March 23, 2020
This briefing is not intended to and does not constitute legal or medical advice. Questions concerning how the law applies to your specific factual circumstance should be directed to one of our attorneys at the firm.
On March 18, 2020, the federal Families First Coronavirus Response Act (“FFCRA“) was signed into law. The FFCRA contains two separate acts that provide paid leave for absences resulting from coronavirus (“COVID-19“): the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act.
Does my Company fall under the requirements of the updated paid leave laws?
Both the update to the Family Medical Leave Act (“FMLA”) and the provision for Emergency Paid Sick Leave under the FFCRA apply to private companies with fewer than 500 employees (i.e. all full and part-time employees with at least 30 calendar days of employment), as discussed in more detail below. The statute does authorize the Department of Labor to issue regulation providing an exemption for companies with 50 employees whose “economic viability” would be jeopardized by having to provide such expanded benefits. However, unless an exemption is provided by the DOL, most small businesses will be required to provide both Emergency Paid Leave and FMLA leave to qualifying employees.
Please note that both the expanded FMLA leave and Emergency Paid Leave entitlements are expected to go into effect on April 2, 2020. It is a possibility in the coming days that Department of Labor will issue further guidance for small business that may alter the applicability and effect to any given Company.
What are my Company’s requirements regarding Emergency Paid Sick Leave?
A company may be required and employees would be entitled to use emergency paid sick leave for COVID-19 related incidents. All employers with fewer than 500 employees and public employers are required to provide paid emergency sick leave. All employees of covered employers are eligible, regardless of the employee’s duration of employment. Full-time employees are entitled to 80 hours of paid leave. Generally, part-time employees are entitled to the average number of hours the employee works over a 2-week period. Employees are able to take paid sick leave for the following reasons:
- One…..The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
- Two….The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- Three….The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
- Four….The employee is 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 (note that this particular reason is not limited to family members);
- Five….The employee is caring for their son or daughter because the school or place of care of the son or daughter has been closed, or the childcare provider is unavailable due to COVID-19 precautions; or
- Six….The employee is 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.
Employers are required to pay employees at the following rates:
- the employee’s regular rate of pay if the sick leave is for reasons 1 through 3 above, capped at $511 per day and $5,110 in the aggregate;
- two-thirds the employee’s regular rate of pay if leave the sick leave is for reasons 4 through 6 above, capped at $200 per day and $2,000 in the aggregate.
What are my Company’s requirements regarding Expanded FMLA?
In addition to the emergency paid sick leave requirements, a Company may be subject to FMLA paid leave requirements. FMLA, normally applicable to employers with 50 employees or more, was modified to include all employers with fewer than 500 employees unless an exemption issued by the Department of Labor applies. The Emergency FMLA also expands coverage by including employees who been employed by the employer for at least 30 days. The circumstances in which an eligible employee can make a claim for FLMA was expanded by the Emergency FMLA to include an event where the employee cannot work or telework due to the need to care for a son or daughter under 18 years of age if, because of a public health emergency regarding COVID-19, the child’s school or place of care has been closed and a child care provider is unavailable.
Under the Emergency FMLA, the first ten days of leave necessitated by a public health emergency related to COVID-19 is unpaid. An employee may elect to substitute accrued paid leave or emergency paid sick leave during that time period under the leave provisions of the FMLA (29 U.S.C. § 2612(d)(2)(A) (allowing an employer to require an employee to use other accrued paid leave during FMLA leave)). Leave after the first ten days must be paid at a rate at least two-thirds the employee’s regular rate of pay based on the employee’s regular schedule. For each employee, paid leave cannot exceed $200 per day and $10,000 in the aggregate.
If a company temporarily shuts down all or a portion of its operations, what obligations exist to pay employees’ wages and benefits?
The answer depends on what the company does with their employees. With a government order, such as the one instituted by Kansas City’s Mayor Lucas over the weekend (see https://www.kcmo.gov/home/showdocument?id=4065 for a copy of the text), that includes restrictions on operating business during a stay-in-place period, companies have the option to do any or a combination of the following: instruct employees to work from home, furlough employees, or layoff employees. If employees are working from home, a company would be required to continue to pay wages and provide benefits in accordance with FLSA and state and local requirements. Furloughed employees may be entitled to certain benefits, while laid off employees would generally not be entitled to further compensation. There are exceptions to these general rules based on the nature of the employment relationship and furloughs and layoffs should be conducted in accordance with applicable labor, compensation, and wage and hour laws.
