The Department of Labor has issued initial guidance on the Families First Coronavirus Response Act (FFCRA), which provides for paid leave under the Family and Medical Leave Act (FMLA) for COVID-19 related child care issues and for emergency paid sick leave for other COVID-19 events.
The new guidance provides an initial round of answers to some fundamental questions, and we will provide updates as new guidance is issued. In particular, the Internal Revenue Service (IRS) is expected to issue guidance in the coming days on claiming payroll tax credits that are used to offset the cost of employers paid leave obligations under the FFCRA.
Timing of Covered Leave
The FFCRA covers COVID-19 leave taken between April 1, 2020, and December 31, 2020. FFCRA-leave may not be applied retroactively to paid leave voluntarily provided between March 18 – the date of enactment – and April 1. Employers who have already provided paid leave will be required to provide additional leave to comply with the FFCRA and to start the FMLA leave period April 1 for eligible employees.
Employer Coverage Standard
In the ordinary course, a corporate entity is a single employer, and only the employees of the entity are counted to determine whether the 500-employee threshold is met. However, employers that are deemed to be “integrated employers” under FMLA or “joint employers” under the recently-revised Fair Labor Standards Act regulations should add the employees of each corporate entity to determine employer size. Only employees within the United States, including its territories and possessions, are counted.
Employer size is determined on the date an employee’s leave is to be taken. Thus, status as a covered employer may change. When determining the number of employees, employers must count:
Paid Sick Leave—Payment Timing
Under the FFCRA sick leave provisions, an employee is entitled to compensation for no more than 80 hours over a 10-day work period, depending upon the hours he or she is normally scheduled to work. To calculate the amount and timing of the payment of compensation, the hours of an employee who works on a variable schedule, whether part-time or full-time, are calculated by looking back at the hours worked over a six-month period (or for the entire period of employment if less than six months). If those hours exceed 40 per week, the employee may receive pay for only 80 hours over the 10-day working period. However, a proportionate amount of the 80 hours would be weighted in the first five days of pay, meaning that a payroll period including only the first five days of sick leave pay would contain more than 40 hours of sick pay with the remainder of the 80 hours paid in a separate payroll.
Paid FMLA Leave—Calculating Applicable Hours
Under the FFCRA paid-FMLA provisions, an employee is entitled to 2/3 of the greater of his or her regular rate of pay or a federal, state or local minimum wage multiplied by regularly scheduled hours or by the variable-hour calculation described above. Thus, if an employee works overtime on a regular basis, he or she will be entitled to 2/3 pay of more than 40 hours per week. This will result in a different payment amount for the paid-FMLA leave than for paid sick leave even though the rate of pay calculation is identical. For part-time employees or those working the same hours per week, the paid sick leave and the paid-FMLA leave will be the same.
Paid Sick Leave and Paid FMLA Leave—Calculating Regular Rate of Pay
An employee’s regular rate of pay is calculated by taking the average of the regular rate over the six months prior to the leave (or the entire period of employment, if less). According to the DOL’s guidance, commissions, tips and piece rates are incorporated into the calculation. The rate may also be computed by adding all compensation for an employee that is part of the regular rate for the prior six months and dividing it by the hours actually worked. A premium for overtime is not included.
Using Employer-Provided PTO
Although the first two weeks of FMLA leave under the FFCRA are technically unpaid, an employee may layer the FFCRA paid sick leave over the FMLA leave to provide 12 weeks of uninterrupted pay for COVID-19 child care eligible leave. In the alternative, employees who have unused PTO may also use their employer-provided PTO during that two-week period in order to receive 100 percent of pay to preserve the paid sick leave for use later in the year.
Single Use of Leave
An employee who qualifies for paid sick leave for multiple reasons is entitled to only 80 hours of paid leave. An employee is not entitled to a new set of 80-hours of paid leave based on the occurrence of a new eligibility condition.
The Department of Labor has indicated that regulations on a hardship exemption for employers with fewer than 50 employees will be forthcoming. The exemption is expected to be limited to child care leave under the FMLA and sick pay provisions.
The Phelps Labor and Employment team will continue to monitor responses to COVID-19. Please contact us if you have any questions or need advice on coronavirus-related issues.