The following is an overview of changes to sick leave and health coverage laws under the Families First Coronavirus Response Act (“Families First Act”), which the President signed into law March 18, 2020. This summary focuses on the expansion of employee benefits, sick leave, COVID-19 testing coverage, and employer tax credits under the Families First Act.
Emergency Family and Medical Leave Expansion Act
The Families First Act temporarily expands the Family and Medical Leave Act (“FMLA”) by enacting the Emergency Family and Medical Leave Expansion Act (“Emergency FMLA”). Emergency FMLA provides employees with the right to take up to twelve (12) weeks of leave related to COVID-19, as specified below. The law takes effect no later than April 2 and expires on December 31, 2020. Emergency FMLA applies to employers with a workforce of fewer than 500 employees and to employees who have been employed for at least thirty (30) calendar days at the time of their request for leave. Emergency FMLA, however, an employer with fewer than 25 employees is not required to reinstate an individual to their former position provided that: (1) the former position was eliminated due to economic or operational factors caused by a public health emergency during the leave period; and (2) the employer has made reasonable efforts to reinstate that individual to an equivalent position, including contacting the employee for a limited time to let them know of comparable positions as the positions become available.
Employees are entitled to twelve (12) weeks of leave to care for their minor child, provided that, due to a public health emergency, (1) the employee is unable to work or telework due to the need to care for the child, and (2) the child’s school or place of care has been closed, or the child’s usual care provider is unavailable.
The first ten (10) days of the leave are unpaid. The employee may elect to substitute accrued vacation leave, personal leave, or medical or sick leave for the initial ten-day unpaid leave period. The employee is not required to substitute paid leave for the unpaid leave period. Subsequent to the initial ten (10) day period, employees are entitled to partial compensation. Payment is generally calculated at a rate of two-thirds of an employee’s regular rate of pay, not to exceed $200 per day and $10,000 total. For employees with varying schedules, payment is based on the employee’s average number of hours scheduled per day over the prior six months. If the employee has not worked for a full six months prior to leave, payment is based on the employee’s reasonable expectation at the time of hire of the average number of hours per day that they would normally work.
Additionally, leave under The Act also provides that employers can fulfill their obligations to provide leave by, pursuant to a collective bargaining agreement, making contributions to multiemployer plans that provide the leave required by the Act. Employees would then be able secure pay from such plans for the leave.
Emergency Paid Sick Leave
The Families First Act also includes the Emergency Paid Sick Leave Act (“Emergency Leave”). Emergency Leave provides employees with the right to take up to two (2) weeks of paid sick leave related to COVID-19, as specified below Emergency Leave applies to public employers and to private employers with a workforce of fewer than 500 employees, and to all employees regardless of their date of hire.
Employees are entitled to the equivalent of two (2) weeks of leave related to COVID-19 health emergencies, provided that the employee also cannot work or telework. Full-time employees receive eighty (80) hours of such leave, while part-time employees receive leave equivalent to the average number of hours they normally work over a two week period. For employees with varying schedules, payment is based on the employee’s average number of hours scheduled per day over the prior six months. If the employee has not worked for a full six months prior to leave, payment is based on the employee’s reasonable expectation at the time of hire of the average number of hours per day that they would normally work.
equivalent to the average number of hours they normally work over a two-week period.
Leave is fully paid at the employee’s regular rate of pay, up to a maximum of $511 per day and $5,110 in total, for any of the following reasons:
- Comply with a government-issued COVID-19 quarantine or isolation order.
- Self-quarantine on the recommendation of a health care provider due to concerns related to COVID-19.
- Seek medical diagnosis after experiencing COVID-19 symptoms.
Leave is partially paid at a rate of two-thirds (2/3) of the employee’s regular pay, up to a maximum of $200 per day and $2,000 in total for any of the following reasons:
- Care for an individual under a government-issued COVID-19 order, or who has been advised to self-isolate by a health care provider.
- Care for a child during a coronavirus-related public health emergency when the normal childcare provider is unavailable or if the child’s school is closed.
- Due to a “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.”
Employees may use Emergency Leave before using other leave provided by the employer, but the employee shall not be required to do so. Employees cannot carry-over any unused portion of the leave.
Emergency Leave payment obligations are as outlined above. Employers are also required to post in a conspicuous place a notice approved by the Secretary of Labor regarding the requirements of Emergency Leave.