Are there any restrictions to layoffs
arising concurrent to federal or local government mandates related to the
No. Currently, there are no new restrictions on laying off employees. However, employers are still required to follow existing laws. Any company initiating furloughs or layoff should consider the legal issues and statutory requirements. Such issues include, among other things:
- Exempt vs non-exempt employees
- Contract claims from contracted employees
- Discrimination and retaliation claims
- WARN Issues
The ramifications for furloughing exempt and non-exempt employees are different. Employers are required to pay non-exempt employees only for actual hours worked. This means if a company reduces hours or cuts hours during a work week, then the company is only required to pay the employee their standard hourly rate for the hours worked. Exempt employees have more complicated rules. An exempt employee that is salaried and the company is generally requires an employer to pay the full amount of the salary for each workweek in which the employee performs any work. The Company must pay the employee’s full salary for any workweek in which the employee performs work for the employer. Therefore, if the employee does not perform any work during a particular workweek, the employer is not obligated to pay the employee for that workweek. “Work” includes work performed away from the employer’s premises or outside normal working hours. This includes reviewing or responding to emails or phone calls. To avoid the payment obligations for furloughed exempt employee, a Company may consider shutting off the employee’s access to company email and voicemail and make sure the employee’s supervisor understands not to ask the employee to perform work during the workweek.
Contract employees or unionized employees may have terms that prevent furloughs. A company furloughing either type of employee should consult the employment agreement or union agreement and ensure the furlough meet all terms of the agreement. Some contracts may have terms that prevent furloughs.
Furloughing employees carries the same legal issues as terminating an employee when it comes to discrimination and anti-retaliation. Generally, employers should select employees for furlough based on criteria of job responsibilities, without regard for race, gender, age, pregnancy, or other protected classes.
The WARN Act requires covered employers to provide at least 60 days’ advance notice of a mass layoff or plant closing. A “covered employer” is an employer that employs at least 100 employees, excluding part-time employees. “Mass layoff” and “plant closing” are also defined and should your company be over 100 employees you should consult our firm on whether your course of action for furloughs or layoffs trigger the notice requirements of the WARN Act. Additionally, many states have their own requirements for layoffs similar to the WARN Act which vary from state to state. These are commonly referred to as mini-WARN Acts. Neither Kansas nor Missouri have a mini-Warn Act.
What exemptions are available to the new paid leave requirements?
Under the FFCRA all private companies with fewer than 500 employees are required to provide covered employees up to 12 weeks of FMLA leave and emergency paid sick leave up to 2 weeks, depending on whether they are full-time or part-time employees. However, the statute provides that for both extended FMLA leave and emergency paid sick leave, companies under 50 employees may apply for an exemption if they can prove that granting such benefits would jeopardize the “economic viability” of the company. The likelihood that this exemption will be provided is unclear. According to a Department of Labor news release, the Department, “will provide emergency guidance and rulemaking to clearly articulate this standard”.
In addition, employers with fewer than 25 employees may not be required to restore paid leave employees to their prior position after they return from leave, subject to certain conditions, such as:
(a) The employee took leave for public health crisis-related reasons;
(b) The position no longer exists due to economic conditions or other changes in the employer’s operating conditions that affect employment and were caused by the public health crisis;
(c) The employer makes reasonable efforts to restore the employee to an equivalent position but ultimately cannot do so; and
(d) The employer makes reasonable efforts to contact the employee if an equivalent position becomes available at a later date (which continues for 1 year beginning on the earlier of (a) the date on which the qualifying need related to the public health emergency concludes, or (b) the date that is 12 weeks after the date on which the employee’s public health emergency leave began)
For employees paid on commissions, how is their compensation calculated for the FMLA and paid sick leave payment calculations?
