Families First Coronavirus Response Act
What Does the Families First Coronavirus Response Act Mean for Small Businesses in Tennessee?
By Mary Dohner Smith
Constangy, Brooks, Smith & Prophete, LLP
In response to the coronavirus pandemic, President Trump signed into law the Families First Coronavirus Response Act that provides leave to employees for certain time off related to COVID-19.
The FFCRA (a) increases the number of employees who will qualify for leave under the Family and Medical Leave Act; (b) provides for leave for coronavirus-related illnesses and circumstances; and (c) allows for paid sick leave for those under quarantine, sick, or affected by childcare needs.
While the new law has generally been well-received, it has left many small business owners worried about whether they have to comply with this law and, if so, whether they can afford to do so without going out of business. More than 94% of the Tennessee private sector is made up of small businesses with fewer than 50 employees.
The bill signed by the president takes effect on April 2, 2020. Thus, small business owners have some time to digest the new law, run the numbers, and see whether the U.S. Department of Labor releases any further guidance on the applicability of the law to them.
In the meantime, here are some options for small businesses to consider.
I. Possible exemptions for small businesses
FMLA Expansion or Emergency FMLA Leave
Under the original FMLA, employers are required to provide 12 weeks of job-protected leave to qualifying employees who have serious health conditions or who are caring for family members with serious health conditions (among other things). This leave is unpaid.
The FMLA expansion just signed into law requires companies employing less than 500 employees to provide 12 weeks of emergency FMLA leave to employees that cannot work or telework because they have to care for a minor child whose school or place of child care is closed due to COVID-19. The first 10 days of this leave can be unpaid (though employees may elect to substitute accrued leave), but the remaining 10 weeks must be paid.
However, companies that employ less than 50 people can apply to be exempt from the requirement if providing these benefits would jeopardize the viability of the business.
It is not yet clear exactly how to apply for this exemption, though it appears that the application would be made to the Secretary of Labor. Hopefully, additional guidance will be issued shortly that will shed light on this process.
This provision expires on December 31, 2020.
Emergency Paid Sick Leave
Under the FFCRA, companies that employ less than 500 employees are required to pay for up to 80 hours of sick leave for employees who are unable to work (or telework) for one of the following reasons:
1. the employee is subject to federal, state, or local quarantine or isolation due to COVID-19;
2. a doctor has told the employee to self-quarantine;
3. the employee is experiencing symptoms of COVID-19 and is seeking a diagnosis;
4. the employee is caring for someone that has been told to quarantine or self-isolate;
5. The employee is caring for a son or daughter whose school or child care center is closed because of COVID-19 precautions, or whose child care provider is unavailable for the same reason; or
6. the employee is experiencing “substantially similar conditions.”
Under this section, the Secretary of Labor may exempt business with less than 50 employees from providing paid sick leave to allow the employee to care for a child (No. 5, above) if, as before, providing these benefits would jeopardize the viability of the business. Thus, if an employee cannot work for any of the other five listed reasons, there is no exception and the employer will be required to provide paid leave.
Of note to small businesses in Tennessee, as of the time of publication, no Tennessee locales are under a “federal, state or local quarantine or isolation.” While it is certainly possible that a quarantine may be implemented shortly, one does not exist today.
Thus, as of this moment, it is likely a small business in Tennessee would need to pay sick leave only to employees (1) who are sick or suspected to be sick (or otherwise quarantined by their doctor) or (2) whose school or childcare center is unavailable (assuming the exemption does not apply to your business).
This provision also expires on December 31, 2020.
Summary of exemptions available to small businesses
A company with fewer than 50 employees can apply for an exemption to the emergency FMLA law and the requirement to provide paid sick leave to employees that cannot work because they have to care for their minor children. If granted such an exemption, then the company would still be legally required to provide up to 80 hours of paid sick leave to employees who qualify.
While perhaps not a huge comfort to small businesses, this exception at least limits the scenarios in which small businesses will have to pay employees for COVID-19-related leave.
II. Potential costs to small businesses with fewer than 50 employees
If a small business is granted an exemption, then the company would only need to pay employees for 80 hours of sick leave. If that is the case, then, generally speaking, small businesses would follow these guidelines:
• If the leave is taken because of the employee’s condition or situation, companies will pay the employee the greater of: (1) the employee’s regular rate or (2) the applicable minimum wage.
