On March 18, the Senate passed and the President signed into law the “Families First Coronavirus Response Act.” Among other things, this new law, set to take effect no later than April 2, 2020, creates a new paid sick leave mandate for all employers with fewer than 500 employees and expands the application of the Family Medical Leave Act to cover all employers in certain circumstances related to the coronavirus. Karen Harned and James Paretti will walk participants through key provisions of this new law.
Karen Harned, Executive Director, National Federation of Independent Business Small Business Legal Center
James A. Paretti, Shareholder, Littler Mendelson P.C.
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Operator: Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society’s Labor & Employment Law Practice Group, was recorded on April 9, 2020, during a live teleforum conference call held exclusively for Federalist Society members.
Micah Wallen: Welcome to The Federalist Society's teleforum conference call. This afternoon's topic is titled “COVID-19 in the Workplace: Mandated Paid Sick Leave.” My name is Micah Wallen, and I am the Assistant Director of Practice Groups at The Federalist Society.
As always, please note that all expressions of opinion are those of the experts on today's call.
Today, we are fortunate to have with us Karen Harned, who is the Executive Director of the National Federation of Independent Business Small Business Legal Center. We also have Jim Paretti, who is a shareholder at Littler Mendelson P.C. in the Workplace Policy Institute. After our speakers give their opening remarks, we will then go to an audience Q&A. Thank you for sharing with us today. Jim, the floor is yours.
James Paretti: Thank you, Micah. Good afternoon, everyone, or good morning, depending on where you’re calling in from. I’ll take only one exception to the introduction, which is that of being an expert. What we’ve found in these last few weeks is that Congress and the agencies are moving so quickly in terms of adopting new laws, sometimes with little or no time to have anyone actually read them, that holding oneself out as an expert is a dangerous if not dubious proposition. But I’ll do the best I can in the time that we have today to walk through some of what we’ve seen with respect to the new sick leave mandates, then I’ll let Karen discuss a little bit about some of the process that the department’s gone through and some of the agencies have looked at, and then we’re happy to take questions.
To put this in context, though, the law we’re going to talk about today, the Families First Coronavirus Response Act, was the second of three pieces of legislation the House -- or really, that Congress has passed and signed into law. The first was a relatively modest, at the time, appropriations bill. The second was the FFCRA, which adopted these paid leave mandates. And then the third, which has somewhat eclipsed the second, was the Senate CARES Act, which created the small business administration paycheck protection loan, dramatically expanded unemployment benefits, created a number of mid-size loan programs, tax retention programs. That’s really not what we’re focusing on today, but that’s a part of the mix as we assess the lay of the land.
Returning to what Congress did in that second bill, the FFCRA, they created two new leave entitlement programs. One is a free-standing off code program that provides for emergency paid sick leave, and the other was an expansion of the existing Family and Medical Leave Act to add an additional permissible use and to broaden the coverage of the act for that specific purpose and for that specific purpose only. The law took effect as of April 1, 2020. It is set to sunset if Congress does nothing further on December 31st of this year.
We’ll see how -- if that sunset date holds, or if that’s changed as we -- just before we got on the call today, it was reported that the Senate failed to clear by unanimous consent what we’re calling Phase 3.5, which is an additional influx of money to the Small Business Administration. We expect over the next few days, there’ll be negotiations between Senate Republicans and Democrats in the House to try to get a package together that certainly will put more money there. But we’ll see what other policy add-ons are included, as well as in the longer term, we anticipate a Phase 4 bill, and possibly even a Phase 5 bill, which may start to become more contentious and less bipartisan in terms of -- as folks try to get their preferred policy priorities ahead.
But turning to the FFCRA, as I mentioned, two new leave programs, paid sick and paid family and medical leave, are covered by this law. Interestingly, Congress usually sets a floor of coverage and then a number above which employers are covered. I think in, probably anecdotally or what they predicted would be the case is that employees of smaller businesses may not have access to as robust a benefits scheme as some in larger companies.
So they set a threshold for fewer than 500 employees. So if you’re a private employer with fewer than 500, you’re covered under this new law. It’s irrespective of some of the traditional FMLA criterion about employees in the workspace or in a certain radius. It’s all private employers with 500 or fewer -- or fewer than 500, subject to a few exceptions. And for purposes of the rule, they’ve adopted the FLSA joint employer test as well as the FMLA integrated employer test for determining if a company with numerous affiliates should aggregate those and get themselves above the 500 number.
