As a small and medium size business (SMB) owner you, along with many others, are in uncharted waters as the
situation with COVID-19 continues to evolve. In these uncertain times, you want to make sure that you are taking care
of your employees, while adjusting to the new legal requirements.
On March 18, President Donald Trump signed the Families First Coronavirus Response Act into law.
Here is what you need to know about key provisions that will affect you as a small and medium size business owner.
What is the Families First Coronavirus Response Act?
On March 18, 2020, the Senate passed the Families First Coronavirus Response Act (Act), a plan aimed at addressing
the impact of the COVID-19 outbreak on Americans and introducing paid sick leave and an expanded family and medical
leave act to the nation’s employers. An earlier version of this Act (H.R. 6201) was previously passed by the House on Saturday, March 14. The bill was signed by President Trump on
March 18 and will become effective on April 2.
This Act includes many provisions which apply to employers, such as paid sick leave for employees impacted by
COVID-19 and expanded paid family and medical leave. The Act also contains several provisions to increase funding for
benefit programs, like WIC and SNAP. This post is focused on the key provisions which affect SMB employers.
What are the New Requirements for Expanded Family and Medical Leave?
Expanded Coverage and Eligibility – The Act significantly amends and expands the federal Family and
Medical Leave Act (FMLA) on a temporary basis. The current employee threshold for FMLA coverage would change from
only covering employers with 50 or more employees to instead covering those employers with fewer than 500
employees. It also lowers the eligibility requirement such that any employee who has worked for the
employer for at least 30 days prior to the designated leave may be eligible to receive paid family and medical
leave. However, the Act includes language allowing the Secretary of Labor to exclude certain
healthcare providers and workers, and to exempt small businesses with fewer than 50 employees if the required leave
would jeopardize the viability of their business.
Reasons for Emergency Leave – Any individual employed by the employer for at least 30 days (before
the first day of leave) may take up to 12 weeks of job-protected leave to allow that employee, who
is unable to work or telework, to care for the employee’s child (under 18 years of age) if the child’s school or
place of care is closed or the childcare provider is unavailable due to a public health emergency. This is now the
only qualifying need for Emergency FMLA and a significant change from the prior version of the bill
passed by the House over the weekend, which contained several other COVID-19-related reasons to provide Emergency
Paid Leave – The first 10 days of Emergency FMLA may be unpaid. During this 10-day period, an
employee may elect to substitute any accrued paid leave (like vacation or sick leave) to cover some or all of the
10-day unpaid period. After the 10-day period, the employer generally must pay full-time employees at
two-thirds the employee’s regular rate for the number of hours the employee would otherwise be normally
scheduled. The new Act now limits this pay entitlement to $200 per day and $10,000 in the aggregate per employee.
Calculating Pay for Non-Full Time Employees – Employees who work a part-time or irregular schedule
are entitled to be paid based on the average number of hours the employee worked for the six months prior to taking
Emergency FMLA. Employees who have worked for less than six months prior to leave are entitled to the employee’s
reasonable expectation at hiring of the average number of hours the employee would normally be scheduled to work.
- Job Restoration – Employers with 25 or more employees will have the same obligation as under
traditional FMLA to return any employee who has taken Emergency FMLA to the same or equivalent position upon the
return to work. However, employers with fewer than 25 employees are generally excluded from this requirement if the
employee’s position no longer exists following the Emergency FMLA leave due to an economic downtown or other
circumstances caused by a public health emergency during the period of Emergency FMLA. This exclusion is subject to
the employer making reasonable attempts to return the employee to an equivalent position and requires an employer to
make efforts to return the employee to work for up to a year following the employee’s leave.
- Effective Date and Expiration – This new requirement will become effective on April 2, remain in
effect until December 31, 2020.
What are the New Requirements for Paid Sick Leave?
