Coronavirus Relief Act Mandates Paid Leave; Provides Tax Credit for Businesses

March 23, 2020

The Families First Coronavirus Response Act (the "Act") was recently passed into law to address the ongoing COVID-19 pandemic.  Effective April 2, 2020, the Act involves two pieces of legislation that will have an immediate impact on all employers with fewer than 500 employees, and whose employees are unable to work (or telework) due to concerns stemming from the coronavirus outbreak.  The Act first expands the Family Medical Leave Act ("FMLA") to now offer job-protection and paid leave to qualifying employees absent from work (for up to 12 weeks) for child-care obligations related to COVID-19.  Next, the Act creates the Emergency Paid Sick Leave Act ("EPSLA") which will immediately provide up to two (2) weeks of mandatory paid sick leave to all employees. 

Both items of legislation offer employers of employees who are health care providers (or emergency responders) an opportunity to opt-out of either of these new leave requirements.  However, due to drafting, such statutory authorization is also in conflict with separate provisions of the Act delegating rulemaking authority to the Secretary of Labor to determine whether or not health care providers (or emergency responders) can exempt themselves from the Act.  Until that question is fully resolved in the coming days and weeks, it is fair to argue that employers of health care providers (and emergency responders) have express authority within the language of the Act to exempt themselves from these new mandates.  While opting-out would alleviate the need of certain employers to provide paid leave, it would also preclude those same employers from receiving any payroll tax credits (i.e., government reimbursement) for any voluntary leave payments given during this time.

FMLA Expansion

From April 2nd until December 31st, the Act amends the FMLA to add "public health emergency leave" to the circumstances which entitle an employee to take leave under Section 102 of the FMLA.[1]  Referred to herein as "subsection 102(a)(1)(F) leave," qualifying employees may take up to twelve (12) total workweeks of job-protected leave if the employee is unable to work (or telework) due to a need for leave to care for the employee's son or daughter (under the age of 18) because the school and/or daycare facility of such child is closed due to a public health emergency (i.e., the coronavirus).[2]  Note that the requirements for this expanded leave condition under the FMLA is very specific – it only applies to employees who are unable to work because they must care for a child following the closure of a school or daycare (or other unavailability of childcare) due to the coronavirus.[3]

The first ten (10) days of subsection 102(a)(1)(F) leave can consist of unpaid leave.  However, employees may elect to substitute and use any previously accrued paid leave with the employer (e.g., vacation days, sick days, personal days, etc.).   Beginning after this initial 10-day leave, employers must then provide paid leave at two-thirds (2/3rds) of an employee's regular wage (multiplied by his or her regular hours) for each day of subsection 102(a)(1)(F) leave that such an employee takes (for up to 12 total weeks).  Payments are capped at $200 per day and cannot exceed $10,000 in the aggregate.[4]

This FMLA expansion applies to all employers with fewer than 500 employees.[5] The Secretary of Labor is authorized to issue regulations to (a) exclude certain health care providers and emergency responders from the definition of eligible employers; and (b) to exempt small businesses with fewer than 50 employees from the requirements the Act when the imposition of such requirements would jeopardize the viability of the business as a going concern.[6]  Employees taking subsection 102(a)(1)(F) leave are entitled a restoration of their position upon return from such leave,[7] however employers with fewer than twenty-five (25) employees may not be required to restore the employee's position if certain hardship requirements are satisfied.[8]

The Act does separately specify that an employer of an employee who is a health care provider or an emergency responder may elect to exclude such employee from the application these expanded FMLA leave requirements.[9]  Under the FMLA, a "heath care provider" is defined as "a doctor of medicine or osteopathy who is authorized to practice medicine or surgery (as appropriate) by the State in which the doctor practices; or any other person determined by the Secretary to be capable of providing health care services."[10]  Therefore, there is no restriction on this opt-out right based upon the type of medical care the employer provides.  This express statutory authority is seemingly at odds with the authority granted to the Department of Labor to decide if health care providers and emergency responders can opt-out of the additional public health emergency paid leave provisions under new subsection 102(a)(1)(F).  However, the plain language of the statute should trump any regulations that may be promulgated under the under the Labor Secretary's authority. 

Emergency Paid Sick Leave Act (EPSLA)

As a new legislative item added by Section 5101 of the Act, the EPSLA requires all employers under 500 employees to provide each employee with paid sick leave to the extent that such employee is unable to work (or telework) due to a need for leave because of the following reasons:

(1) The employee is subject to a federal, state, or local quarantine isolation order related to COVID-19;

(2) The employee has been advised by a health care provider to self-quarantine over concerns related to COVID-19;

(3) The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;

(4) The employee is caring for an individual who is subject to an order of quarantine/self-quarantine described in #1 and #2 above;

(5) The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed or is unavailable due to COVID-19 precautions; or

(6) The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Treasury and Labor Secretaries.[11]

The most important aspect of the EPSLA from the employer's perspective is that employers are required to pay sick leave for up to two (2) weeks.[12]  Effective April 2nd, this requirement applies to both full-time and part-time employees, and (unlike the FMLA expansion) this paid sick leave entitlement is immediately available to all employees regardless how long the employee has been employed with the employer.[13]

For up to two (2) weeks, the employee's paid sick time benefit shall be equal to the employee's full-rate if the employee is taking sick leave due to reasons (1), (2), or (3) outlined above.  In other words, if the employee cannot work and is taking paid sick leave under the EPLSA because he or she is directly affected by COVID-19 (i.e., quarantined, self-quarantined, or seeking diagnosis), then the employee is entitled to full pay during the 2-week leave period.  This pay requirement is capped at $511 per day (not to exceed $5,110 in the aggregate).[14]  If the employee cannot work and is taking paid sick leave under the EPLSA for an indirect reason described in (4), (5), or (6) above (i.e., caring for a quarantined individual or a child due to school and/or daycare closures), then the employee is entitled to two-thirds (2/3rds) of his or her regular pay during the 2-week leave period, not to exceed $200 per day and $2,000 in the aggregate.[15]

