Expanded Paid Leave and Unemployment Benefits for American Workers Impacted by COVID-19

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On March 18, 2020, the President signed the Families First Coronavirus Response Act (FFCRA) into law. The legislation delivers widespread changes for all employers with less than 500 employees and government employers. Effective Thursday, April 2, and continuing until December 31, 2020, such employers must now provide their employees with certain relief related to the exigencies caused by COVID-19. Relief measures include the following:

  1. Two weeks of emergency paid leave;
  2. 12 weeks of partial paid leave and job restoration; and
  3. Expanded unemployment insurance for states.

The Act applies to private employers with fewer than 500 employees as well as all government employers. While there are limited exceptions for employers of health care providers and first responders, there is no current exemption for small employers or nonprofit organizations. 

To be sure, the Act imposes significant responsibilities on employers to help sustain employees affected by COVID-19 during this uncertain time. But the Act also promises tax credits equal to 100% of the FFCRA-mandated paid leave wages provided by employers each calendar quarter subject to certain caps. The Act does not directly provide relief for employers with respect to unemployment insurance benefits, but it may ease the pain of unemployment for those employees who are laid off.

Emergency Paid Sick Leave

Under the new legislation, covered employers must provide all employees up to two weeks of paid sick leave for COVID-19-related absences for immediate use. This requirement adds to (and may not take away from) any paid leave already provided to employees. All qualifying employees, regardless of the length of employment, are eligible for emergency sick leave at their regular pay rate (up to $511 per day or $5,110 total). The sick leave applies for employees who need to quarantine themselves per a government-issued directive or the advice of a medical professional, or to seek a COVID-19 diagnosis or preventative care. Additionally, qualifying employees are eligible for two weeks of paid sick leave at no less than two-thirds their regular pay rate (up to $200 per day or $2,000 total) to care for a family member with a COVID-19 diagnosis or for a child whose school or daycare has closed as a result of coronavirus concerns. 

Full-time employees are entitled to a maximum of 80 hours of paid sick time, whereas part-time employees are entitled to the number of hours they normally work in a two-week period. 

Expanded Leave under the Family Medical Leave Act (“FMLA”)

In addition to the above paid sick leave benefit, it is now much easier for employees to qualify for Family and Medical Leave Act (FMLA) leave due to COVID-19-related absences.  For those who have worked at least 30 days for organizations with fewer than 500 employees or the government, the new FMLA will provide 12 weeks of job-protected leave to care for a child whose school or daycare facility has been closed. The 30-day employment requirement is the only qualifying circumstance for expanded FMLA coverage.    

Under the expanded FMLA, the first ten days of leave are generally unpaid, although an employee may substitute available paid time (including emergency paid sick leave) for the unpaid portion of leave. An employer cannot require substitution of paid time off, however. After the first ten days, the employer must provide no less than two-thirds of the employee’s regular pay rate – up to $200 per day and $10,000 total. 

Employers with 25 or more employees will have the same obligation as under traditional FMLA to return employees who have taken qualifying leave to the same position, or one that is substantially equivalent. Employers with less than 25 employees may be excused from this requirement, but only if all of the following conditions are met. 

  1. The employee has taken leave to care for his or her child because the child’s school or daycare facility closed, or the childcare provider is unavailable due to a COVID-19-related emergency declared by a federal, state, or local authority.
  2. The position held by the employee no longer exists due to economic conditions or other changes in operating conditions caused by a public health emergency.
  3. The employer makes reasonable efforts to restore the employee to an equivalent position, with equivalent terms and conditions of employment.
  4. If the reasonable efforts fail, the employer makes reasonable efforts for up to a year to contact the employee if an equivalent position described above becomes available. 

Significantly, the legislation authorizes the Department of Labor to exempt small businesses with fewer than 50 employees from providing workers with paid emergency leave when the imposition of the requirement would jeopardize the viability of the business. About 12 million private sector employees work for companies with fewer than 50 employees. To date, it is unclear whether and when the Department of Labor will issue such an exemption. 

What does this mean for your organization? Tax credit relief!

Organizations with less than 500 employees will front the costs of paid emergency and sick leave. In turn, they will be eligible for federal tax credits. These credits are equal to maximum caps for paid leave. For paid emergency sick leave provided to a qualifying employee who must quarantine due to sickness or is trying to seek a COVID-19 diagnosis or preventative care, the employer will be reimbursed up to $511 per day. For emergency sick leave provided to an employee to care for a family member, the employer will be reimbursed up to $200 per day. In other words, the tax credits mean that an employer should not be financially out of pocket for providing these benefits – at least up to the prescribed reimbursement amounts.

Organizations with less than 50 employees for which compliance with the mandate will “jeopardize the viability” of ongoing operations may wish to contact the Department of Labor to apply for an exemption.

But wait, there’s more – Expanded Unemployment Insurance

State Funding for Benefits

In addition to paid emergency and sick leave, the new legislation provides increased funding to states to extend unemployment benefits. Specifically, $1 billion will be provided in the form of grants to states. This figure includes an immediate distribution of $500 million for administrative costs and another $500 million reserved for states that experience at least a 10% spike in unemployment compensation claims as compared to the same quarter in the year prior. 

Immediate funding for administrative costs is conditioned on some basic requirements, such as 1) requiring employers to notify employees of the availability of unemployment compensation at the time of separation; 2) providing at least two forms of assistance in making application for unemployment compensation (i.e., in-person, by phone, online); and 3) notifying applicants when the application is received and under review and, if necessary, providing additional information to ensure successful processing. 

To receive the reserve amounts, states must amend their laws to ease unemployment eligibility requirements and access in light of COVID-19 (e.g., waive work search or waiting period requirements). States that do so will receive 100% federal funding of extended unemployment benefits, up to an additional 26 weeks after regular unemployment insurance benefits are exhausted. Such federal funding should ease the future burden on employers’ unemployment insurance taxes, which are based in part on overall unemployment rates.

Implications for Nonprofit Employees and Employers

As a result of these changes, laid-off employees should be able to access unemployment insurance more easily, sooner, and for longer periods than presently. For employers concerned about whether they need to reduce their staff in light of anticipated lean financial times, this should bring some comfort to all. It may be helpful too for employers that lay off employees for short-term periods or significantly reduce employees’ hours of work. In both situations, the employees should be eligible for unemployment benefits to compensate for the resulting lack of work. 

Please keep in mind, however, that some affected employees may not be eligible for unemployment benefits. Employees of small nonprofits with less than four employees typically are not covered for purposes of unemployment insurance benefits. Similarly, employees of churches and church-controlled, primarily religious ministries will not be eligible for unemployment benefits due to categorical exemptions for such entities. For those employees, other financial compensation such as severance pay may be particularly appropriate.

Note too that nonprofit employers that are “reimbursable” (i.e., self-insured for purposes of unemployment insurance) will be responsible for any unemployment benefits, dollar for dollar, for the initial period of unemployment benefits. But keep in mind that unemployment benefits generally should cease upon a worker’s reemployment or full-time enrollment in school. Also, the amount of unemployment benefits is adjusted based on an employee’s number of dependents, and is generally limited based on state-specific monetary caps.

What’s Next?

This Congressional response to COVID-19 may raise further questions for nonprofit organizations. We will endeavor to address these questions in the days to come as Congress builds on the FFCRA, the Department of Labor provides relevant regulatory guidance, and states propose similar emergency legislation to address COVID-19.