By Anthony Cammarata Jr.
This article was published in the Cherokee Tribune & Ledger News on March 20, 2020: Tribune Ledger News - FROM THE BENCH & BAR.
As our nation faces the implications of the unprecedented crisis caused by the spread of COVID-19 across the globe, the federal government has now enacted legislation that could greatly affect your business. President Donald Trump signed the Families First Coronavirus Act into law late Wednesday evening It is the second bill passed this month designed to blunt the pandemic's impact. In addition to expanding unemployment insurance benefits, increasing Medicaid funding, providing free coronavirus testing, and delivering additional nutritional assistance for a variety of low-income assistance programs, the Families First Coronavirus Act also includes two emergency paid sick leave and childcare leave programs.
Emergency Family Leave
If your business employs less than 500 employees, you may be required under the Act to provide up to 10 weeks of paid leave to eligible employees if they are unable to work (or telework) because of a need to take care of children whose schools or child care providers are closed or are otherwise unavailable to work as a result of a COVID-19 emergency declaration. An employee who takes such emergency family leave will be entitled to two-thirds of the employee's regular wage during this time up to a maximum total of $10,000 per employee.
Emergency Sick Leave
In addition to emergency family leave, if your business employs less than 500 employees, you may also be required by the Act to provide paid sick leave to your employees during the COVID-19 pandemic. The Act requires employers to provide paid sick time if an employee is unable to work (or telework) because the employee is: (1) subject to a federal, state, or local quarantine or isolation order; (2) advised by a health care provider to self-quarantine; (3) experiencing symptoms of the coronavirus and seeking a diagnosis; (4) caring for an individual who is quarantined; (5) caring for a child whose school or child care provider is closed or are otherwise unavailable to work; or (6) experiencing any other substantially similar condition as determined by certain government authorities.
Qualified full-time employees are entitled to receive up to 80 hours of paid sick leave, and part-time workers are granted leave equivalent to their average hours worked in a two-week period, with the sick leave in either instance being available for immediate use regardless of how long the employee has been employed. Based on certain factual circumstances, employees could be entitled to up to 100% of their regular rate of pay during such paid sick leave. Employers are also prohibited under the Act from requiring workers to find replacements to cover their hours during this time off.
An employer who violates the leave requirements established by the Act will be considered to have failed to pay minimum wage in violation of the Fair Labor Standards Act of 1938 (FLSA). Doing so could subject the employer to penalties including fines up to $10,000 per occurrence and imprisonment up to 6 months for subsequent offenses, as well as possible damages in any lawsuit an employee may bring.
Employer Tax Credits
Will employers be expected to bear the cost of these emergency leave programs? Not entirely. Employers providing paid emergency leave and/or paid sick time under the Act will be provided refundable credits for the employer portion (but not the employee portion) of the Old-Age, Survivors, and Disability Insurance (OASDI) component of payroll taxes (i.e., the 6.2 percent employer portion of the Social Security tax).
However, the structure of the payroll tax credits could present serious cashflow problems in the short term for business owners, who are essentially expected to take on the initial costs of these programs with an expectation that the federal government will reimburse them through payroll tax credits each calendar quarter. Some businesses, particularly those that are already experiencing a reduction in revenue in these challenging times, may not be able to overcome the initial financial burden these programs pose.
In an attempt to provide liquidity and financing options to such struggling businesses, Governor Brian Kemp announced Wednesday that the U.S. Small Business Administration (SBA) will be providing SBA Economic Injury Disaster Loans to eligible Georgia businesses. Applications for such loans are now open, and many will have 30-year repayment terms with first payments not due for up to 12 months. Interest rates will likely range anywhere from 2.75% to 3.75%.
Exemptions for Certain Small Businesses
While the Act does provide authority to the U.S. Secretary of Labor, Eugene Scalia, to exempt certain small businesses from these emergency family and sick leave requirements if the requirements would jeopardize the viability of the business, no such regulations have been introduced by Secretary Scalia to date. Accordingly, unless and until any such exemptions are enacted, the aforementioned leave requirements could apply to your business if you employ less than 500 employees.
The enactment of the Families First Coronavirus Act, which will officially go into effect on April 2, 2020 and remain in effect until December 31, 2020, will have a widespread impact on private sector businesses in our community and across the country. Employers need to act quickly to amend policies and train employees so that the emergency leave programs are administered in accordance with the new law. If you own a business, I encourage you to seek guidance from legal and tax professionals to ensure that your business is adequately prepared to navigate the uncharted waters ahead.
Anthony Cammarata Jr. is an associate attorney with Flint, Connolly & Walker, LLP currently assisting clients in various corporate, civil, and transactional matters. He is experienced in a range of legal issues affecting business owners and companies and has dedicated a significant amount of time researching the effects of the COVID-19 situation on his clients.