Late Friday evening, the House of Representative passed HR 6201, the Families First Coronavirus Response Act by a vote of 363 to 40. The text of the bill was negotiated with the Trump Administration and the President has signaled his support for the bill. Although the bill has not yet been voted on by the Senate, it is widely expected that the Senate will pass the House bill early this week and send it to the White House for enactment.
We don’t generally send updates on bills that haven’t yet passed, but HR 6201 includes sweeping provisions that will impact many employers in the very near term. Furthermore, since the general provisions of the bill are widely being discussed in the press (sometimes inaccurately) employers are likely to begin fielding questions this week. Although we can’t be sure yet, we expect the major provision to be effective on or around April 1st. Following are some of the major provisions likely to impact employers.
Emergency Paid Sick Leave
The law mandates that covered employers provide an additional 80 hours of paid sick leave to full time employees for COVID-19 related absences. Covered employers include all U.S. companies that employ fewer than 500 employees. Part time employees are entitled to a prorated amount. This new sick leave cannot be reduced by any leave employers already provide, nor may employers reduce any existing sick leave benefits. The bill is very clear that this entitlement is in addition to whatever sick leave an employer currently provides.
Naturally it can be used by employees who are sick with the virus, but it may also be used for a wide range of other reasons, including school closures. The definitions are so broad, that we expect high utilization. There is no medical certification requirement and employees may utilize leave to “…comply with a recommendation or order by a public official with jurisdiction or a health care provider on the basis that the physical presence of the employee on the job would jeopardize the health of others…” In effect, any employee who has potential symptoms or has been in contact with someone who has potential symptoms could invoke leave.
The DOL has been instructed to produce an employee notification within 7 days of enactment that employers must post to make employees aware of the new sick leave. The bill includes antidiscrimination provisions which prohibit any adverse employment action connected with use of the new leave. Failure to provide this mandated sick leave will be deemed a violation of the Fair Labor Standards Act, with all associated penalties, etc.
Public Health Emergency Leave
The bill includes a significant expansion to the Family and Medical Leave Act (FMLA). This expansion, called “Public Health Emergency Leave” not only includes provisions for leave to be paid, but also reduces employee eligibility from the normal one year and 1,250 hours to just 30 days and changes the definition of a covered employer from “50 or more employees” to “fewer than 500 employees.” Significantly, this new leave will apply to a broad swath of U.S. companies and employees, who would not otherwise be covered by traditional FMLA.
Employees may take up to 12 weeks of Public Health Emergency Leave for their own health needs or for a family member (with a broader definition than normal FMLA) as well as quarantines and school closures. Unlike traditional FMLA, leave taken under this new provision is paid, following a 14-day waiting period. During the first 14 days of leave an employee may utilize any existing accrued sick or vacation leave as well as the new Emergency Paid Sick Leave described above. However, unlike traditional FMLA, an employer may not require substitution. Following the waiting period, pay is to be provided at 2/3 the employees normal pay.
Normal FMLA job restoration rights may not apply in certain situations for employers with fewer than 25 employees. Normal FMLA benefits continuation provisions appear to apply to all employers covered by this expansion.
Emergency Unemployment Insurance Stabilization and Access Act
Recognizing the possibility of a large number of displaced workers, the bill includes a variety of measures to expand access to unemployment benefits. Notably, the bill provides additional flexibility and funding to states that choose to loosen eligibility requirements and otherwise expand benefits. This provision may soften the blow of layoffs and furloughs, but the impact will largely depend on how it is implemented at the state level.
Health Plan Changes
The bill requires that most employer sponsored health plans eliminate cost sharing provisions for COVID-19 related testing, including Qualifying High Deductible Health Plans, which are generally prohibited from covering any diagnostic testing without the application of the deductible. Note that this change only applies to testing, not treatment. Many insurers are providing guidance to employers and this should be passed along to plan participants.
Tax Credits
The costs of providing the previously discussed benefits could represent a substantial hardship for many firms which may simultaneously see a reduction in revenues. Anticipating this, the bill includes targeted tax credits to help reimburse for the paid leave requirements. We speculated last week that this was likely to be the case, but were concerned that traditional tax credits, which are typically tied to an annual return would arrive too late for many firms.
Instead, the bill allows for a refundable credit against quarterly tax filings, covering up to 100% of the cost for the paid leave required under the bill, subject to a $511 daily limit per employee for the Emergency Paid Sick Leave. A refundable credit is also available for up to 100% of the cost for the Public Health Emergency Leave, subject to a $200 daily limit and $10,000 aggregate limit per employee.
Interestingly, these credits are also available for self-employed individuals, such as members in an LLC.
Employers may still face cash flow challenges even with the credits. Payroll taxes are filed quarterly with the current quarter set to end March 31st. This could leave a three-month window following enactment of the new bill before employers could receive refunds. Various delays have been proposed for tax filings and payments, but we are unsure if those will apply to payroll taxes.
An additional challenge (or opportunity), relates to how most employers file payroll taxes. Rather than submitting these filings and funds themselves, many employers utilize a payroll service, which impounds payroll taxes each pay period, completes the filings at quarter-end and submits payment on behalf of the employer. We hope that payroll providers will rapidly implement system changes that will allow employers to offset payroll tax deposits by any amount of credit they expect to receive. In principle such an approach could provide immediate relief to employers that must provide these mandated benefits.
Thank you for taking the time to read this lengthy message. We will continue to monitor developments and update you with further information as it becomes available. As a result of this legislation, we may delay our Employee Handbook webinar that is currently scheduled for Thursday March 19th. Leave policies are a major focus of this webinar and employer obligations are evolving rapidly. We will also sponsor a webinar specific to this legislation once it is enacted.
We have been fielding many questions in recent weeks on HR issues related to COVID-19 and we remain available to support you.
