COVID-19 Update for Employers: Congress Passes Emergency Employment Legislation; Governor Cooper Issues Executive Order on Unemployment Benefits

By Rosemary Gill Kenyon, Jenny Bobbitt and Travis Hockaday

Congress Passed the Families First Coronavirus Response Act

Congress passed emergency legislation to address the coronavirus (“COVID-19”) crisis gripping the nation.  The Families First Coronavirus Response Act (“COVID-19 Response Act”) passed the House of Representatives on March 14, 2020, was amended on March 16, 2020, passed the Senate on March 18, 2020, and was signed by the President on the same date. 

The COVID-19 Response Act includes the following separate sections that directly affect employers and employees:

• Division C - Emergency Family and Medical Leave Expansion Act
• Division D - Emergency Unemployment Insurance Stabilization and Access Act
• Division E - Emergency Paid Sick Leave Act
• Division F - Health Provisions (including requirements for group health plans)
• Division G - Tax Credits for Paid Sick and Paid Family and Medical Leave

Emergency Family and Medical Leave Expansion Act

As indicated by its title, the Emergency Family and Medical Leave Expansion Act (“FMLA Expansion Act”) portion of the COVID-19 Response Act expands the Family and Medical Leave Act (“FMLA”) in several ways. The key elements of the FMLA Expansion Act portion of the COVID-19 Response Act are: 

• Employers covered: It covers employers with fewer than 500 employees, including small employers who are not covered by the FMLA. Recall that the FMLA otherwise applies to employers with at least 50 employees.
• Eligible employees: It lowers the threshold requirements for employees to be eligible for COVID-19-related leave. To be eligible for the new leave, an employee need only have been employed for 30 days. The employee is not required to have worked a minimum number of hours during that 30-day period, so part-time employees are eligible as well. Recall that under the FMLA, to be eligible for protected leave, an employee must have been employed for 12 months and worked at least 1,250 hours.
• Reasons for leave: The FMLA Expansion Act provides that an eligible employee must be allowed protected leave if the employee is unable to work (or telework) in order to care for a son or daughter under the age of 18 whose school or place of care has been closed, or whose regular childcare provider is unavailable, due to a public health emergency.
• Amount of paid and unpaid leave: The FMLA Expansion Act provides as follows:
  • An eligible employee is allowed 12 weeks of FMLA leave.
  • The first 10 days may be unpaid. In most cases, the first 10 days will be covered by the Paid Sick Leave Act (discussed below). An employee may elect to substitute accrued employer-provided paid leave during this 10-day period; however, an employer may not require the employee to use such paid leave.
  • Paid leave must be provided for each day of leave after the first 10 days of leave and is subject to a cap of $200 per day or $10,000 in the aggregate.
  • Subject to the caps, pay for leave is calculated based on two-thirds of the employee’s regular rate of pay for the number of hours the employee would otherwise be normally scheduled to work. In the case of an employee whose schedule varies from week to week, then the employer shall use the following in place of such number: (i) the average hours that the employee was scheduled per day over the 6-month period prior to the date the employee takes leave, or (ii) if the employee did not work for the prior 6-month period, the reasonable expectation of the employee at the time of hiring of the average number of hours per day that the employee normally would have been scheduled. 

• Notice: If the reason for leave is foreseeable, the FMLA Expansion Act provides that employees are required to give notice as practical. 
• Restoration to position: The FMLA Expansion Act provides that the general requirement under the FMLA to restore an employee to his or her prior position applies, except that for employers with fewer than 25 employees, this requirement may not apply if the employee’s position does not exist after FMLA leave due to an economic downturn or other operating conditions that affect employment caused by a public health emergency during the period leave (and subject to certain other conditions, including reasonable attempts to return the employee to an equivalent position and required efforts to contact a displaced employee for up to a year after displacement).
• Enforcement: Employers covered by the FMLA Expansion Act are subject to the normal enforcement mechanisms set forth under the FMLA, primarily civil claims by employees, except that employers with 50 or fewer employees are exempt from civil claims.
• Potential exemption for healthcare workers and emergency responders: Employers of such workers may elect to exclude them from the application of the FMLA Expansion Act.
• Department of Labor potential exemptions: The FMLA Expansion Act gives the Secretary of Labor authority to issue regulations for good cause to: (i) exclude healthcare providers and emergency responders from eligibility, and (ii) exempt small businesses with fewer than 50 employees from coverage if the “imposition of such requirements would jeopardize the viability of the business as a going concern.”
• Multiemployer bargaining units: The FMLA Expansion Act includes provisions addressing employees working for such employers.
• Effective date: The FMLA Expansion Act will be effective no later than April 2, 2020 and will sunset on December 31, 2020.   

