Has the Coronavirus Broken the Deadlock over Sick and Family Leave Benefit Expansion?

“Sometimes at midnight, in the great silence of the sleep-bound town, the doctor turned on his radio before going to bed for the few hours’ sleep he allowed himself. And from the ends of the earth, across the thousands of miles of land and sea, kindly, well-meaning speakers tried to voice their fellow-feeling, and indeed did so, but at the same time proved the utter incapacity of every man truly to share in suffering that he cannot see.” 

― Albert Camus, The Plague

In the early morning of Saturday, March 14th, the United States House of Representatives passed the Families First Coronavirus Response Act (FFCRA) to combat the growing coronavirus pandemic facing America. The bill would allow for two weeks of fully paid sick leave and up to 10 weeks of partially paid leave (at two-thirds pay) for workers of small business employers meeting certain conditions. The leave would be financed by a tax credit to the small business employer, and thus ultimately paid for by the federal taxpayers.

The purpose of the bill is to expand and fill in a gap in the Family Medical Leave Act (“FMLA”), as well as to add emergency paid sick leave requirements for businesses with less than 500 employees. (And, subject to rulemaking, very small businesses with less than 50 employees may be exempted entirely too, if the leave expense would endanger their solvency.) With federal guidelines now in place restricting any gathering of more than 10 people, many employees have been forced to work from home or abandon work all together. Restaurants are closing along with many other small business employers. This bill aims to partially alleviate the some of the financial stress of those employees. The bill passed by bipartisan majorities. President Trump endorsed the legislation. It would fulfill a promise he made back in the 2016 campaign to enact a family and sick leave plan for workers. As it stands, after some technical fixes over the week-end, the bill was sent over to the Senate for consideration. The situation there is chaotic, with some divisions within the Republican caucus as to how to respond to the national emergency. The president has suggested that he wants changes made by the Senate, so the final contours of the law remain murky. Accordingly,  some of the discussion below may yet be overtaken by events.

If what the House has passed remains on the table, this is what it requires. First the bill aims to amend the FMLA, which only requires employers of more than 50 employees to provide unpaid medical leave for sickness, or those who were taking care of family members, or certain other limited events. But the new bill would expand on that requirement with a series of paid leave mandates for small businesses and new provisions. To be covered by the new mandates, unlike the FMLA, an employee only must be employed for 30 days at their job to qualify under this proposed law. In addition, the bill modifies the definition of family members and includes non-traditional family and caretaker situations such as stepparents or grandparents.

Second, the bill changes the definition of “Employer” for the purposes of this new qualifying situation to only include employers of 500 employees or less. Large businesses are not covered by the new mandate. On its face, this is a curious omission in the bill, but one which may stem from the likelihood that larger  employers may already have their own standard vacation and sick leave benefit plans, and the House did not want to complicate or overregulate them by layering on a statutory requirement. In addition, given the tax credit which is being used to finance the leave, there were concerns over the cost of the benefit if it was extended to large and national employers. However, the exclusion of large employers may have the impact of treating small employers disparately. It may also impose new burdens only on small employers, at a moment in time when many of them are vulnerable to shutdowns or slows downs in commerce.

Third, under the bill, an employee may take paid leave under this Act if a public health official has ordered them to stay home as a result of the coronavirus crisis, must take care of a family member as a result of the crisis because they are a danger to the community, or will take care of a child as a result of the crisis due to school closing or child caretaker being unable to work. Following a 14-day period, the covered employer must compensate the employee at two thirds their regular rate for the remaining 10 weeks for the number of hours they would normally work. In addition, the bill contains provisions for job security -- employers under certain circumstances must endeavor to keep the worker’s job position or provide an equivalent position. If they fail to do this, then if a similar position opens within one year, they must contact the employee and make reasonable efforts to restore them to that position.

Fourth, the bill also adds the Emergency Paid Sick Leave Act which mandates eighty hours of paid sick leave for full time employees. This applies to employees who are self-isolating as a result of the virus, are taking time for diagnosis or care as a result of symptoms for the virus, or are complying with a public health order requiring them to remain home unable to fulfill the requirements of the position. In addition, the paid leave requirement applies if the employee is taking care of a family member that has been exposed to the virus or are exhibiting symptoms. The bill also provides for paid leave if employees’ children are under the age of eighteen and their school has been closed or their childcare provider is unavailable as a result of the health emergency. However, it seems that employees who are able to fulfill the requirements of their positions by working at home (i.e., while not attending at the workplace) would not qualify for the paid sick leave under this bill.

Full-time employees must receive 80 hours of paid sick leave and part-time employees must receive hours equal to the number of hours they work on average over a two-week period. The paid sick leave requirement is in addition to any sick leave that is owed to the employee, and an employer may not require their employees to use their accrued sick leave before they use their sick leave provided under this bill. Employers may not change their sick leave or paid leave policies as a result of this bill. Employees are compensated at the greater of their regular rate of pay or the minimum wage in their State or locality. However, employees using their sick leave to take care of family members will be compensated at two-thirds of their regular rate or the minimum wage in their state or locality.

This bill will require small business employers to compensate their employees in the event that they are unable to fulfill their obligations as a result of the coronavirus. It doesn’t provide any direct upfront federal funding for that effort.  The initial financial burden is placed entirely on small businesses who are the least able to bear it, albeit they can get a tax credit at the back end for the expense provided that they have revenue, profits, and remain in business. (Apparently, one of the adjustments in the Senate that is being discussed is letting employers draw on taxes already paid to the Internal Revenue Administration to cover the sick leave costs. In addition, the federal government has delayed the April 15th tax payment deadline by 90 days so businesses will have more cash to finance these kinds of costs as well as operational disruptions.

The bill is structured to provide all of this in addition to anything the employer would have provided the employee in the way of paid time off or paid medical leave. So, employers will likely be unable to take a fringe benefit offsetting credit for the dispensed emergency sick leave against their required health and wellness benefits under any prevailing wage law specifying fringe benefits, like the Service Contract Act or the Davis-Bacon Act.  And some states like New York are proceeding with their own State mandated sick leave requirements for the coronavirus situation, and it is unclear how those state laws will interact with the prevailing wage requirements and the provisions of the FFCRA.

Whatever the final bill, the tab will be picked up in ever larger deficit spending by the federal government.  Employers will not be the only group paying for the time off because the federal government is allowing employers a tax credit for the Emergency Sick Leave and Family Medical Leave. Note that this is a tax credit and not a tax deduction, meaning that the employer will receive the full amount per day against their tax obligation, if they have any income to be taxed, whereas a tax deduction would be applied against pre-tax income. This public expense associated with the tax credit was the difference when law makers voted to include only small businesses of less than 500 employers. The tax obligations of “big” businesses was deemed too expensive for the federal government to include. It is possible that a second bill will be introduced to alleviate the struggle of employees working at larger businesses, or some other proposal emerges in the Senate, but for right now the only bill sent to the Senate is the Families First Coronavirus Response Act.

For more information or to read the proposed bill itself, please refer to this URL: https://docs.house.gov/billsthisweek/20200309/BILLS-116hr6201-SUS.pdf. And please check for any updated or corrected version of the bill too. It is a fluid situation.