- Reasons for Paid Sick Leave –paid sick leave must be provided to an eligible employee who is unable to work (or telework) because the employee is:
- subject to a federal, state or local quarantine or isolation order related to COVID-19;
- advised by a health care provider to self-quarantine due to COVID-19 concerns;
- experiencing COVID-19 symptoms and seeking medical diagnosis;
- caring for an individual subject to a federal, state or local quarantine or isolation order or advised by
a health care provider to self-quarantine due to COVID-19 concerns;
- caring for the employee’s child if the child’s school or place of care is closed or the child’s care provider is
unavailable due to public health emergency; or
- experiencing any other substantially similar condition specified by the Secretary of Health and Human Services
in consultation with the Secretary of the Treasury and the Secretary of Labor.
Of note, caring for another who is subject to an isolation order or advised to self-quarantine as described above is
not limited to just family members.
- Eligibility – This provision requires employers with fewer than 500 employees to
provide full-time employees (regardless of the employee’s duration of employment prior to leave) with 80
hours of paid sick leave at the employee’s regular rate (or two-thirds the employee’s regular rate to
care for qualifying reasons 4, 5, or 6 listed above). This section provides an exception for employers who are
healthcare providers or emergency responders at their election.
- Cap on Paid Sick Leave Wages –Paid sick leave wages are limited to $511 per day up to $5,110
total per employee for their own use and to $200 per day up to $2,000 total to care for others and any other
substantially similar condition.
- Carryover and Interaction with Other Paid Leave – This paid sick leave will not carry over to the
following year and may be in addition to any paid sick leave currently provided by employers.
- Calculating Rate of Pay – Employees who work a part-time or irregular schedule are entitled to be
paid based on the average number of hours the employee worked for the six months prior to taking paid sick leave.
Employees who have worked for less than six months prior to leave are entitled to the average number of hours the
employee would normally be scheduled to work over a two-week period. A business employing fewer than 500 employees
is required, at the request of the employee, to pay a full-time employee for 80 hours of mandated emergency paid
sick leave instead of the initial 10 days of unpaid leave permitted by the Emergency Family and Medical Leave
Expansion Act (summarized above).
- Effective Date and Expiration – This new requirement will become effective on April 2 and remain
in effect until December 31, 2020.
How Will Employers Pay for the Paid Sick and Expanded Family and Medical Leave?
The Act provides a series of refundable tax credits for employers who are required to provide the Emergency Paid Sick
Leave and Emergency Paid Family and Medical Leave described above. These tax credits are allowed against the employer
portion of Social Security taxes. While this limits application of the tax credit, employers will be reimbursed if
their costs for qualified sick leave or qualified family leave wages exceed the taxes they would owe.
How is Unemployment Affected?
The Act provides $1 billion in 2020 for emergency grants to states for activities related to unemployment insurance
benefit processing and payment.
Are Health Plans Required to Cover Testing For COVID-19?
The Act requires private health plans (including insured, self-insured, and grandfathered) to provide coverage for
COVID-19 diagnostic testing and related services to employees and their covered dependents, without cost sharing (like
deductibles, copayments and coinsurance) from enactment of the Act through the end of the national emergency period.
Covered services apply to diagnostic testing, healthcare provider services (in-person and telehealth), and facility
costs (physician office, urgent care center and emergency room) to the extent the costs are related to evaluating the
need for, or furnishing, COVID-19 diagnosis and treatment. In addition to coverage and cost waiver provisions, plans
shall not require prior authorization or similar medical management requirements as a precondition of COVID-19 testing
The Act requires employers with fewer than 500 employees will not only need to adhere to the above leave requirements
within 15 days, but such employers will also be required to provide notice to their employees through postings and
In addition to this federal Act, many states are proposing similar emergency legislation to enact or expand their own
paid sick leave or family and medical leave laws to cover coronavirus-related issues. Some of these state laws may be
in addition to these new requirements at the federal level.
We are monitoring the situation closely and will be updating you as necessary. Follow our COVID-19 blog series to get answers to some of your most pressing questions. In addition, our
recent webinar in collaboration with national employment law firm Fisher & Phillips LLP., provides critical up-to-date
information related to legal and compliance requirements in direct response to your questions. You can watch the
webcast replay here.
This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an
offer to sell, buy or procure insurance.
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