Hey Compliance Warriors!
We’ve talked about CARES and PPP quite a lot over the last couple of months. However, if you aren’t abreast of the situation, this article will give you a nice quick look into those two acts and what employers need to know during these times. Read on…
Article Via: Law.com
As state governments issue stay-at-home orders, employment lawyers across the country have been digesting new employment laws, assisting clients in managing layoffs, furloughs, and leaves of absence, and working to keep up with a changing employment landscape. Federal legislation has imposed dramatic, although temporary, changes to the way employers manage their employees during this trying time. The Families First Coronavirus Response Act (Families First Act) and its regulations impose, for the first time under federal law, paid leave obligations. The CARES Act changes the economics of layoffs, furloughs and reduced hours for employers.
On March 18, President Donald Trump signed the Families First Act into law. The act includes provisions to assist employers and employees during these extraordinary times. The Families First Act creates two forms of paid leave related to the COVID-19 crisis: two-week paid leave (emergency leave); and expansion of the Family and Medical Leave Act (FMLA) to provide 12 weeks of paid leave (expanded FMLA leave).
For the period of time beginning April 2 to Dec. 31, the Families First Act requires employers with fewer than 500 employees to provide full-time employees with two weeks of paid sick leave, and to provide part-time employees with the equivalent of average hours per week for two weeks, if the employee is unable to work or telework because the employee:
- Is subject to a quarantine or isolation order;
- Has been advised by a health care provider to self-quarantine;
- Is experiencing symptoms and seeking a medical diagnosis;
- Is caring for an individual (not limited to family members) who is subject to a quarantine order, has been advised to self-quarantine or is experiencing symptoms;
- Is caring for a son or daughter whose school or place of care has been closed or the childcare provider is unavailable; or
- Is experiencing similar conditions to any specified by the Secretary of Health and Human Services in consultation with the Secretaries of Labor and the Treasury.
There are caps on the amount of pay to which an employee is entitled. If the leave is required because the employee is subject to a quarantine order, has been advised to self-quarantine or is experiencing symptoms and seeking a diagnosis, paid leave under this provision shall not exceed $511 per day and $5,110 in the aggregate. Where the leave is necessary to care for another or a child or due to a school or childcare provider closing, paid leave is limited to two-thirds of average pay, and paid leave under the act is limited to $200 per day and $2,000 in the aggregate.
The Families First Act expands the protections of the FMLA. Employees may be eligible for a combination of paid and unpaid leave for a period of up to 12 weeks under the FMLA, under certain conditions. This requirement applies only to employers with fewer than 500 employees.
Eligible employees will receive two weeks of unpaid leave and 10 weeks of paid leave. To be eligible for leave, the employee must have been on the employer’s payroll for 30 days. The act applies where the employee is unable to work or telework to care for a child of an employee if the child’s school or place of care has been closed, or the childcare provider is unavailable, due to the COVID-19 crisis.
The regulations provide some guidance as to how the Emergency Leave and Expanded FMLA leave work together where the leave is necessary due to the closure of a school or childcare provider. If the employee is eligible for both forms of leave, the leaves run concurrently, so that even though the Families First Act states that the first two weeks of the Expanded FMLA Leave are unpaid, the employee will be paid pursuant to the Emergency Leave provisions. The employer cannot require the employee to exhaust paid time off. The maximum amount of paid leave under the act is $200 per day and $10,000 in the aggregate.
Employers must return the employee to the same or equivalent position upon return to work. There is an exception for employers who employee less than 25 employees—if the position no longer exists due to the COVID-19 crisis, the employer must make “reasonable efforts” to restore the employee to an equivalent position over a one-year period.
This leave is available for immediate use by employees, regardless of length of employment. Employers cannot require employees to exhaust other paid leave before using the paid leave provided by the act.
For both forms of leave, the Department of Labor has issued regulations regarding an exemption for small employers (those with fewer than 50 employees), where the imposition of the act’s requirements would jeopardize the viability of the business as a going concern. The regulation contemplates that the small employer would invoke the exemption as leaves are requested. Small employers are still required to post the notice required by the act. The small employer need not seek the exemption from the Department of Labor or submit any documentation to the Department of Labor. Instead, the employer must document the determination pursuant to the criteria in the regulation, and maintain those records in its files.
The exemption applies in the following circumstances:
- The leave requested would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
- The absence of the employee would cause substantial risk to the financial health or operational capabilities of the business because of the employee’s specialized skills, knowledge of the business, or responsibilities; or
- There are not sufficient workers to perform the labor or services provided by the employee, and these labor or services are needed for the small business to operate at a minimal capacity.
Employers are entitled to dollar-for dollar payroll tax credits for the amount of paid leave.
The regulations clarify a few other issues. The regulations provide a mechanism for taking intermittent leave. Most importantly, the regulations specifically state that those who are out of work because their employer has no work for the employee are not entitled to paid leave.
The CARES Act does not impose any requirements on employers, but is worth a short discussion as it provides options for employers in determining how to manage their employees during the crisis. Many employers have already laid off or furloughed employees, and those employees will be able to take advantage of enhanced unemployment benefits until at least July 30. The CARES Act also expands eligibility for unemployment benefits to the self-employed, independent contractors and those with a limited work history. While the increased financial benefits are available through July 30, benefits themselves are extended an additional 13 weeks over the usual 26 weeks of benefits.
The CARES Act also creates, among other programs, the Payroll Protection Program, which provides “forgivable” loans for employers to pay salaries, benefits, rent or mortgage interest and utilities during an eight-week period that the loan represents. Funds actually spent on those items will reduce the amount of the loan that the employer must repay.
The Families First Act and the Cares Act provide short-term options for employers to navigate the crisis, retain employees, and maintain as much income as possible for those employees. Practitioners are challenged to ensure compliance with the Families First Act in this quickly changing environment, to predict how states and banks will enact the protections of the CARES Act, and to maximize those programs to the benefit of clients.