I’ll tell you anecdotally, we’ve had a number of clients who said, “Oh, wouldn’t it be great if we could do that and establish ourselves as being -- combine all of our entities to be a larger than 500 employer. We could get out of this benefit mandate.” And our advice to folks has been proceed with great caution there. Those who’ve followed in the labor and employment space know that we’ve spent a lot of time these last few years arguing for narrow definitions of joint employer. We’ve gotten great regulations from Department of Labor, from the National Labor Relations Board.
And an important thing to remember as we go through this is that things we do in the here and now are going to have collateral consequences far into the future, be that the ability to telework, or with respect to single employer and aggregation, it may be very tempting right now to say, “Well, I’ve got three, four affiliate companies that if I slice and dice things the right way, I can roll them up and say, ‘Oh, I’m over 500. I don’t have to provide these benefits. We’re all one big, happy family.’” Query whether six months from now when it’s either SEIU showing up with a petition or a plaintiff’s class action Wage and Hour lawyer showing up, whether you’re going to be as happy to be one big, happy family. So decisions that we make today will have consequences beyond the narrow confines of this act.
But that’s what the statute provides right now is the 500 count. It’s a live count, meaning on any day that an employee would ask for leave, the employer, if they’re under that 500 number, are required to grant it. That’s a bit of a moving target, to say the least, suggesting that depending on what recovery looks like here, an employer who may be under 500 today and required to provide some of these benefits, if they increase their payroll in the weeks to come, may find that the second employee or the next employee who asks might not be eligible. Now, you still have to continue to provide that first employee relief, but at that point, the second employee is ineligible.
In terms of what the leave may be used for, sick leave is granted for -- there are six enumerated reasons. Three of them really revolve around an individual being either subject to a quarantine order, or having symptoms of COVID and seeking a diagnosis, or caring for someone who is sick. And probably the most significant for folks on the call is that among the permissible uses of paid sick leave is where an employee needs to be home to care for a child because the child’s school or childcare provider is unavailable due to the COVID-19 restriction. As we know, right now it seems just about every school is closed, at least in the near term. Whether some will open before the school year or not is less clear.
But that’s an important point to note is that I think the majority of folks when this first was being contemplated, we were talking about, oh, what about folks who’ve been exposed or infected? They need to stay home for 14 days. They need to be out of the workforce. Very quickly, the dynamic changed to being about, well, schools are closed, and people need to be home with children or childcare, or more broadly, shelter in place orders. For example, here in the District of Columbia, most non-essential businesses have been told you can’t open your doors. Your employees are required to shelter in place. They should be teleworking if possible. So the law was already a little bit behind the times. By the time it became law, it already was trying to address scenarios that had not yet been contemplated.
The paid sick leave is available for up to six different reasons. The extended family and medical leave is permissible for only one reason, and that is that same care for a child whose school or childcare provider has been closed. Now, you get -- if you’re newly covered under the FMLA for this emergency expansion, your employees have up to 12 weeks of FMLA leave. The first two of those weeks would be unpaid. The remainder of those weeks are paid. They’re paid at two-thirds the employee’s regular rate, subject to a statutory cap of $200 per day.
With respect to the paid sick leave, full time employees get 80 hours of paid sick leave. They’re immediately eligible for it. There’s no beyond the payroll requirement. So as a practical matter, if you have an employee who is dealing with this need to be home for care, they’re going to get two weeks. And they’re what’s called full time because it’s 80 hours for full time employees, defined as 40 hours per week. It’s prorated for part timers based on what they’re normally scheduled to work. But Congress giveth and taketh away. So the first two weeks of leave would be unpaid under the FMLA, but you’d likely be paying them by way of the paid sick leave act, at which point then they go into that extended 10 week FMLA period. All of that is at two-thirds of the rate of the rate of pay, again subject to $200 per day aggregate.
If an employee is taking paid sick leave for other purposes, such as they’ve been exposed, they need to self-quarantine, they’ve been diagnosed with coronavirus, that is also subject to a statutory path. They’re entitled to their full rate of pay up to $511 per day. The maximum is $5,110. So those are the two. Coordination of benefits is going to be a key issue here.