The FFCRA states that for paid extended FMLA pay and emergency paid sick leave an employee should be paid according to “employee’s regular rate of pay” and it defers to the Fair Labor Standards Act (“FLSA”). Regulations state that when calculating an employee’s regular rate, all compensation received by the employee in a workweek must be included, including wages, bonuses, commissions, and any other forms of compensation. See 29 CFR 778.109. Due to the fluidity of the FFCRA and the forthcoming regulations from the Department of Labor, employers may consider consulting with our firm on how to calculate commissions on a case by case basis. It is important to note that any such calculation will also take into account the daily and aggregate statutory caps which may make such an issue mute if the base salary and commissions combined exceed that cap.
What businesses may remain open during the Kansas City stay-at-home order?
The order states that all individuals may only leave their residences or place of rest to perform “Essential Activities”, one of which being to provide services to “Essential Business”. “Essential Business” includes a number of enumerated categories of goods and services, including “Healthcare Operations”, “Essential Infrastructure” (such as public works construction, construction of housing….roads and highways, public transportation, solid waste collection and removal), grocery stores, farming activities, business that provide for particularly needy individuals, certain media outlets, gas stations, banks, hardware stores, certain essential home service providers, mailing and shipping services, schools (remote), to-go food operations, home-based care providers, residential facilities, legal and accounting services, and childcare facilities that enable individuals to work for “Essential Business”. Essential Business also include businesses that “supply other essential businesses with the support or supplies necessary to operate.”
Additionally, individuals are permitted to leave their residence to provide “Minimum Basic Operations” at a non-essential business, which is defined as:
- “the minimum necessary activities to maintain the value of the business’s inventory and facilities, ensure security, process payroll and employee benefits, or for related functions; and
- the minimum necessary activities to facilitate employees of the business being able to continue to work remotely from their residences, place of rest, or elsewhere.”
Any Minimum Basic Operation must be done in keeping with the Social Distance requirements which include, “maintaining at least six-foot social distancing from other individuals, washing hands with soap and water for at least twenty seconds as frequently as possible or using hand sanitizer, regularly cleaning high-touch surfaces, and not shaking hands.” (see https://www.kcmo.gov/home/showdocument?id=4065 for a copy of the text of the order for a full description of businesses and activities exempt from the order)
What types of governmental programs are available to assist with the additional costs employers are likely to face?
In light of the financial burdens created by COVID-19, there have been some governmental assistance programs adopted. For example, the SBA has made certain disaster relief loans available to small employers (see https://disasterloan.sba.gov/ela/ for more information). In addition, Kansas has announced a $5 million Emergency Relief Fund to provide Bridge Loans for Kansas Companies in the hospitality sector (see https://www.kansascommerce.gov/covid-19-response/hospitality-industry-relief-emergency-hire-fund/hirefund-application/ for more information).
Certain tax credits are also available. The FFRCA, in an effort to alleviate some of the financial burden of paying new benefits by providing Employers with tax credits against the employer portion of social security taxes. Employers will be reimbursed to the extent their cost providing the foregoing leave exceeds the taxes owed.
In regards to emergency paid sick leave, a Company will be entitled to a refundable tax credit equal to 100% of the sick leave wages paid for each calendar quarter. The wages and corresponding credits are capped at $511 per day ($200 per day if the leave is for caring for another person per the statute) for up to 10 days per employee in each calendar quarter. In regards to the extended FMLA leave, employers will be entitled to a refundable tax credit equal to 100% of the FMLA leave wages paid for each calendar quarter. Similarly, the wages and corresponding credits are capped at $200 per day for each individual up to $10,000 total per calendar quarter.
How can we communicate with Conroy Baran?
Conroy Baran remains committed in these trying times to assisting our business clients with their day-to-day corporate needs, as well as their mergers, acquisitions, sales, reorganizations (including Chapter 11), succession planning, corporate and securities needs, and can accommodate safe client contact through video conferencing and screen sharing, as well as the usual talk, text, and email.
Kyle Conroy: 816-388-9686
Robert Baran: 816-616-5009
Larry Pittman: 816-210-9680
Christopher Stewart: 816-522-1582
Andrew Potter: 719-359-2701
Bob Reynolds: 417-496-2467