Department of Labor Guidance on Families First Coronavirus Response Act: Takeaways for Employers Part One

This client alert has been updated to reflect our summary of the U.S. Department of Labor’s additional Q&A guidance set forth on March 28, 2020, and Temporary Regulations published on April 1, 2020.

On March 18, 2020, the Families First Coronavirus Response Act (the “Act”) became law. Our summary of key employment provisions can be found here, and our explanation of the tax credit provisions can be found here. Over the past few weeks, employers have struggled to make sense of the paid leave provisions, including when they become effective, what types of leave they cover, and which employers are covered by the Act.

The U.S. Department of Labor (“DOL”) rolled out its initial guidance on the Act by publishing a Q&A webpage on March 24th, which was subsequently updated on March 28, 2020. Most recently, on April 1, 2020, the DOL issued Temporary Regulations to clarify how the Act is to be implemented in response to the COVID-19 global pandemic. This summary identifies several aspects of the Act that have generated questions and what we currently know about the answers based on the DOL’s guidance to date. Additional topics from the new Temporary Regulations are discussed in our Takeaways for Employers Part Two.

Effective Date: Confirmed

While many had initially presumed the leave entitlement would begin on April 2, 2020 (15 days from enactment), a joint DOL/IRS press release on March 20, 2020 suggested that the entitlement might have already become available. But now, the DOL has clarified that paid leave under the Act became available on April 1, 2020. There will be no retroactivity for leave taken before this date.

Interaction Between Paid Sick Leave for Childcare and Emergency Family Leave: Confirmed

If an eligible employee of a covered employer must miss work (and is unable to telework) in order to care for his or her “son or daughter” whose school or daycare is closed, he or she can take up to a full 12 weeks of leave. The DOL has confirmed that: (i) the first 10 days (two workweeks) of such leave could be covered by the Paid Sick Leave provisions (at 2/3 pay, capped at $200 per day, for a total aggregate of $2,000) and (ii) the remaining 10 weeks would be covered under the Emergency Family Leave provisions (again at 2/3 pay, capped at $200 per day, for a total aggregate of $10,000). Accordingly, an employee taking leave for this reason could receive a total of 12 weeks of leave to care for his or her child, with a maximum total aggregate payment of $12,000. The covered employer could then seek a tax credit for the leave benefits it paid in this regard.

Note: The Act adopts the FMLA’s broad definition of “son or daughter,” which includes minor children as well as an adult son or daughter who has a mental or physical disability and is incapable of self-care because of that disability.

Relief for Small Employers: Defined

The Act empowers the DOL to exempt employers with fewer than 50 employees from the childcare leave provisions where the requirements would “jeopardize the viability of the business as a going concern.” The Temporary Regulations specify that a small business with fewer than 50 employees can satisfy the viability threshold if “an authorized officer of the business” has determined that at least one of the following conditions is satisfied:

  1. The provision of Paid Sick Leave (for childcare) or Expanded Family and Medical Leave 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;
  2. The absence of the employee or employees requesting childcare leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
  3. There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting childcare leave, and these labor or services are needed for the small business to operate at a minimal capacity.

Notably, the Temporary Regulations permit the employer to make the determination as to whether it meets the viability threshold or not. However, the small businesses must document why they believe they satisfy one of the criteria and retain this documentation for four years.

Counting Employees for Multi-Entity Employers: Confirmed

Because the Act’s Paid Sick Leave and Emergency Family Leave provisions do not apply to employers with 500 or more employees, many multi-entity employers have wondered whether they can aggregate the employees of their various entities to avoid coverage. After some initial confusion, the DOL has clarified that the “integrated employer” test (traditionally used under the FMLA) will be used to determine whether a multi-entity employer is integrated for purposes of counting employees. Under this test, integration is determined by weighing four factors: (i) common management; (ii) interrelation between operations; (iii) centralized control of labor relations; and, (iv) degree of common ownership or financial control. Where a multi-entity employer can successfully prove they are an integrated enterprise under the FMLA with more than 500 employees in the aggregate, it will be exempt from the requirement to provide benefits under the Act. Additionally, any individual employees jointly employed by the employer and another entity under standard DOL joint employment rules will also be added to the total employee count.

Impact of “Stay-at-Home” Orders: Confirmed

At the time the Act was passed, no U.S. state had issued a “stay-at-home” order. Nothing in the Act explicitly contemplated such an eventuality. Now, with stay-at-home orders in place over much of the country, employers are left to grapple with the following question: if an employer must shut down in order to comply with a stay-at-home order, are its employees entitled to Paid Sick Leave or Emergency Family Leave? According to the Temporary Regulations, the answer is no. The DOL explains that a qualifying reason under the Act must be the cause of the employee’s absence. Thus, if the employer is closed due to a stay-at-home order (or the employer has no work for the employee to do for other reasons, such as a furlough), that employee is not entitled to paid leave benefits under the Act. The employee may, however, be eligible for unemployment benefits. On the other hand, if the employer remains in operation and has work for the employee, but the employee cannot come to work due to a stay-at-home order (e.g., the employee is of a category of citizens – such as those with a certain medical condition – that has been advised by a government authority or health care provider to stay at home because he or she is particularly vulnerable to COVID-19), he or she would be entitled to leave under the Act.

What’s Next

On March 25, the day after originally publishing its Q&A guidance, the DOL issued a Poster, that must be displayed by all covered employers by April 1, 2020, as well as an FAQ discussing the Act’s posting requirements

At this time, the DOL has advised that its April 1, 2020 regulations are temporary in nature, which means the guidance could change yet again in the near future. Although we do not anticipate that there will be major changes in the guidance already published, we will continue to monitor all developments as they occur and publish additional guidance, including the companion to this Alert – Takeaways for Employers Part Two – as necessary.

If you have any questions about the Act, please feel free to reach out to one of the authors above or another member of the Lewis Rice Labor & Employment Group