There are numerous exemptions in the law or ways that employers may exclude themselves. There is a small business exemption for employers of fewer than 50. That’s been fleshed out by the department by way of regulations, but it’s clear that that exemption contemplates where a small employer is facing either providing leave is going to cause either costs to outweigh revenue or they’re going to have shortage of labor to be able to perform at minimal capacity, they can deny leave to employees.
But the regulations are rather clear that this is not meant to be a get out of jail free ticket on day one. We’ve advised small employers that they really do need to look at a case by case or projected basis of what would this leave look like? What would it cost me to provide it? What would my labor force look like? I don’t think it’s a wise move to say, “Okay, well, we’re under 50 and this would be too much for us, so we’re going to deny leave to all individuals in all circumstances.”
There are exemptions as well in the bill for healthcare employees and emergency responders. Those provisions are defined by way of regulation. The healthcare exemption is a fairly broad exemption. I think that’s good. But in both instances, the department urges employers to use those judiciously. Put another way, if you are a hospital employer and you’re required to provide these benefits, you may be able to exempt from providing to employees. Might want to think twice if you’re -- it’s one thing to exempt your nurses or your doctors from getting this leave because they’re needed to be there, particularly where the exemption applies only for that sort of care for a child provision. But if you’ve got backroom staff, administrative staff, folks who are maybe not critical to the actual delivery of healthcare, it may be a wise idea to take a more nuanced approach.
Finally, before I’ll turn this over to Karen, so we do just want to do an overview, the bill is --these requirements are paid for by the federal government. They’re paid for by way of a refundable tax credit. IRS has already issued information on their website — it’s a good, robust website — about how employers may avail themselves of this. They may take credits against monies they’ve already deposited. In fact, there’s provisions perhaps via advanced funds, if that’s necessary. So I think the intent here was that while this benefit mandate would be put on employers, the federal government is going to pick up the tab up to those statutory caps. But whether cashflow, I think, particularly for smaller businesses, has been more of the immediate issue. So I think by way of regulation, FAQ, and others, they’ve tried to do as much as they can to get the money out there.
But as we’ve seen with so many things, including the SBA loan program, the emergency unemployment compensation, these tax credits, these systems just are not built to be that nimble. And every day, the reports I’m seeing are, oh, despite unemployment being ostensibly immediately available, applicants are having a hard time getting to it. Websites are crashing, on the phone 800 times before you get through. And there is a finite number of employees who are working for these agencies who are able to process these claims.
So to say things are a little bit of a lick and a prayer right now I think is probably generous. In the weeks to come, we’ll see if things start to stabilize or if they’re able to start to administer these programs a little more effectively. But right now, it’s a little bit of a wild, wild west out there, and folks are scrambling.
So I think with that, I’m going to pause. I’m going to turn it over to my colleague, Karen. And then we’re happy to take questions and jump in for any discussion that you might have.
Karen Harned: Thanks, Jim. Yes, my name’s Karen Harned. I run NFIB Small Business Legal Center. So NFIB is the nation’s largest small business advocacy organization with around 300,000 members in all 50 states and offices in every state capital.
And so as you can imagine -- well, I should start with the fact that for literally decades, NFIB members have been very clear that they could not operate with a paid sick leave -- with a sick leave mandate, period, much less a paid sick leave mandate. That’s because a lot of them can’t afford it. We have, I’d say, around 73 percent, I think is the number, of small business owners in the country have been able to provide paid sick and family leave at some scale for their employees. And of course, they want to do that because they’re competing with larger companies who often, but not always, provide that benefit. Those that don’t provide it can’t provide it. They don’t have the money to provide it.
So I just say that because it was -- the law itself, we thought, was very -- adding kerosene to a fire that was the COVID-19 and all of the closures that have resulted from that. We now have to deal with a new mandate on small businesses that they have to figure out in a matter of days whether -- how that applies to their business, how they’re going to comply with it, can they comply with it. And so it really left small business scrambling and also frustrated, quite frankly, that this wasn’t a similar mandate on larger businesses with over 500 employees.
All that said, when we did get to the implementation process, it was interesting to see how regulation will work when you have such a short window and the regulators don’t have a lot of time to bake in the cake their opinions on what needs to happen to implement a statute. And by that, I mean they literally were very clear at Department of Labor, Wage and Hour, that they wanted feedback on what the questions were the regulated community has.
