Paid Sick Leave! A Practical Look at the New Federal Law

By Todd Masuda

Paid sick leave! A DOL workplace notice/poster issued last week stirred up a burst of questions and exclamations from employees and employers. This post walks through the issues in the poster and the paid sick leave law – the FFCRA – to help break down the rights and obligations that take effect April 1, 2020.

What is the paid sick leave law?

The Families First Coronavirus Response Act is very new federal law, drafted weeks ago and signed into law on March 18, 2020. It becomes effective on April 1, 2020 and expires December 31, 2020. The FFCRA includes paid leave law, which actually consists of two separate laws: the Paid Sick Leave Act (PSLA), which applies broadly to most employees, and the Emergency Family and Medical Leave Expansion Act, an enhanced version of the FMLA (EFLMA), which applies more narrowly.

The FFCRA grants limited paid sick leave rights to employees for certain reasons. It does not grant a blanket PTO right. Employers who make payments pursuant to this law are entitled to take a dollar-for-dollar credit against their payroll tax obligations each quarter. If an employer’s sick leave payments exceed their tax obligation, the excess payment is treated as an overpayment subject to accelerated reimbursement.

The DOL issued a relatively detailed new FAQ this weekend, but outstanding questions are raised below.

The FFCRA is federal law, administered mostly by the DOL and the IRS. It does not deal with the Ohio Stay at Home Order, and does not have an “essential business” component.

Who are the employers covered by the law?

The law applies generally to employers with fewer than 500 employees. There are limited exceptions for employers who have fewer than 50 employees and whose businesses would be jeopardized by granting the rights under the law (discussed below).

Employers of healthcare providers and first responders are allowed to exempt their employees from benefits under this law.

What are the employee entitlements?

Employees are entitled to limited amounts of paid sick leave for any of the six reasons listed on the FFCRA poster. Leave rights are charted then discussed below.

Limited Reasons. The FFCRA provides paid sick leave only for the specific reasons listed in the law.

PSLA Rights and Limits. Virtually all employees of a qualified employer will be entitled to PSLA. The amount of leave is based on 80 hours of leave for a full-time employee, prorated for part-time employees. Payment for the leave is based on the employee’s regular rate of pay (generally their straight time rate): employees taking leave for reasons 1, 2, or 3 on the poster entitled to leave at 100% of their pay, while employees taking leave for reasons 4, 5, or 6 on the poster are entitled to leave at two-thirds of their pay. PSLA payments are capped at $511 per day/$5110 in total for employees receiving 100% pay, and $200 per day/$2000 in total for employees receiving two thirds pay.

EFMLA Rights and Limits. EFMLA rights apply only to employees who have been employed for at least 30 days and need leave to care for their son or daughter as a result of school or daycare closings, or the unavailability of the child’s childcare provider, as a result of COVID-19 measures, and the need for such leave prevents the employee from working or teleworking. Note that this is a somewhat narrower category of employee then those entitled to rights under the PSLA: employees working less than 30 days are not qualified, and, employees who are able to care for their children and perform their job duties are not eligible for this benefit. Technically, EFMLA gives an unpaid right to leave for the first 10 days of leave (when the employee is presumably being paid under PSLA). EFMLA paid leave rights paid at the employee’s two thirds rate. EFMLA payments are capped at $200 per day, and $10,000 in total, for each employee.

After PSLA and EFMLA leave rights are exhausted, employees will be covered by the regular FMLA, ADA, and the employer’s regular sick leave policies.

Intermittent EFMLA leave. Employers are encouraged to work with EFMLA qualified employees to use leave on an intermittent basis. Today’s DOL guidance suggests employers and employees agree on increments of leave, such as 90 minutes. For example, if you agree on a 90-minute increment, employees could telework from 1:00 PM to 2:30 PM, take leave from 2:30 PM to 4:00 PM, and then return to teleworking. The DOL encourages employers and employees to collaborate to achieve flexibility and meet mutual needs, and is supportive of such voluntary arrangements that combine telework and intermittent leave.

Child care exemption for small employers. Employers with fewer than 50 employees may claim an exemption from paying child care leave only (Reason #5 on the poster for PSLA and EMFLA leave) when the paid leave “would jeopardize the viability of the business as a going concern.” As detailed in the new DOL FAQ, to claim the exemption, an authorized officer of the company must determine one of the following :

1. The provision of paid sick leave 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 paid sick leave or expanded family and medical 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 paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.

At this point employers should take a cautious and conservative approach in making a claim for this exemption. These guidelines are full of undefined language, and the PLSA contains language that could impose personal liability on the “authorized officer” who makes an improper determination.

Are there other outstanding issues giving employers concern?

How do you request or document paid leave? The IRS expects to issue forms or other formalities for documenting paid leave and especially for seeking the tax credit. At this point employers should keep a detailed record of the leave times, amounts paid, and the FFCRA reasons for leave, for each employee seeking leave.

How do you run payroll? Employers are uncertain about the mechanics of paying leave. FFCRA payments are not subject to payroll taxes, but we do not have IRS guidance on withholding, including health insurance costs and wage garnishments. We also lack guidance on how to handle pay periods in which an employee receives regular wages and FFCRA payments. Until we have further guidance, employers will likely run payroll as usual, and expect to offset those payment amounts as tax credits.

What about employee abuse of paid sick leave?

Some employers – especially those who have dealt with intermittent FMLA abuse – have concerns that employees will use FFCRA leave when they do not need it. There are several differences between the FFCRA and other leave rights that might mitigate those concerns.

The FFCRA is not a blanket PTO right – it covers specific reasons for leave as part of the government’s response to the national coronavirus pandemic. Employees will have to claim paid sick leave for one of the reasons stated in the poster. The rights are limited, and the employer’s costs will be offset by tax credits. Employers are being encouraged on every level to make it easy for employees to stay home, especially during these weeks of accelerating infection. COVID-19 may cause unprecedented numbers of employees to fall ill in the short term. FFCRA paid sick leave rights are unlikely to cover all of the sick leave employees will need by the end of the year, so employees should be encouraged to use the leave only when they need it.

**This information is offered for discussion, marketing and news purposes and is not intended to constitute legal advice.**