Employers are prohibited from:
- Retaliating or discriminating against employees who request Emergency Leave.
- Requiring employees to find alternative coverage while they are on leave.
An employer in violation of Emergency Leave shall face the same penalties as under the Fair Labor Standards Act, which include 100% liquidated damages. Employers are not required to pay out any unused portion of sick leave available under Emergency Leave upon the employee’s termination or separation from employment. Additionally, employers of health care providers or emergency responders are not required to provide leave to such employees.
The Act also provides that employers can fulfill their obligations to provide leave by, pursuant to a collective bargaining agreement, making contributions to multiemployer plans that provide the leave required by the Act. Employees would then be able secure pay from such plans for the leave.
Employer Tax Credits for Emergency FMLA and Emergency Leave Acts
Under the Families First Act, employers are entitled to a “refundable tax credit” equal to 100% of the Emergency Leave and Emergency FMLA wages paid by an employer for each calendar quarter and the employer’s cost of the employee’s healthcare while on emergency leave. This tax credit is applied to the employer’s required match of the Old Age Survivors and Disability Insurance (“OASDI”) payroll employment tax, a 6.2% levy on wages (up to the
OASDI annual wage limit – OASDI wage base for 2020 is $137,700, which at 6.2% would be a maximum OASDI tax of $8,537.40 each from an employee’s wages and the employer’s match) . Employees are not relieved from having to pay their 6.2% and 1.45% shares of the employment tax for OASDI and Medicare, respectively, on their Emergency Leave and Emergency FMLA wages.
These employer refundable OASDI tax credits are capped. For Emergency Leave pay, the cap is $511 per day for employees who are receiving paid sick leave to care for themselves, or $200 per day if the Emergency Leave pay is to care for a quarantined family member, or a child whose school is closed with no other day care available. In addition, these daily maximum limits on the Emergency Leave refundable credit cannot exceed ten (10) full or partial days per employee, per calendar quarter.
The Emergency FMLA employer refundable OASDI tax credit is capped at $200 per employee per day while the employee is receiving Emergency FMLA leave pay, but not in excess of $10,000 in the aggregate per employee, per calendar quarter.
Despite these limits on the employer’s OASDI tax credit, employers will be reimbursed at the end of each quarter if their Emergency Leave and Emergency FMLA leave pay exceeds the OASDI taxes owed for the quarter. The tax credit does not apply to state and local governments.
These refundable tax credits expire at the end of calendar year 2020.
Employers can affirmatively elect to not to receive the refundable tax credits (since they will be taxed on the credits). Employers who take the refundable credit must include the amount of the refunded credit in their gross income for 2020.
The Act delegates to the Department of the Treasury the authority to issue guidance, including regulations, to ensure the proper administration of the Emergency Leave and Emergency FMLA pay tax credits.
Coverage of COVID-19 Testing During Emergency Period
The Families First Act requires that all group health plans and health insurance issuers provide coverage for testing for coronavirus and COVID-19 without any cost-sharing (i.e., deductibles, copayments and coinsurance) to the patient. Plans also may not apply cost-sharing for the administration of the testing, or to health care provider office visits (including both in- person and telehealth visits), urgent care center visits and emergency room visits that relate to the administration of such testing or that are for the evaluation as to whether an individual needs to be tested.
The Act further states that plans cannot apply prior authorization or other medical management requirements to the testing or related services. These requirements are effective immediately and will be in force so long as the national emergency and public health emergency previously declared by the President and the Secretary of Health and Human Services remain in effect.
It is important to note that some states have already enacted benefit mandates related to COVID-19, which apply only to plans that are insured and subject to state laws. While self-insured plans are not subject to those state requirements, they must comply with any federal benefit mandate. Further, the Act does not generally provide for “free testing” for COVID-19. The Act only provides relief for individuals with some form of health coverage, whether it be under a group health plan or individual or group health insurance, as well as Medicare, Medicare Advantage, Medicaid, the Children’s Health Insurance Program (CHIP), TRICARE, coverage for veterans, coverage for federal civilian employees and coverage under the Indian Health Care Improvement Act. Uninsured individuals are not entitled to free testing or services under the Act, though the Act provides an option for states to provide coverage for uninsured individuals.