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For Employers: Coronavirus Leaves and Consequences; Lawful Emergency Payroll Reductions

Employers are scrambling to find an equitable and lawful plan to manage reduced or eliminated revenue resulting from mandated closures, illnesses, and quarantines and to understand newly enacted laws.

On March 18, 2020, President Trump signed the Families First Coronavirus Response Act ("FFCRA"). With respect to employment concerns, the FFRCA provides for expanded coverage under the Family Medical Leave Act as well as paid sick leave for 14 days. The below questions and answers will hopefully provide answers to many of these pressing and important questions.

Legal counsel is recommended to address specific circumstance and local and state laws.

I. Families First Coronavirus Response Act

A. Emergency Family and Medical Leave Expansion Act ("EFMLEA")

1. What does the EFMLEA provide?

This temporary emergency amendment to the FMLA provides for 10 initial days of unpaid leave and 10 weeks of paid leave thereafter for employees. The amount of paid leave available under EFMLEA is limited to $200 per day per employee and $10,000 total per employee.

2. What can employees use the paid EFMLEA leave for?

This amendment only applies to leave needed for employees to care for children under 18 if their school or place of care is closed. (This is substantially changed from the original bill).

3. Is the employee entitled to paid EFMLEA leave if they can work from home?

The employee may only use the paid leave under this law if they are unable to work either in their place of business or if they are unable to telework. If they are able to telework, the employee is not entitled to the EFMLA leave.

4. Are all employers required to provide the paid EFMLEA?

No. The law applies to all employers with less than 500 employees. However, employers with less than 50 employees may apply for an exemption if the requirements of the law would jeopardize the viability of the business. At this point, there are no stated criteria to determine if this viability exemption is met.

5. Can I require an employee to use under existing company PTO/Vacation/sick leave policies accrued leave before taking the EFMLEA paid leave?

No, an employee may elect to take accrued vacation, personal, or sick leave accrued under company policies, but the employer cannot require the employee to take accrued leave first. (Remember leave under this statute is paid at 2/3rds so an employee might wish to elect to use their saved paid leave instead).

6. Does the employee receive their full rate of pay under the EFMLEA?

No, the first 10 days of leave are unpaid - unless the employee qualifies for the paid sick leave portion of the law as discussed below. The remaining 10 weeks of the amended FMLA portion of the FFCRA provides the employee with at least 2/3rds of the employee's regular rate of pay calculated on the basis of the number of hours the employee would otherwise be scheduled to work.

7. Will an employer be liable for FMLA interference or retaliation if the employee is not returned to his/her job after EFMLEA leave?

Probably not if: the employer has fewer than 25 employees; if the position doesn't exist after the leave due to economic circumstances; if reasonable efforts are made to return the employee to an equivalent position; and, if no position is available, makes reasonable efforts to contact the employee if a position becomes available within 1 year from the earlier of the start of the leave or the end of the qualifying need related to the public health emergency.

B. Paid Sick Leave Under the FFRCA

1. How does an employer determine if an employee is entitled to FFCRA paid sick leave?

The employee may use the paid sick leave under the FFCRA if they are subject to a quarantine order, to self-isolate based on advice from a health care provider, to obtain a medical diagnosis or if they are experiencing symptoms of the virus, to care for a family member who is self-isolated or experiencing symptoms, or to care for a child if school is closed.

2. How many hours of sick leave is the employee entitled to?

A full-time employee is permitted to take up to 80 hours of paid sick leave. Part-time employees are entitled to the number of hours the employee works, on average, over a 2-week period.

3. Is there a limit on the dollar amount of the sick time?

Yes. The paid sick time is limited to $511 per day ($5,110 total) if the employee is quarantined or experiencing symptoms of the virus and limited to $200 per day ($2,000 total) if the employee is caring for a family member

4. Will the government reimburse employers for the expanded FMLA or the paid sick leave?

Yes, but not in advance or contemporaneously. For both benefits, the government provides tax credits for each calendar quarter in an amount equal to 100 percent of the qualified sick leave wages paid. This amount is limited to $200 for any day and $10,000 in the aggregate with respect to all calendar quarters for any individual.

5. Are there any posting requirements?

Each employer must post, and keep posted, a notice approved by the Secretary of Labor of the requirements of the FFCRA. This notice was not available at the time of this publication.

NOTE: The requirements of both the EFMLEA and FFCRA apply to employers in addition to any employer policies regarding FMLA and sick leave.

II. WARN Act, Unemployment and Other Considerations.

A. Will WARN Act 60-day notice requirements apply if employers lay off or furlough employees due to business downturn/closure?

Likely not because: (i) most layoffs/furloughs are expected to be temporary; (ii) the circumstances of this virus may qualify under a natural disaster exception; and (iii) the fact that the business circumstances requiring the layoffs could not have been foreseen.

[Federal WARN Act notice requirements apply to employers of at least 100 full-time employees. WARN notice requirements generally apply to plant closures and layoffs/furloughs where the employer is laying off at least 50 employees at a single facility or reducing the hours of at least 50 employees by at least 50%. Many states, including Illinois, have mini-WARN acts which cover smaller employers (in Illinois 75) and which are triggered by smaller layoffs and closures (in Illinois 25 or more if one-third of workforce or 250 or more employees). The federal WARN Act and the Illinois WARN Act require at least 60 days of notice].

B. Will employees who are temporarily laid off due to the economic impact of the coronavirus be eligible for unemployment compensation?

You will need to check your local unemployment compensation laws. Under the Illinois Department of Employment Security's emergency rules adopted to address the coronavirus crisis, employees laid off by their employer due to coronavirus business slowdowns will generally be eligible for unemployment compensation without having to register to apply for other jobs so long as the employee remains able and willing to return to the job they lost in the layoff.

C. What are the consequences of reducing a group of employees' pay or hours/days of work?

WARN: WARN Act notice requirements should not apply. See A above.

FLSA EXEMPTION: There is a risk that reducing exempt employees' pay temporarily will destroy their exemption (and thus render them eligible for overtime pay).

However, reducing the pay prospectively (before the work has been performed) due to an economic slowdown should avoid the loss of an exemption. While the current national emergency should qualify for an economically bona fide reduction an alternate strategy, where feasible, an employer could avoid this concern by having exempt employees alternate weeks that they work thus allowing for no pay on the weeks during which they perform no work.

UNEMPLOYMENT COMPENSATION: Employee may become eligible for unemployment compensation. In Illinois, where the amount of the reduction is at least 50% of the benefit that the employee would have qualified for, the employee may be eligible for unemployment compensation.

D. If employees are completely laid off due to the coronavirus crisis but paid a severance during the lay off period, does the severance render the employees ineligible for unemployment compensation.

Local unemployment compensation laws should be consulted. In Illinois, severance pay will not impact an employee's eligibility for unemployment compensation.

E. Can employers keep employees on their health plan following a temporary layoff or reduction of hours?

Most health insurance plans require that employees work an amount that qualifies as full-time hours in order to participate in the health plan. If employers want to ensure that laid off employees remain on their plan without having to elect COBRA coverage (and potentially be subject to another waiting period upon re-hire), employers should discuss with their agent or insurer the possibility of amending the plan. Alternatively, if employees cannot remain on the plan, the laid off employees will have the option to electing COBRA coverage. If COBRA coverage is necessary, employers may offer to pay all or a portion of the COBRA premium but are not required to do so.

Questions? Contact Attorney Jennifer Adams Murphy or Elizabeth Bidwill in our St. Charles office at (630)377-1554 or by email at [email protected] or [email protected]

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