And Jim and I were both on that initial call. They held on Friday, March 20, on which all they did was take questions. And a lot of people that were -- and they did that for an hour and a half. I think anybody that had a question from all over the country --
James Paretti: -- Karen, this is Jim. I’m having a hard time hearing you. Micah, are we still on the call? Are we still good?
Micah Wallen: We’re still on the call, but I’m not hearing Karen anymore, either. It abruptly cut off, but it appears her number is still on the line.
James Paretti: Okay. Well, while Karen is finding her voice, I’ll fill the gap for a few minutes. It’s interesting. She made some very good points about small businesses looking and saying, “Hey, why us, and why not companies that are larger than 500?” Frankly, an issue I think we’re going to see in this Phase 4 as we turn to the next policy discussions is going to be whether Congress chooses to revisit that 500 cap and to bump it higher. Again, anecdotally, I think their belief was that, well, large employers are already providing this suite of benefits or giving their employees what availability. And I think they’re going to find out that that’s not always the case, and as that starts to resonate, query whether Congress is going to say, “Well, maybe we do need to knock this mandate up higher than it was.”
The other issue that I think led them to cap it was that because it is paid for by the federal government by way of those tax credits, I think a policy decision was, “Boy, if we applied this mandate to every employer in the country, the costs would be astronomical.” Now, that was ten days before we all signed an almost unanimously passed $2.2 trillion bill, and now we’re talking about additional trillions of dollars, so the thought that this tax credit would have been expensive seems almost like archaic and quaint back on March 18th or 19th, where by April 1st or 2nd, we were writing checks for $2.2 trillion and contemplating what the next tranche of monies is going to look like.
So we’ll see. As I said, I think in addition to revisiting the threshold, we’ve already seen a number of policy proposals that are being floated right now. We’re talking about the HEROES Act, which would supplement the wages of healthcare providers and emergency responders. Not surprisingly, lots of folks who we might not think of as emergency responders, like grocery clerks, are -- the grocery companies and others are lobbying to include them. Whether these mandates will be tried to be made more permanent remains unclear.
Yeah, I think what we’re watching is the traditional Washington dance of, “Okay, there’s a crisis.” Both sides will say, “We never let a crisis go unused or go to waste.” But while there was initial fairly quick bipartisan consensus that, “Okay, we’ll take your bill. It’s not perfect. You take our bill. It’s not perfect.” As folks start to say, “Okay, now let’s go fishing, or let’s go shopping for some of the things we’ve been trying to do for years,” I think you’ll see that consensus start to break down.
So with that, Karen, are you with us? Are you back?
Karen Harned: Yes. I apologize. All of a sudden, it just stopped. [Laughter] Anyway --
James Paretti: -- We can cover for one another. So I’m happy to turn it back to you.
Karen Harned: Did you cover what happened following that meeting?
James Paretti: I did not.
Karen Harned: Okay.
James Paretti: While you were muted, I discussed how it’s possible that Congress might revisit that 500 employee threshold, which I know your members are very concerned about, if they start to realize that, okay, hey, these large, large employers may not be offering their employees the benefits which they need to be offering. So that was what we talked about in the interim, and so I’ll leave you back exactly where you were.
Karen Harned: Right. So anyway, after the 20th meeting, it was interesting because everybody was very frustrated that they did not feel like DOL was listening to them. But in fact, we started seeing as frequently asked questions, FAQs came out, that they were listening. And a lot of the concerns we had were being listened to then. And then in addition, they did an online dialogue where for a week, anybody that wanted to could comment on what they wanted to see in regulation, and people could even vote on those comments. All that to say although small business owners were very unhappy with the law as enacted, we did feel like DOL heard our concerns, particularly when it comes to the exemption for the 50 under.
As Jim says, it’s not a get out of jail free card, but like Washington loves to normally do, compose a lot of paperwork burden and documentation burdens on the regulated community, they took our advice and did not do that this time. A small business owner does have to analyze whether or not, in fact, they can offer the benefit. They document it and keep it for themselves in case they’re ever challenged. So that at least takes one big headache away from them as they’re trying to comply with this law.
So all I would say about the process is I do think it’s a lesson learned going forward that when the regulators don’t have a lot of time to prebake their opinions on how they want the rule to turn out, then they actually listen to the regulated community, you may find that you’re going to ultimately get a better regulation. I don’t think that’s necessarily a shock to anybody on this call, but it was great to see that actually work out in practice.