• If the leave is taken because of the employee’s quarantine or isolation ordered by a government authority or health care provider, or the employee’s COVID-19 symptoms (and the employee is seeking a medical diagnosis), then the paid leave is capped at $511 a day, or $5,110 aggregated.
• If the leave is taken so that the employee can care for another person (which employers may be granted an exemption from), or pursuant to the “catchall” provision quoted above, then the company would pay the greater of: (1) two-thirds of the employee’s regular rate or (2) applicable minimum wage. Paid leave under these circumstances is capped at $200 a day, or $2,000 aggregated.
III. Consequences of failing to comply with the Emergency FMLA Requirements or the Emergency Paid Sick Leave Requirements
If a company willfully fails to comply with the Emergency Paid Sick Leave law, it may be subject to a $10,000 fine. (It is unclear whether this fine would be $10,000 total or $10,000 per violation.)
Also, the Department of Labor could conduct an investigation and fine the company for the unpaid employee wages, plus liquidated damages in the amount of the unpaid wages. In the case of litigation, a judge will also award prevailing employees his or her attorneys’ fees and costs. However, the Emergency Family and Medical Leave Act does bar employee-initiated suits against business with less than 50 employees.
IV. Tax relief for small businesses
The FFCRA also provides tax relief for employers who are required to pay employees for COVID-19-related leave under the new law. We recommend employers consult with their tax specialists or tax attorneys for a comprehensive assessment of the potential costs or benefits related to this provision.
One major concern among small businesses is, while the potential for tax relief is a welcome benefit, it does not help small businesses here and now. Small businesses in Tennessee, especially those in the service and hospitality industries, are suffering because of the decrease in or complete lack of business due to COVID-19. Thus, small business owners looking for more immediate relief may want to immediately explore whether the exemptions discussed above are applicable to them.
V. For small businesses in Tennessee looking into a reduction of hours or mass layoff
If you are a small business owner in Tennessee, you may be taking a hard look at your books to determine whether you can afford to pay your employees and remain in business. Many small businesses have been weighing whether or not a reduction in hours or mass layoff are viable options.
Small businesses with less than 50 employees do not have to comply with the federal Worker Adjustment and Retraining Notification Act or Tennessee’s “mini-WARN” statute, both of which require companies to provide certain types of notice within a certain timeframe before engaging in any kind of mass layoff or reduction in force.
Additionally, the Tennessee Department of Labor has provided an expedited unemployment insurance claim filing procedure for employers to utilize in order to make sure their employees get unemployment insurance after they are laid off or if their hours are reduced as a result of COVID-19.
The Tennessee Department of Labor provides the following options for employers (quoted verbatim):
If you are going to close your business and will not be in contact with your employees again, and expect them to file their own unemployment claims:
Provide the Tennessee Department of Labor with a “Mass Layoff List.” Download Mass Layoff Form Here and send the filled out form to Mass.Layoff@tn.gov.
If you have not yet closed, and plan to re-open after the Pandemic is resolved.
You can mass-file on behalf of your employees. Tell your employees not to file on their own, but that you will do it for them and that they will need to certify each Sunday to be paid in a timely manner. Download Employer-Filed Mass Claim Form Here
If you are only doing “partial layoffs” (reduction in hours), send the same information to Partial.Claims@tn.gov
VI. What now? And what relief is the State of Tennessee providing?
While the FFCRA was only just passed, and federal agencies have yet to weigh in with any clarifications or further instruction, small businesses with less than 50 employees should immediately evaluate whether they can afford to provide qualifying employees with 80 hours of paid sick leave. If this is the case, and if the company employs less than 50 people, then that may be the only leave the company is required to pay under the FFCRA.
If your company has been forced to close until the pandemic resolves, then we encourage you to file for expedited unemployment benefits for affected employees.
On March 18, 2020, Governor Bill Lee issued a statement that the governor’s office has submitted a request to the Small Business Administration to pursue statewide relief opportunities for Tennesseans. According to the statement, Tennessee is also pursuing loan assistance for small businesses, private, and non-profit organizations with funds up to $2 million in assistance per business.
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