“It is a riddle, wrapped in a mystery, inside an enigma; “

—Winston Churchill

With the recent actions by Congress and some federal agencies, the leave benefit obligations for small size employers have been both extended and complicated. The Families First Coronavirus Response Act (“FFCRA”), among other things, extended family, medical and paid sick leave obligations for employers with less than 500 employees. We discussed this new law at length in several blogs including: https://www.awrcounsel.com/blog/2020/3/23/the-coronavirus-leave-bill-becomes-law-never-let-a-crises-go-to-waste?rq=Coronavirus; https://www.awrcounsel.com/blog/2020/3/27/what-me-worry-new-whd-guidance-issued-on-coronavirus-leave-requirements.

The FFCRA, on its face, is clear in that it imposes significant new responsibilities for employers with less than 500 employees. But it is unclear how the law affects some of the already existing leave and benefit obligations imposed by such acts as the Service Contract Act (“SCA) and the Davis-Bacon Act (“DBA”). More specifically, one issue is whether the FFCRA’s requirements count towards the already existing employer’s obligations, or are they are additional to existing obligations? Furthermore, does the new leave require — when read in tandem with prevailing wage laws — additional health and welfare (“H&W”) benefits to be paid out along with the paid leave? Considering the possible penalties imposed for violating the SCA and the DBA, including debarment, these are high stakes questions and we will explore them here.

It is clearly understood that the leave requirements of the FFCRA are additional to the already existing obligations imposed by the state law, SCA, and DBA. And the law is additive and not concurrent as noted above. Notably, the FMLA already requires covered employers to maintain any health benefit plan funded by H&W, even if the employee is not being paid.  Since emergency family leave is an extension of FMLA, one should expect this requirement to remain in place. Also under the FFCRA, employers can get reimbursed not only for the leave, but also for health plans expenses at about two-thirds of the cost. The Emergency Family and Medical Leave Expansion Act (EFMLA) also expands the already existing requirements of the Family and Medical Leave Act of 1993 by imposing a new reason why employers would have to supply their workers with family or medical leave. The act already exists within the regulatory scheme and new requirements do not replace any of the obligations required by the existing scheme. The Emergency Paid Sick Leave Act (EPSLA) also does not replace any of the obligations of the FLSA, SCA, or DBA — it only adds additional obligations. Even before the EPSLA existed, under the pre-existing regulatory scheme, paid sick leave was offered as a benefit by employers to help attract more competent employees to their company. This paid sick leave usually counted against the requirements of the SCA and DBA and their wage determinations for each class of employee. However, this is not the case under the EPSLA. The Department of Labor (“DOL”) Wage and Hour Division (“WHD”) has published guidance through the use of online Frequently Asked Questions. That guidancce states that the new paid sick leave is “in addition to you employee’s … other leave entitlements.” https://www.dol.gov/agencies/whd/pandemic/ffcra-questions. Therefore, an employer would not be able to count the sick leave required by the new FFCRA against their obligations under state, SCA, DBA, or other related laws.

Despite the clear guidance relating to the lack of concurrency of the FFCRA’s leave requirements and the existing leave requirements, it is unclear if the leave required under the FFCRA triggers additional benefits associated with hours worked for SCA and DBA workers. Both the SCA and sometimes the DBA require H&W be furbished or paid for hours worked. These are dictated by the wage determination applicable to the employee’s position. Does the paid leave under the FFCRA require the health and welfare benefits be paid (or accrued depending on an employer’s compensation plan) as well?

Maybe. This question has not been answered by the DOL and the rules and regulations promulgated by DOL are silent on the issue. However, the DOL Prevailing Wage Resource Book could be helpful. It states that, for employees under a “fixed cost” H&W plan, that the H&W benefit are triggered by “all hours paid for” which include paid vacations, holidays, and sick leave. US DOL Prevailing Wage Resource Book, at 9. For these employees, it is likely that the paid sick leave required by the FFCRA would trigger H&W benefits. However, employees with an “average cost” H&W plan may not receive the same benefit because their benefits are triggered by all hours worked which do not include paid leave hours and the leave can be averaged, meaning that not all workers need be furnished the leave benefit. Id. Additionally, of course, collective bargained agreements must be followed.

A more complicated question is whether the leave required by the Emergency Family and Medical Leave Expansion Act triggers these H&W benefits for the SCA and DBA covered workers. One reason why this question is unanswered is that the FMLA offers unpaid leave to covered employees. The expansion in the FFCRA requires employers to give paid leave for certain reasons related to the coronavirus. In other words, this wasn’t relevant until the FMLA included paid leave obligations.

An argument could be made similar to those related to the “fixed cost” H&W benefit calculation that the fixed cost plan includes all hours paid for, and the new paid leave obligation is for the hours employees have forsaken on account of the coronavirus. This would also mean that only 2/3 of the normal H&W benefits would be owed because only 2/3 of the employee’s regular rate would be compensated under the Emergency Family and Medical Leave Expansion Act. Other’s would say that no section of the FMLA triggered any H&W benefits before the act, and neither was it discussed within the act or by any following regulations. In addition, the act mentions that the employee is owed 2/3’s their “regular rate” a defined term discussed in the FLSA context which often excludes some types of fringe benefits. Since the regular rate excludes such things as “contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirement, life, accident, or health insurance or similar benefits for employees…”, then it is likely that the manner in which the manner in which the H&W benefits are paid will govern its inclusion in the regular rate. Fair Labor Standards Act § 7(e)(4).

This leaves us somewhat in limbo. There are arguments both ways. This isn’t the first time we at AWR have faced a similar issue. The same kind of issue arises under both short term disability (“STD”) and long term disability (“LTD”) plans. In those situations, employees get salary continuation. If the salary is paid by the employer, like in a STD situation, then the prudent thing likely is to pay the H&W. But if the salary is paid by a LTD third party insurer, while there are ambiguities, we have generally been of the view that no H&W is due for that “leave” period. It is not working time under the government contract. It is not a traditional paid leave benefit. It is furnished by a third party, and we have thought that you don’t pyramid benefits on top of benefits. And the LTD payment is made for an absence from the workplace, and not some kind of further benefit. The LTD was also presumably paid for by the prior H&W benefit while the worker was employed. But here the two-thirds FFCRA leave is somewhere in between the LTD and STD examples, making it even more of a twilight zone (Don’t touch that dial!).

The FFCRA includes a 30-day non-enforcement period so that employers can research and understand their new obligations. The WHD has promulgated a new temporary rule on April 6, 2020 that is in place until December 31, 2020 that does not discuss either of these topics. Those regulations can be found here: https://www.federalregister.gov/documents/2020/04/06/2020-07237/paid-leave-under-the-families-first-coronavirus-response-act. Until WHD decides to clarify the reach of the H&W, the conservative route is to just play it safe and pay H&W along with the FFCRA leave. If you are not going to play it safe, then it is likely in an employer’s best interest to discuss these compensation plans with an attorney or to contact the DOL to discuss their perspective on the new law.