The Department of Labor issued its Final Rule regarding implementation of the Families First Coronavirus Response Act on April 1, but it does not resolve all outstanding questions for employers.
The Final Rule provides points of clarity on issues such as the definitions of health care provider and emergency responders, the small business exemption to the Act, and the effect of state or local stay-at-home orders on an employee’s right to take leave. But it also contains some apparent internal inconsistencies, including whether employers can require employees to use employer-provided paid time off and partially paid Emergency Family and Medical Leave Expansion Act leave (“Emergency Family Medical Leave”) concurrently.
Health Care Provider, Emergency Responder Defined
Under both the Emergency Paid Sick Leave and Emergency Family Medical Leave provisions of the Act, employers may exclude employees from leave entitlements if the employees are health care providers or emergency responders. Section 826.30(c) of the Final Rule defines both of these terms. Under the rule, a health care provider is broadly defined as:
Anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, Employer or entity. This includes any permanent or temporary institution, facility, location or site where medical services are provided that are similar to such institutions.
The definition also includes any individual employed by an entity that contracts with any of the above institutions to provide services or to maintain the operation of the facility, where that individual’s services support the operation of the facility. It further covers employees of medical product and equipment suppliers, if their production work is related to COVID-19 response.
The definition of emergency responder is more limited. Under the Final Rule, an emergency responder is:
Anyone necessary for the provision of transport, care, healthcare, comfort and nutrition of such [COVID-19] patients, or others needed for the response to COVID-19.
The Final Rule provides a non-exhaustive list of emergency responders, including military, law enforcement officers, correctional institution personnel, emergency medical technicians, paramedics, public works personnel and persons with skills or training in operating specialized equipment needed to provide aid in a declared emergency. The definition also includes employees who work at such facilities and are necessary to maintain the operation of the facility.
Even though the Final Rule defines these two key terms, some questions remain. For example, what kind of employees are covered as public works personnel? And what kind of employees are necessary to maintain the operation of a facility that enables emergency response? These questions remain open to interpretation.
It is important to note that employers facing tough questions about whether an employee may qualify for an exception to leave can always maintain a safe harbor by electing to provide employees with leave. The Act allows employers to choose whether to claim the exception. If an employer does not elect to claim the exception for any qualifying employees, it is still eligible for the tax credits associated with the Act.
Small Business Exemption
The Final Rule also clarifies the three available bases for small businesses to claim an exemption from providing leave due to school closures or the unavailability of childcare. Section 826.40(b) of the Final Rule provides that an employer with fewer than 50 employees is exempt from the childcare-related leave provisions of the Act when the imposition of the leave requirements would jeopardize the business as a going concern. An employer may claim such an exemption if any of the following three conditions exist, as determined by an authorized officer of the business:
- Providing the leave would result in a small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at minimal capacity
- The absence of the employee or employees requesting leave would entail substantial risk to the financial health or operational capabilities of the business because of their specialized skills, knowledge of the business or responsibilities; or
- There are not sufficient workers who are able, willing and qualified who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting leave, and these labor or services are needed for the small business to operate at a minimal capacity.
An employer must document its bases for determining that any of these rationales allows it to claim an exemption, but it does not need to send any documentation to the Department of Labor. Instead, the employer must maintain the records in its own files.
Even if a small business claims an exemption from the Act based on the above rationales for any or all of its employees, it still must post the notice poster required by the Act.
State and Local Stay-at-Home Orders and Leave Entitlements
The first qualifying reason an employee may take Emergency Paid Sick Leave under the Act is if they are subject to a local, state or federal quarantine or isolation order. Section 826.10(a) of the Final Rule clarifies that state and local shelter-in-place or stay-at-home orders can qualify as “quarantine or isolation orders” for the purposes of the law. But what if an employer is subject to an exception from such orders as an essential business? Or what if the business ceases to operate because of such orders?
The answer to the latter question is clear. Employees may only use leave under the Act if the employer has work available for the employee to do, either in person or through telework. If a state or local stay-at-home order requires a business to cease operations, then an employee is not eligible to take paid sick leave during the time that the business is closed.
If a business lawfully remains open despite a stay-at-home order, the question is more nuanced but still appears answered by the Final Rule. In defining a qualifying quarantine or isolation order, the Final Rule says the order must “cause the employee to be unable to work even though his or her employer has work that the employee could perform but for the order.” If a state government issues a stay-at-home order, but includes carve-outs for continued operation of essential businesses, then the stay-at-home order will not qualify as a ‘but for’ cause preventing the employee from working for those essential businesses. That’s because the order specifically excluded certain employers from its scope, and allowed employees of those employers to continue working. Thus, a statewide stay-at-home order will generally not provide a qualifying ground to take Emergency Paid Sick Leave if it excepts the employee’s employer from its scope, or if the employee may continue to telework despite the order.
Can Employer Require Employees to Use Paid Emergency Family Leave and Employer-Provided PTO Simultaneously?
The Final Rule contains apparently inconsistent statements regarding an employer’s right to require employees to use Emergency Family Medical Leave concurrently with other employer-provided paid time off.
As background, the Act provides for up to 12 weeks of leave under the Emergency Family Medical Leave portions of the law. This leave essentially expands the traditional Family and Medical Leave Act (“FMLA”) to add another qualifying reason for leave: to care for a son or daughter out of school, daycare or childcare for COVID-19 related reasons. But it is also unique because the last 10 weeks of Emergency Family Medical Leave are paid at up to 2/3 of an employee’s regular rate, whereas leave under the traditional FMLA is unpaid.
When employees seek to take unpaid leave under the FMLA, employers may require them to first substitute accrued, paid time off provided under employer policies. But whether the same principles applied to Emergency Family Medical Leave remained an open question. Unfortunately, the Final Rule did not provide clarity on the issue.
At first glance, Section 826.70(f) of the Final Rule appears to answer the question. It explicitly states that traditional FMLA substitution principles are not applicable to the periods of Emergency Family Medical Leave during which the employee receives 2/3 of his or her regular rate.
But other sections of the Final Rule seem to contradict Section 826.70(f). For example, Section 826.160(c) and 826.24(d) both seem to allow the employer to require an employee to use employer-provided PTO concurrently with their Emergency Family Medical Leave.
The Department of Labor’s FAQs provide further confusion, because they also contradict Section 826.70(f)’s prohibition on concurrent use of employer PTO and paid family leave. Question 33 of the Department’s FAQs specifically states that an employer may require employees to use employer-provided PTO concurrently with the last 10 weeks of paid Emergency Family Leave.
This inconsistency puts employers in a difficult position. An employer may want to require its employees to use employer-provided PTO and Emergency Family Leave simultaneously because, without simultaneous leave, employees could be eligible for four-plus months of paid leave between now and December 31, 2020. And while several sections of the Act and the guidance seem to allow this practice, Section 826.70(f)’s restriction on mandatory substitution of employer PTO seems explicit.
Given the uncertainty, employers should use caution if they want employees to use employer-provided PTO and Emergency Family Medical Leave simultaneously. As potential workarounds, employers and employees may mutually agree to use the leave simultaneously to allow employees to receive full pay during the last 10 weeks rather than 2/3 pay (in which case, the employer may take a tax credit for the 2/3 rate). Employers may also change their existing leave policies to reduce employer-provided paid leave entitlements, but must do so in a non-discriminatory fashion and consistent with any applicable state law.
The Department of Labor continued to issue guidance on the Families First Act over the weekend of April 4, and it is likely to continue to do so. In the meantime, employers should consult experienced labor and employment counsel before moving forward with strategies that implicate the gray areas of the Final Rule.