of the Mandate
The requirement to provide 10 days of paid sick leave is in a new free-standing law, but incorporates several provisions of the Fair Labor Standards Act (FLSA). The requirement to provide job-protected leave for 12 weeks (of which 10 weeks must be paid) is an amendment to the Family and Medical Leave Act.
How to Count Employees for Purposes of Determining Coverage
The bill does not explain how to determine which employees count toward the 500-employee cap. As the bill adopts the FLSA’s definition of employee, it is likely only employees working within the United States and its territories count. Whether and how employers should count the employees of separate, but related, entities when determining coverage is a more complicated issue, and one on which we will be issuing further analysis.
Employees Who Are Eligible
All employees, full-time and part-time, are eligible for the short-term paid sick leave. Employees are eligible regardless of when the employee started working for the employer.
All employees, full-time and part-time, are eligible for the long-term paid leave. However, to be eligible for the long-term leave, the employee must have been employed for at least 30 days.
Employers of healthcare providers or emergency responders have the option to exclude their employees from both the short-term and long-term paid leave requirements of the bill.
Number of Hours of Paid Leave Required
Full-time employees must be provided with 80 hours (10 days) of short-term sick leave. Part-time workers are entitled to the number of hours they work on average over a two-week period.
The revised bill does not require that the 10 days of paid sick time be provided in addition to whatever paid sick time or PTO the employer already provides to its employees. However, employers may not require that an employee use any other paid time program offered by the employer before using this sick leave.
The paid sick time does not carry over to the following year. Employers are also not required to reimburse employees for paid sick time not used by the employee when the employee leaves the job.
With regard to long-term leave, employees must be provided with 12 weeks of job-protected leave. The first two weeks (10 days) of such leave can be unpaid, while the following 10 weeks must be paid. For the first ten days, the employee may use the 10 days of paid sick leave provided by the bill or use any other paid leave otherwise available from the employer.
Amount of Wage Replacement
If an employee needs leave for the employee’s own illness, the need to self-quarantine or the need to get medical treatment, the employer must pay the employee’s full regular wage for the 10 days of paid sick leave. If the employee needs leave to care for someone else, the employer must pay the employee two-thirds of those wages for the 10 days of paid sick leave.
For the 10 weeks of long-term FMLA leave, the employer must pay two-thirds of the employee’s regular wage.
However, regardless of the employee’s salary, the bill limits the amount of payments the employer must make, so that such payments will be equal to the tax credit the employer will receive in return.
For sick leave payments, that means an employee may receive up to $511 per day and $5,110 in the aggregate if the employee uses the sick time because of his or her own needs. The employee may receive up to $200 per day and $2,000 in the aggregate if the employee uses the 10 sick days to care for someone else.
For long-term (FMLA) payments, the employee may receive $200 per day and $10,000 in the aggregate.
Thus, the amount of wages that employers must pay for either the short-term sick leave or the long-term FMLA leave will never exceed the tax credit that the employer will be permitted to apply against certain taxes. (See description of the tax credit below.)
Uses of the Paid Leave
The short-term paid sick leave may be used if the employee cannot work (or telework) because 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 healthcare provider to self-quarantine due to concerns related to COVID-19
- The employee is seeking a medical diagnosis because the employee is experiencing the symptoms of COVID-19
- The employee is caring for an individual who is subject to a federal, state, or local quarantine or isolation order related to COVID-19 or has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19
- The employee needs to care for a son or daughter if the child’s school or child care location has been closed, or if the child care provider of the child is unavailable due to COVID-19
The Secretary of Health and Human Services, in consultation with the Secretary of the Treasury and the Secretary of Labor, is authorized to identify other “substantially similar” conditions that would trigger the paid sick leave provisions.
For purposes of the long-term paid FMLA leave, the only qualifying reason for that leave is if the employee is unable to work or telework because he or she must care for a child (under 18 years of age) if, due to a declared public health emergency related to COVID-19:
- the child’s school or place of care has been closed, or
- the child’s care provider (someone who receives compensation for providing child care on a regular basis) is unavailable
If the closure of the school or place of care, or the unavailability of the child care provider is foreseeable, the employee must provide the employer with notice of leave as is practicable. (The bill does not define what is “foreseeable” nor does it define what is “practicable.”)