And the other thing I would say is this was a law that normally would take years to implement that was implemented in a matter of weeks. And it was helpful because people had questions. We were getting hundreds of questions from our members all across the country, and DOL was literally updating the FAQs over the weekend and getting to the heart of the matter on the questions that were most frequently being asked. And so to that, again, it made it -- made what was a bad situation not as bad, I guess, going forward.
James Paretti: I think that’s right. And I could tell you as someone who’s been on the front lines of this in terms of trying to pump out to our clients the most current information updates, regulations, yeah, I remember one Sunday night in particular where it was 9 o’clock, ready to leave the office. I was like, “Oh god, DOL just dumped 15 more questions on us.” Not so great for me. It is great for our clients in terms of the guidance they’re providing. I think they’ve been relatively consistent in terms of trying to address employers’ concerns, make responsibilities clear.
There’s not perfect symmetry among these. For example, DOL’s position is that that ability is to care for a child or need to care for a child when school is closed, that extends to use the full FMLA definition of child, which is any minor under the age of 18, and some who are older in certain circumstances where special needs might exist. On the other hand, IRS, when they’re saying what documents do you need to retain to claim the tax credit, suggests that if you have an employee who says, “Hey, my kid’s school is closed and I can’t come to work because I’ve got to take care of my 17-year-old high school senior,” the IRS is going to take the slightly more narrow position that says where the child is over 14 and the employee is claiming that they need to be home during daylight hours to provide care, you need to get a statement of special circumstances from the employee. So there’s not perfect symmetry.
I think all of these agencies are working as best as they can, as quickly as they can. But we’ll see how this all sorts out. Similarly, DOL announced that while the law became effective April 1st that DOL would not start active enforcement efforts until, I think it’s April 17th or maybe the 18th. And in the interim, they’re going to focus on compliance and getting regulations out, providing assistance. That’s the Department of Labor. There’s nothing here that suggests the plaintiff’s bar is not going to come knocking with a class -- all employees as of April 1 who were eligible.
So I think we’ve laid out the landscape. Karen, if you have nothing further to add at this moment, maybe we’ll turn it over for questions.
Karen Harned: Yes, that sounds great.
Micah Wallen: Absolutely. Let’s go ahead and open up the floor for audience questions. We already have some questions lining up, so without further ado, we’ll move to our first caller.
Caller 1: Yes. For purposes of the 50 employee threshold and the 500 employee maximum, do employees who’ve been furloughed count? And what about employees who are on the sick leave?
James Paretti: Okay, very good question because there’s two concepts in there. This is a good opportunity to unpack them. For purposes of the threshold counts, am I over or under 500, you count employees who are on leave, you count employees who are furloughed, you count temporary workers, you count part time workers. You don’t count a 20 hour a week person as only half an FTE. It really is just count all the noses that are on your payroll in any status. That’s for determining the eligibility.
Where the question of furlough and layoff and other things come into play is the department, by way of it’s regulations, has taken the position that, really, this leave isn’t -- this paid leave is required where an employee would otherwise be able to work and there’s work available and they’re not able to because of these COVID reasons, and that’s why the employer has to pay them. So where, for example -- and the regulations use the example of a coffee shop. If the coffee shop has been closed because its foot traffic is down, whether it’s been ordered to close by way of an order, it furloughs its employees because it doesn’t have work for them, DOL’s regulations take the position that those employees are not entitled to paid leave. What they are, or very possibly entitled to, depending on the state rules, is unemployment insurance and unemployment compensation.
So for purposes of counting heads and determining whether you’re on the payroll, whether you’re under these employee caps of 50 and 500, it’s a broad definition. You count folks who are on leave. You count folks who are in layoff status. But where you have, when it comes time to actually provide the benefits, the regulations are fairly clear that where someone -- if there is not work available to them, the employer has shuttered its operations or reduced its operations, the department’s position is that it’s the -- it’s not that the employee can’t work because of COVID, it’s the employee can’t work because the employer doesn’t have work for them. So that’s sort of how that works itself out in the wash.
The question will then become -- this I also put in to the category of is this something Congress is going to come back around and say, “Hey, that’s not what we intended here.” You’re immediately seeing some of the usual suspects rip into the department for some of their interpretations, particularly this one that, “Oh, we always intended this to be employee’s work is closed. They should be able to get this leave.” So I don't know whether they’re going to try to revisit that, but the department’s position is where you have folks in that nonworking status because there’s no work available to them, that’s -- they’re not eligible for leave.
