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Families First Coronavirus Response Act: What It Means for Your Small and Medium Size Business

March 19, 2020

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.

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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 FMLA.
  • 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:
    1. subject to a federal, state or local quarantine or isolation order related to COVID-19;
    2. advised by a health care provider to self-quarantine due to COVID-19 concerns;
    3. experiencing COVID-19 symptoms and seeking medical diagnosis;
    4. 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;
    5. 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
    6. 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 or services.

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 policies.

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.

This post may contain hyperlinks to websites operated by parties other than TriNet. Such hyperlinks are provided for reference only. TriNet does not control such websites and is not responsible for their content. Inclusion of such hyperlinks on TriNet.com does not necessarily imply any endorsement of the material on such websites or association with their operators.

By Samantha Wellington

Senior Vice President, Chief Legal Officer and Secretary, TriNet

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