Employers cannot force employees to use any available employer-provided paid time off before utilizing the paid sick leave benefits under the EPSLA, nor can employers terminate employees who take paid sick leave in accordance with the Act.   Employers who violate these rules are considered to be in violation of the Fair Labor Standard Act and subject to all penalties with respect to such violation.[16]  Furthermore, employers must post notice of employees' rights to paid leave under the EPLA, and the Secretary of Labor is expected to issue a model notice in early April.  Also note that the EPSLA is set to expire on December 31, 2020.

Similar to the FMLA expansion, the Act permits the Secretary of Labor to issue regulations to exempt health care providers and emergency responders from the mandates of the EPSLA.  Likewise, the Labor Secretary has the authority to exempt small businesses under 50 employees if complying with the EPSLA would jeopardize the financial viability of the business.[17] 

While it would seem that employers of health care providers and emergency responders must wait on Labor Department regulation before deciding to opt-out of the EPSLA, the flush language of Section 5102(a) also states that "an employer of an employee who is a health care provider or an emergency responder may elect to exclude such employee from the application of [the EPSLA]."  Though this exemptions is also in conflict with itself, it is nevertheless provides direct statutory authority for employers of health care providers and emergency responders to also opt-out of the EPSLA provisions without waiting on guidance for the Department of Labor. 

Overlap of the FMLA Expansion & the EPLSA

It would seem that the two provisions for paid leave under the Act are incredibly similar, and indeed they are in one particular circumstance.  The most important takeaway is that the 2-week mandatory paid sick leave provided for by the EPSLA will be the most utilized.  Under the EPSLA, employees unable to work for direct or indirect reasons stemming from the COVID-19 outbreak can demand and receive 2-weeks of paid sick leave.   For employers (and employees) it will be important to distinguish the reason for taking such paid sick leave under the EPSLA, as it will determine which rate (full or two-thirds) the employer is obligated to pay.  After two weeks, regardless of the pay rate involved, the paid sick leave benefits under the EPSLA are exhausted.  From then on, and only for employees that cannot return to work due to care for a child whose school or daycare is closed because of the coronavirus, could employees elect to take additional  paid leave under the FMLA.

It seems likely that most employees unable to work due to COVID-19 will utilize their new EPLSA benefits first, as it guarantees pay beginning on the first day of any such leave.  Employees taking leave under subsection 102(a)(1)(F) of the FMLA would also qualify for the EPSLA, so, in practicality, employees unable to work due to caring for a child out of school or daycare could expect to receive at least two-thirds (2/3rds) pay (capped at $200 per day) for up to twelve (12) total weeks.  Employees not facing child-care challenges can expect to receive at least two week of full pay (up to $500 per day).

Tax Relief Provisions

Undoubtedly, the mandates of the Act will place an incredible burden on employers, particularly small businesses who face significant slowdowns and/or shutdowns due to the coronavirus outbreak.  While hardship protections potentially exist for employers with fewer than twenty-five (25) employees, such relief wholly depends on the swift actions of the Secretary of Labor.  Fortunately, for all employers, there is a relief provision already written into to the Act intended to fully compensate all affected employers for the amounts they must pay in sick leave under both the expanded FMLA and the new EPSLA. 

This monetary relief takes the form a payroll tax credit equal to the total amount of qualified sick leave paid by the employer under the Act.[18]  To be qualified, the amounts covered by this credit cannot exceed the $511/$200 per day limits described above.  That is to say, while employers could potentially pay more in sick leave benefits, any amounts in excess of the statutory caps will not be eligible for a refund with an offsetting payroll tax credit.  The good news is that these payroll tax credits are intended to be fully refundable to the employer, regardless of the employer's current payroll tax liability.  Simply put, the Act is designed to fully compensate employers, dollar-for-dollar, for the total amount of qualified sick leave benefits paid out during this extraordinary time.  The open question is when exactly employers will realize these credits and refunds will be issued by the Treasury.  The details and timeframe of that process is still to be determine.  Meanwhile, the immediate challenge for employers faced under the Act will be surviving any cash-crunch associated with making these payments in the meantime.

This Insight is intended only to provide an overview of the matters addressed herein and does not constitute legal advice.  If you have any questions regarding a specific issue, please seek appropriate legal counsel.


[1] H.R. 6201 § 3102(a); 29 U.S.C. § 2612(a)(1). 

[2] FMLA § 110(a)(2)(B) & (C).

[3] Qualifying employees must also have been employed with the employer for at least 30 calendar days.

[4] FMLA § 102(b)(1)(B)(i) & (ii).

[5] FMLA § 110(a)(1)(B).

[6] FMLA § 110(a)(3).

[7] 29 U.S.C. 2614(a)(1) (FMLA § 104(a)(1)).

[8] FMLA § 110(d).

[9] H.R. 6201 § 3105.

[10] 29 U.S.C.  2611(6).

[11] H.R. 6201 § 5102(a)(1) – (6).

[12] H.R. 6201 § 5102(b).

[13] H.R. 6201 § 5102(e).

[14] H.R. 6201 § 5110(5)(A)(ii)(I).

[15] H.R. 6201 § 5110(5)(A)(ii)(II).

[16] H.R. 6201 § 5105(a).

[17] H.R. 6201 § 5111.

[18] H.R. 6201 § 7001.

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