If, on the other hand, you’re an essential business, your employees are allowed to come to work, you’re required to allow them to come to work, and you have someone who says, “I cannot,” because of child care needs or because of a diagnosis or a need to self-quarantine that’s documented by a medical healthcare provider, that person is eligible because but for that diagnosis, or but for the school closure, there’s work available to them, the employer would be able to put them on the schedule, etc., etc. Does that -- I hope that answers your question.
Micah Wallen: Karen, did you want to add anything before we move to the next caller?
Karen Harned: No. I think Jim covered it great.
Micah Wallen: All right, we’ll move to the next caller. If anyone would like to join the queue, it’s just star and then pound.
Caller 2: My question concerns the rate of pay, which I think the statute says the regular rate of pay, which seems to me would be what the person was making at the time. But the guidance issued by the Wage and Hour division says you use the average of the regular rate over the past six months. Could you clarify?
James Paretti: I’ll be perfectly blunt. That’s not an issue I have had occasion to look at very, very closely. If that’s what -- I’m going to put it this way: If that’s what the regulation says, that is likely what is required. I’m not going to pretend that I have an answer to this one because while I’ve looked at it, I know that there’s been, with respect to the FAQs on regular rate, the original FAQ was rather overbroad and suggested that tips and all this other stuff needed to be included. They subsequently narrowed that definition to say they need to be -- those sorts of compensation need to be included in the regular rate as they would be calculated under the FLSA.
I’ll be honest, I think you’re the first person who’s flagged this issue to me, so we’re happy to see if we can get an answer to that and maybe provide something to you offline. But if that’s the department’s reg -- do you know, and forgive me for asking, is that in all instances, or is that where you have employees who have variable rates of pay and varied schedules because I know there they’ve had some flexibility. What if I have employees who make a different rate from week to week or earn a different amount from week to week because of flexible -- because their schedule is unclear? There, I know there’s lookback as well as sort of what their hours of work would be. I’ll be frank, I was not aware until this moment that that had come up in the concept of how they compute the regular rate as well.
Caller 2: Right. The FLSA appears to only apply that six month lookback to variable rate, but the guidance just says bluntly the regular rate of pay is the average of the regular rate over a period of six months. I wondered if that might be a minimum, for instance, so the employer couldn’t cut the salary, cut the wage rate at the beginning of the leave so as to pay less leave.
Karen Harned: Yes.
James Paretti: That may be right. And again, depending on what folks are being paid and the reasons for which they’re taking leave, you are still subject to those statutory caps of $511 per day for paid sick, $200 a day for paid family and medical leave. So I’ll have a look. I’ll be frank, that is not one that has yet bubbled up to me, but these conversations -- it’s always good. I find I always learn something on these calls. I don’t always feel like I’m -- I don't know if I’m always teaching things, but I do feel like I’m learning things.
Karen Harned: Well, and that’s also a good note that we are still going back to the department with questions because, again, all of this came out so quickly. So if there’s a discrepancy, I would encourage you, and I’m sure Jim will be on it, and we will as well, to let them know and give them our guidance on what we think the best answer should be.
Micah Wallen: All right, we’ll now move to our next caller in the queue.
Tammy McCutchen: Hi, this is Tammy McCutchen from Littler. And this question really, Karen, is for you. So I had one call from a small business owner who told me, “Tammy, I cannot pay this. I just can’t pay it.” And they’re above 50. So what happens? What advice do you give to small businesses above 50 but below 500 that just says, “I can’t afford this right now. I have no revenue.”?
Karen Harned: Right. Well, that’s the sticky thing. I mean, this is -- we are dealing with those calls. We are dealing with people just trying to keep their business afloat. And we remind them of the tax credits and the loans that are available, but you can only pay what you can pay. And I’d be interested to see what you’re advising too because I think what you’re saying is the harsh reality of the situation that Congress just refuses, I think, even to today to accept. I saw reports over the weekend that Democrats were upset with how the department handled the 50 and under exemption and felt like they needed to put more pressure on the under 50s.
And these folks, I can assure you, our research is saying that they can maybe make it another month or two, but over half will be out of business within the next eight weeks if they don’t get relief now. And there are many that could only make it another week. So at the end of the day, you can only pay people if you have money. And I think that’s going to not be an uncommon question, sadly.
