Employers React to COVID-19 – The CARES Act and Expanded Emergency Paid Sick and Family Leave

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law by President Donald Trump on Friday, March 27, provides many employers options for economic relief while also supporting employees through a broad expansion of unemployment insurance programs throughout the country. Together with the Families First Coronavirus Response Act (FFCRA) — which provides emergency paid sick leave and an emergency expansion of the Family and Medical Leave Act (FMLA) — these federal actions have a profound impact on workplaces as the country responds to the challenges of the COVID-19 pandemic. In addition, new guidance issued by the U.S. Department of Labor (DOL) clarifies the scope and implementation of the paid leave provisions of the FFCRA. And the DOL has published the poster that employers covered by the FFCRA are required to post in their workplaces or otherwise provide to employees.

Employer Economic Relief Under the CARES Act

The CARES Act provides $2 trillion in economic relief to individuals and businesses. Employers may be able to take advantage of an employment tax credit for businesses that suffer economically as a result of the pandemic as well as a delay in the required deposit of employment taxes. These tax-related aspects of the CARES Act are discussed at length in our COVID-19 Legal Resources Guide. In addition, the CARES Act provides relief for employers that sponsor defined benefit pension plans, such as 401(k) plans.

The CARES Act also established a Paycheck Protection Program, which provides loans of up to $10 million to certain employers (principally those that have fewer than 500 employees and larger employers providing accommodation and food services in multiple locations). Uses of the loan proceeds are limited but include costs of payroll and certain benefits. The Paycheck Protection Program is discussed in more detail in this Kramer Levin COVID-19 Update.

The CARES Act Implements a Massive Expansion of Unemployment Benefits

The CARES Act creates three new unemployment insurance (UI) programs: Pandemic Unemployment Compensation (PUC), Pandemic Emergency Unemployment Compensation (PEUC), and Pandemic Unemployment Assistance (PUA). States will have to enter into specific agreements with the DOL in order to take advantage of the increased unemployment insurance benefits provided by the CARES Act. Employees who are laid off or furloughed may be able to obtain enhanced UI benefits under these programs.

Pandemic Unemployment Compensation (PUC)

• UI recipients under state plans, PEUC or PUA will receive their usual calculated benefit plus an additional $600 per week in compensation for weeks ending on or before July 31, 2020.
  
  
• Thus, for example, the maximum state unemployment benefit for an unemployed worker in New York is $504 per week. Under the new expansion, such a worker would receive an additional $600 of federal pandemic unemployment compensation, for a total of $1,104.
  
  
• Note that some states’ UI plans are more generous than others — the maximum weekly benefit ranges from a low of $275 in Alabama to a high of $823 in Massachusetts.
  
  
• Critically, the $600 supplement is not limited by the employee’s income prior to termination. As a result, some employees could be paid more for each week of unemployment than they received when they were actively employed.

Pandemic Emergency Unemployment Compensation (PEUC)

• Individuals who have exhausted state/federal UI benefits (many states offer 26 weeks of UI benefits, but some states offer substantially less) and are able to work, available to work and actively seeking work will receive UI benefits for an additional 13 weeks. The law explicitly provides, however, that “a State shall provide flexibility in meeting such [work search] requirements in case of individuals unable to search for work because of COVID-19, including because of illness, quarantine, or movement restriction.”
  
  
• PEUC benefits will expire on Dec. 31, 2020. PEUC benefits would be the Weekly Benefit Amount as calculated under state law.  

Pandemic Unemployment Assistance (PUA)

• PUA provides emergency unemployment assistance to workers who are not covered by regular state UI or who have exhausted their state UI benefits and who are unable to work as a direct result of COVID-19. Workers who are eligible for state UI or the 13-week extended benefits under PEUC (see above) are not eligible for the PUA program.
  
  
• Up to 39 weeks of PUA are available to eligible workers, offset by any weeks of other UI benefits the individual receives under any program. 
  
  
• PUA would pay benefits to covered individuals for weeks of unemployment, partial unemployment or inability to work beginning on or after Jan. 27, 2020, and ending on or before Dec. 31, 2020.
  
  
• Those eligible for PUA include self-employed workers, including independent contractors, workers seeking part-time work and workers who do not have a long enough work history to qualify for state UI benefits. 
  