Emergency Paid Sick Leave Act

The provisions under the Emergency Paid Sick Leave Act (“Paid Sick Leave Act”) portion of the COVID-19 Response Act imposes new requirements on employers to provide two weeks of sick pay, filling the gap left by the paid leave provisions of the portion of the bill discussed above under the FMLA Expansion Act. The key provisions are as follows: 

• Employers covered: The Paid Sick Leave Act provisions cover any employer with fewer than 500 employees.
• Eligible employees: Any employee, with no minimum period of employment, is eligible.
• Reasons for allowed sick pay: An employer must provide paid sick time for an employee who is unable to work (including teleworking) for the following reasons:
  • The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
  • The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • The employee has symptoms of COVID-19 and is seeking a medical diagnosis;
  • The employee is caring for an individual subject to a government quarantine or isolation order or had been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • The employee is caring for a son or daughter if the child’s school or place of care has been closed, or the child’s care provider is unavailable due to COVID-19 precautions; or
  • The employee is experiencing any other 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.
• Amount of hours of paid sick time:
  • For full-time employees: 80 hours.
  • For part-time employees: the equivalent of two weeks’ worth of regular hours.
  • Paid sick time may not be carried over from year to year.
• Amount of pay: The rate of pay during paid sick leave is:
  • For employees taking paid sick leave due to their own quarantine or isolation, diagnosis, or symptoms, the employee’s regular rate of pay, subject to a limit of $511 per day or $5,110 in the aggregate; or

  • For employees taking paid sick leave to fulfill caregiving obligations, or because the employee is experiencing one of the conditions covered by the catchall provision discussed above (i.e., as specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor), the greater of two-thirds of the employee’s regular wages and two-thirds of the applicable federal, state, or local minimum wage, subject to a limit of $200 per day or $2,000 in the aggregate.

For calculating part-time employees’ regular rates of pay whose schedules vary from week to week, the employer shall use the following calculation to determine such employee’s regular rate of pay: (i) the average hours that the employee was scheduled per day over the 6-month period prior to the date the employee takes leave, or (ii) if the employee did not work for the prior 6-month period, the reasonable expectation of the employee at the time of hiring of the average number of hours per day that the employee normally would have been scheduled.

• Additional requirements:
  • Employers are prohibited from requiring employees to find replacement coverage as a condition of using paid sick leave.
  • Employers may not take adverse employment actions or retaliate against employees who take paid sick leave pursuant to the Paid Sick Leave Act.
  • Employers may not require employees to use paid sick leave under an employer policy before using sick leave under the Paid Sick Leave Act.
  • Employers are required to post notices prepared by the Secretary of Labor that inform employees of their rights to paid sick leave pursuant to the Paid Sick Leave Act. 

• Potential exemption for healthcare workers and emergency responders: Employers of such workers may elect to exclude them from the application of the Paid Sick Leave Act.
• Enforcement: Covered employers who fail to comply with the Paid Sick Leave Act are considered to have violated the minimum wage provisions set forth under the Fair Labor Standards Act (“FLSA”), and will be subject to the normal penalties and remedies available for violations of the FLSA.
• Department of Labor potential exemptions: The Secretary of Labor is authorized to issue regulations for good cause to: (i) exclude healthcare providers and emergency responders from eligibility; and (ii) exempt small businesses with fewer than 50 employees from coverage if the “imposition of such requirements would jeopardize the viability of the business as a going concern.”
• Multiemployer bargaining units: The Paid Sick Leave Act includes provisions addressing employees working for such employers.
• Guidelines: The Secretary of Labor is required to issue guidelines to assist employers in calculating the amount of paid sick time within 15 days of enactment.
• Effective date: The Paid Sick Leave Act will be effective no later than April 2, 2020 and will sunset on December 31, 2020.    

Emergency Unemployment Insurance Stabilization and Access Act

The COVID-19 Response Act provides a significant amount of funding to states for COVID-19-related issues, including increased claims processing, and encouragement to the states to ease eligibility requirements that would otherwise limit benefits for COVID-19-related job losses. 

Significant funding will be provided to states for activities related to processing and paying unemployment insurance (“UI”) benefits, under certain conditions. One-half of this funding is allocated to all states for staffing, technology, systems, and other administrative costs, so long as they meet new requirements for providing benefits related to the COVID-19-related emergency including:

• Requiring employers to provide notification of potential UI benefit eligibility to laid-off workers;
• Ensuring that workers have at least two ways to apply for benefits (for example, online and via phone);
• Notifying applicants when an application is received and being processed and if the application cannot be processed; and
• Providing information to applicants about how to ensure successful processing.

The remaining one-half of the funding is reserved for emergency grants to states that experience at least a 10% increase in unemployment claims. Those states will be eligible to receive the additional grant to assist with costs related to the unemployment spike and will also be required to take steps to temporarily ease eligibility requirements that are limiting access to UI benefits during the COVID-19 outbreak, like work search requirements, required waiting periods, and requirements to increase employer UI taxes if they have high layoff rates. 