Tammy McCutchen: Yeah, and two things in response to that. One, for small businesses, it’s about cash flow, not getting money back later. They do not have the cash. And number two, on what I’ve been telling people — and this is not legal advice, this is practical advice — by the time DOL or private lawsuit gets around to trying to enforce this against you, you’ll either have your revenue back or you’ll be bankrupt. In any case, it’ll resolve itself, so do what you can.
Karen Harned: Yeah, I agree. And that is the key. We were worried even -- they were touting the tax credits when they passed this thing, and you really get those when you file your quarterly taxes. And we said, “Our members aren’t going to make it that long. They’re not going to have the money to do that.” And so they had talked about it being payments and, again, these loans, but the loans are not coming through. We don’t know one member that has received money in hand yet. And we have many more that haven’t even been able to find a place to apply because banks will not take their applications. So small businesses out there are struggling, and this mandate was like the very last thing they needed at this time.
James Paretti: Tammy, this is Jim. My colleague, my partner. Thank you for that. Do you -- in those instances, have you advised clients as much as they may not want to do it, they may want to put folks into temporary furlough status and such so that they’re able to avail themselves of unemployment benefits if the employer -- if it’s simply my revenue’s don’t allow me to do this. I can’t maintain the level of payroll that I need to and provide these benefits. Is that something you’ve contemplated with folks, or is that not the way the process works?
Tammy McCutchen: No, no. Yeah, that’s another example of how people in Congress and in the Treasury Department don’t understand incentives because the incentive here is to lay off these people completely so that when they get a COVID -- when they get COVID or they have to quarantine or their kids are out of school, they’re no longer on their payroll. So the incentive is fire people completely. [phone rings] Sorry about that. Anyway, yes, the incentive is to lay off people completely to get them off your payroll so that they are not working, they’re not on your payroll, and you do not have to pay the sick leave. That’s the incentive. And it’s a bad one, in my opinion.
Karen Hared: Yeah, sadly, for a lot of small business owners, if I’m being completely candid, by the time this thing became effective on April 1st, a lot of those dismissals had already occurred because they could just see that they weren’t going to be able to do it.
Micah Wallen: We’ll now move to our next caller in the queue. If anyone would like to join, just press star and then pound.
Caller 4: Hi. Good morning, Karen and Jim. You may have already addressed this question in some form with the earlier questions. If so, then disregard. But if you have an employee who is on a leave and coming back from a leave, then how does this play out? Are they able to take a leave for additional time period or is there overlap?
James Paretti: Okay, a couple of answers there. For what purpose were they -- depending on what purpose they were taking the leave for. The law is clear that this entitlement is on top of any existing entitlement that the employee might have by way of the employer’s PTO program, any CBA that’s in place, state law mandates, etc.
If you had someone who was -- if the question is I have someone who on January 1st gave birth to a child or adopted a child and took eight weeks of Family and Medical Leave Act unpaid to care for the child, which they’re permitted to do because I’m a covered employer, and now they’re coming back to work, and they’re saying, “Well, geez, my kid’s school is closed. My other kid’s school is closed, and I need to stay home,” or “I’ve been exposed to corona,” the regulations do make clear that for employers who were covered under FMLA prior to the expansion, any additional permissible use of leave comes out of the employee’s existing 12 week bank.
So in the example I gave, if employer gave FMLA in January for eight weeks to an employee, employee came back to work, now says, “Oh, I need additional COVID related leave,” that employee would only be entitled to four weeks of COVID related leave. It’s not an additional 12 because they did not create a new leave bank so much as they created a new permissible use. That’s a different answer for employers who would not have been covered under the FMLA prior to this and who are now required to provide this leave, absent an exemption. Does that answer your question?
Caller 4: Yes. So it’s wrapped around the existing leave framework that’s in place for employer benefits I think is what I heard, right? Thanks, Jim.
James Paretti: Yes. To be clear, the FMLA portion is wrapped around existing -- is folded into the existing FMLA scheme. That paid sick leave really is a standalone. It’s an off code adoption, so in that instance, you’d really need to take a close look. But if you had someone who was on leave, came back to work, and then was needed to take at least through the paid sick leave -- let’s make it easy. They say, “I’ve been diagnosed.” They would be eligible for that 80 hours of paid sick leave in addition to any leave that they had already been provided or were entitled to. There are rules about coordination of leave and when an employee wants to use additional time off. Those are a little too complicated to get into for the purposes of this call.