The bill authorizes a refundable tax credit for qualified sick leave wages and qualified family medical leave wages that can be applied against the 6.2% Old-Age, Survivors, and Disability Insurance, or (Social Security) taxes that the employer/self-employed taxpayer pays on wages up to $137,700.
- The credit is limited to $511/day per employee if qualified sick leave was taken by the employee for his or her own needs or $200/day per employee if qualified sick leave was taken to provide care for others. In either case, the credit is limited to 10 days of leave per qualifying employee.
- The credit is limited to $200/day per employee, with an aggregate $10,000 cap per employee, if taken for qualified family medical leave.
- Because of the effective date of the provisions, i.e., 15 days after action by the Secretary, the credit is only available for Q2 through Q4 2020. Enactment will take too long for the credit to have any application in Q1.
- To the extent that a covered employer elects to receive the credit, the credit amount must be taken into the employer’s gross income, which effectively eliminates any potential double benefit because the employer will have deducted the sick leave wages it paid.
- The qualified sick leave wages paid are not “wages” for the employer-portion of the Social Security tax. The legislation has no effect on the employee-portion of the Social Security tax, nor does it have any effect on employer or employee-portion of the Medicare tax.
Notices and Procedures
An employer must post a notice for employees about the requirements of the law.
After the first workday that an employee receives paid sick time, the employer may require the employee to follow “reasonable notice” procedures in order to continue receiving the paid sick time. “Reasonable notice” is not defined in the bill.
The employer may not require that the employee find or search for a replacement to cover the hours the employee will be on sick leave.
Multiemployer Collective Bargaining Agreements
For employers who participate in multiemployer collective bargaining agreements (CBAs), the employer can fulfill the bill’s requirements by making contributions to the multiemployer fund or plan based on the hours of paid short-term and long-term leave each of its employees is entitled to under the bill. But the fund must allow employees to secure pay from the fund or plan for the paid leave the bill requires.
Nondiscrimination and Anti-Retaliation
The bill prohibits an employer from discriminating against an employee for using paid sick leave, filing a complaint, or testifying in an action under the law. The FMLA’s existing prohibition against retaliation applies with regard to employees who take the long-term family leave.
An employer who fails to provide required sick leave, or who engages in discrimination, including retaliation, faces enforcement actions under the Fair Labor Standards Act (FLSA). An enforcement action can be brought by a single employee or as a collective action, or by the US Secretary of Labor. Penalties would include payment of the unpaid wages plus an equal amount as liquidated damages, equitable relief (such as reinstatement), injunctive relief, and even criminal prosecution for willful violations. Attorney fees and costs can also be awarded.
An employer who fails to provide the long-term family leave faces the enforcement provisions of the FMLA.
Nothing in the law diminishes the rights that employees have under federal, state, or local laws; a collective bargaining agreement; or an employer’s existing policy.
Possible Exemptions for Healthcare Employers and Employers with Fewer than 50 Employees
The bill gives the Secretary of Labor the authority to exclude healthcare providers and emergency responders from the definition of employee under the act. (The bill allows each such employer to decide whether to opt out from the bill. But the Secretary has the authority to exclude all such employers in the first place.)
The bill also gives the Secretary of Labor the authority to exempt businesses with fewer than 50 employees when “the imposition of the requirements would jeopardize the viability of the business as a going concern.”
Additional Guidance from the Secretary of Labor
Within seven days of enactment of the law, the Secretary of Labor must provide a model notice that employers can post explaining the requirements of the law.
Within 15 days after the date of enactment, the Secretary of Labor must issue guidelines on how to calculate the wages of part-time workers under different circumstances.
Finally, in a catch-all provision, the Secretary of Labor is given the authority to issue regulations “to ensure consistency between the Sick Leave Act and Division C (The FMLA Section) and Division G (the Tax Credit Section).”