It could take time for these changes to trickle down to workers because states must act first, although some states, like North Carolina, have already taken action (see below).

Health Provisions – COVID-19 Testing and Group Health Plans

The COVID-19 Response Act provides that group health plans will be required to pay the full costs of COVID-19 testing for covered individuals, without imposing any cost-sharing (including deductibles, copayments or coinsurance) requirements or prior authorizations or other medical management requirements.    

Tax Credits for Paid Sick Leave and Family and Medical Leave

The COVID-19 Response Act provides for a series of refundable tax credits for employers providing paid emergency sick leave or paid FMLA leave, including tax relief for self-employed individuals. These tax credits will apply against the tax imposed under section 3111(a) of the Internal Revenue Code (the employer portion of Social Security taxes). While this limits the impact of the tax credit, employers will be reimbursed if their costs for qualified sick leave or qualified family leave wages exceed the taxes they would owe.

The credits for qualified sick leave wages and qualified family leave wages with respect to any employee are subject to caps depending on the employee’s situation.  The credit for qualified sick leave wages paid to an employee under the Paid Sick Leave Act due to the employee being subject to quarantine or isolation restrictions, the employee being advised to self-quarantine or the employee seeking a diagnosis of COVID-19 symptoms may not exceed the maximum of $511 per day for an aggregate of up to 10 days for all calendar quarters, or $5,110 in total for that employee.  Qualified sick leave wages paid to an employee under the Paid Sick Leave Act due to any of the other allowed reasons may not exceed $200 per day for an aggregate of up to 10 days for all calendar quarters, for a total of $2,000 for that employee. Qualified family leave wages paid to an employee under the FMLA Expansion Act may not exceed $200 per day for an aggregate of 50 days for all calendar quarters, for a total of $10,000 for that employee. 

Each of the qualified sick leave and qualified family leave credits for any quarter cannot exceed the total employer Social Security tax for the quarter on the wages of all the employer’s employees, reduced by the credit allowed against the tax for employing veterans and the credit allowed against the tax for small business research and development expenditures. Any excess credit is refundable.

For further details, please see Tax Provisions of the Families First Coronavirus Response Act.

North Carolina Governor Expands Eligibility for Unemployment Benefits

On March 17, 2020, before Senate passage of the COVID-19 Response Act, North Carolina Governor Roy Cooper issued an executive order to ensure that North Carolinians who, as a result of COVID-19, are separated from employment, have had their work hours reduced, or are prevented from working due to a medical condition caused by COVID-19 or due to communicable disease control measures (including quarantine or isolation directives or orders related to COVID-19 that are issued by the state or federal government, a local government, or a medical or public health professional), are eligible for unemployment benefits to the maximum extent permitted by federal law. 

Specifically, Executive Order 118 (“EO118”) authorizes the North Carolina Department of Commerce to “flexibly interpret or waive” the following:

• The one-week waiting period for unemployment benefits;
• The requirement that claimants be able and available to work while receiving benefits;
• The requirement that claimants actively seek work and meet certain work search requirements while receiving benefits; and
• The requirement that claimants who are still employed, but who are working less than a normal schedule because of lack of work, have worked fewer than three customary scheduled full-time days in the payroll week for which benefits are requested. (This final provision should help some employees whose hours are reduced to qualify for a reduced weekly benefit amount.)

EO118 also provides that employers’ unemployment accounts will not be charged for benefits paid to employees for reasons related to COVID-19.  This provision will ensure that employers’ experience ratings are not impacted by COVID-19-related claims.

Finally, EO118 directs the Department of Commerce to postpone all mandatory in-person contact with individuals seeking unemployment benefits (including Employability Assessment Interviews) as long as the State of Emergency for COVID-19 remains in effect, and to provide reasonable means (including telephone and online access) for filing initial and weekly benefit claims.

Other States - Unemployment Benefits

Other states are expected to make changes in the unemployment compensation process similar to North Carolina and as encouraged by the COVID-19 Response Act. 

Next Steps – COVID-19

There are many unanswered questions that have arisen and will continue to arise under the COVID-19 Response Act.  We will provide further updates and guidance as appropriate on this emergency legislation and on other employment issues arising from the COVID-19 crisis.  In the meantime, please feel free to reach out to anyone on our Employment, Labor and Human Resources team if you have any questions or want to discuss specific circumstances you are facing. 

Please See Smith Anderson’s Prior Updates:

• Coronavirus ("COVID-19"): Employer Guidance and Strategies, March 9, 2020.
• COVID-19 Update:  Governor  Cooper Issues Guidance for NC Employers, March 10, 2020.