One last caveat there with respect to the FMLA leave eligibility, and as I said, paid sick leave, anyone who is on the payroll is immediately eligible. The FMLA does have a 30 day payroll lookback, as in you had someone who had to be on the payroll for 30 days prior to becoming eligible for leave or in certain instances if they’re rehired, so you don’t have a situation where someone’s hired on Monday and then on Tuesday says, “Well, now I want to take 12 weeks of FMLA leave under this new expanded bill.” That person would not be entitled because of that 30 day requirement. That doesn’t mean that 30 days from now -- in 29 days, they would be eligible. So I think that’s as much --
Caller 4: -- Right. I think the small employer, small business that’s essential or at least allowed to be open, they have employees that are coming in to help the management to do the -- to serve the customers. I’m talking about, not to say coffee, but fast -- on the retail side, retail, whether it’s pharmacy or non-pharmacy. I think that they’re under 50, they’re not going to be able to offer any of this. So I think I was referring to the over 50.
But I think someone touched on this, the cash flow is an issue, and young people that are showing up to do their part help the employer keep the business and the doors open, putting themselves out there in the front lines just like other healthcare workers, I think we may have to come up with a solution, if you don’t have one yet, down the road. But anyway, just as a relief for some of these people. But all right, I’ll let you get back to the floor here, and thank you very much for your time. Take care.
Micah Wallen: All right. We have reached the end of our question queue as of now. I’ll just give the instructions again. For any more questions, just hit star and then pound if you’d like to join the queue. And also, I’ll offer a quick plug for a teleforum we have coming up later today at 2 p.m. Eastern time. We’ll be featuring the current Solicitor General of Colorado in Eric Olson and the former Solicitor General of Colorado in Frederick Yarger. So be sure to tune into that later for another teleforum production.
Not seeing any questions coming in still. Karen and Jim, I’ll toss it back to you. Is there anything else you’d like to cover or any closing remarks for us today?
James Paretti: No, I --
Karen Harned: -- Well, I do feel --
James Paretti: Go ahead, Karen.
Karen Harned: Go ahead, Jim. No, no, no. Jim, you go.
James Paretti: Okay. I started, so you get to finish. I appreciate it. As I said, thank you for the questions. They give us additional things to think about and seek clarification.
Our only other advice to all clients right now is each of these agencies, IRS, DOL, Treasury, Small Business, one thing they appear to be trying to do and are doing well is keeping a fairly robust and up-to-date presence on the web. So we all log in every morning, whether we’re doing it in our pajamas in the kitchen now because we don’t get to go to our offices. You have that list of websites you immediately visit before you start the day. I would encourage folks to keep this in that list of things they should be looking at because guidance, particularly around unemployment, around some of the FFCRA stuff, this is happening on a day to day to day basis. It really is a moving, fluid target. So we’re advising all folks to keep an eye on things and keep track of relevant developments.
Obviously, our firm, we try to push stuff out to clients as quickly as we can. I know others are doing that as well. And it is easy to get a little overwhelmed. I mean, we all wake up now to an inbox that’s probably gotten 70 emails from the time we went to bed to the time we woke up. But it’s good, particularly if you’re focusing on compliance or helping your employers comply or your organization comply. I highly recommend people keeping an eye on those sites because there are new things being added every day.
And that’s my last word. I’m going to give it back to Karen.
Karen Harned: Yes, and I would absolutely agree with that. I think as people are encountering issues, letting the departments know is critical, and letting their legislators know because we’re not at the end of the legislative cycle here on some of this stuff. And there are already so many problems that are being presented that need to be fixed in upcoming legislation.
NFIB is obviously working on that. And I would also say we have tried to be a source for -- and I think we’ve been a good source for small business owners with questions along these lines as we also troll through the FAQs on the websites every day because literally the guidance does change within the day, or you get new or updated clarifications. So it’s a new world with a lot of incoming when it comes to information.
Micah Wallen: All right. Well, on behalf of The Federalist Society, I would like to thank both of our experts for the benefit of their valuable time and expertise today. We welcome listener feedback by email at email@example.com. Thank you all for joining us. We are adjourned.
Operator: Thank you for listening. We hope you enjoyed this practice group podcast. For materials related to this podcast and other Federalist Society multimedia, please visit The Federalist Society's website at www.fedsoc.org/multimedia.