  
• Applicants will need to provide self-certification that they are (a) partially or fully unemployed, or (b) unable and unavailable to work, in either case because:
• They have been diagnosed with COVID-19 or have symptoms of it and are seeking diagnosis.
• A member of their household has been diagnosed with COVID-19.
• They are providing care for a family or household member diagnosed with COVID-19.
• A child or other person in the household for whom they have primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of COVID-19, and such school or facility care is required for the individual to work.
• They cannot reach the place of employment because of a quarantine imposed as a direct result of a COVID-19 outbreak or have been advised by a health care provider to self-quarantine.
• They were scheduled to start employment and do not have a job or cannot reach their place of employment as a result of the COVID-19 public health emergency.
• They have become the breadwinner for a household because the head of household has died as a direct result of COVID-19.
• They had to quit their job as a direct result of COVID-19.
• Their place of employment is closed as a direct result of COVID-19.
• They meet other criteria established by the secretary of labor.
• Workers are not eligible for PUA if they either can telework with pay or are receiving paid sick days or other paid leave.
  
  
• The PUA benefit amount would be the weekly benefit amount as calculated under state law based on recent earnings, augmented by the $600-per-week supplement available under the PUC program through July 31.

Individuals who are furloughed (i.e., who are temporarily laid off and receive no compensation) often are eligible to receive UI benefits during the furlough. Furloughed employees in New York, for example, generally qualify for such benefits. Employees whose work hours are reduced by their employers also may qualify for UI benefits, but the availability of such relief is more limited. Thus, in New York, only employees who work fewer than four days in a week and earn $504 or less per week can qualify for UI benefits to help offset the compensation reduction.

DOL Guidance Clarifies Application of the Federal Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act

The leave provisions of the FFCRA are discussed in detail in our previous alert, and tax credits available to offset the cost of benefits are addressed in our COVID-19 Legal Resource Guide. Since the FFCRA was passed, the DOL has published and updated guidance on the leave provisions in the form of Questions and Answers. The guidance provides additional clarity regarding the application of the FFCRA.

• Effective Date: The DOL has announced that the paid leave provisions go into effect on April 1 and apply to leave taken between that date and Dec. 31. Leave taken prior to April 1 does not satisfy or offset the leave requirements under the FFCRA.
  
  
• Aggregation of Separate Corporate Entities: The leave provisions of the FFCRA apply only to employers that have fewer than 500 employees at the time the employee’s leave would begin. Nonetheless, separate subsidiaries under a holding company structure will be aggregated if they satisfy the integrated employer test, which balances factors including common management, interrelation of operations, centralized control of labor relations, and degree of common ownership or financial control. 
  
  
• Record-keeping Requirements: Private sector employers that provide paid sick leave and expanded family and medical leave required by the FFCRA are eligible for reimbursement of the costs of that leave through refundable tax credits. In order to maintain eligibility for tax credits, employers will need to obtain and retain appropriate documentation. Guidance will be forthcoming from the Internal Revenue Service, but for sick leave we expect that documentation similar to that used for other types of sick leave (e.g., for FMLA or paid family leave) will suffice. For an employee who takes expanded family and medical leave to care for a child whose school or place of care is closed or whose child care provider is unavailable, due to COVID-19, the guidance states that employers may require that the employee provide additional documentation in support of such leave, such as a notice that has been posted on a government, school, or day care website or published in a newspaper, or an email from an employee or official of the school, place of care or child care provider.
  
  
• Intermittent Leave: Employers may, but are not required to, permit employees to take leave provided under the FFCRA intermittently.
  
  
• Impact of Furloughs on Eligibility for Leave:
• An employee who was furloughed prior to April 1 is not entitled to leave under the FFCRA.
• An employee who was furloughed subsequent to April 1 cannot take FFCRA leave after the date of furlough.
• An employee who is on FFCRA leave on the date a furlough occurs will cease to be eligible for such leave.
• Reduced Work Hours: Employees cannot use FFCRA leave to make up for a reduction in work hours undertaken by the employer.
  
  
• Continued Health Coverage: Employees are entitled to continue health coverage during any period of leave under the FFCRA, subject to continued payment of employee contributions.
  
  
• Use of Other Employer-Provided Paid Leave: Employers may permit, but cannot require, employees to use other paid leave benefits to supplement the pay available under the FFCRA. 

DOL Issues Poster That Employers Covered Under the FFCRA Must Post or Provide to Employees

The FFCRA requires that covered employers post a notice in the workplace regarding employee rights under the Act. The DOL has now published the form of notice, together with Frequently Asked Questions regarding the notice requirement. Although the guidance does not specifically address the issue, employers that have implemented work-from-home arrangements likely are required to distribute the notice by email or other means reasonably calculated to reach employees. Employers also should consider posting the notice on intranets or other websites accessible to employees.

Covered employers should take action now to ensure they comply with the notice requirement by April 1, the effective date of the Act.