Taking their time: What small businesses need to know about COVID-related paid leave rules

By Paul Bergeron
Haddonfield | Apr 15, 2020 at 4:00 am

With the first-ever federally required paid leave law — the Families First Coronavirus Response Act — passed in mid-March, companies with 500 or fewer employees must consider changes in their company policies.

(The act was passed with the assumption that larger companies can take care of their own.)

The act requires these businesses to offer paid sick leave for an amount of time and percentage of their salary based upon which reason they have for taking the leave.

However, there is an exception for businesses with less than 50 employees. They can apply for exemption from the act if they can show the U.S. Department of Labor that offering this paid leave would “jeopardize the viability of the business.”

As this is a new law and regulations are changing by the day, there is no further guidance besides this — so how can small businesses know if they should apply, or risk their business going under?

New Jersey-based attorney Pete Frattarelli, chair of the Labor & Employment practice group at Archer in Haddonfield, is an expert in human resources matters and recently spoke with ROI-NJ about the act.

Employers have always struggled with the Family and Medical Leave Act, due to the absences and uncertainly in workforce levels that it can cause, but, by having it paid (or at least partially paid), it does give employees a greater incentive and ability to take the time off, he says.

“I am not saying under the circumstances it is not justified, and employees understandably need time off. In the end, the money will be reimbursed to the small owner by the federal government,” Frattarelli said.

ROI-NJ: What mistakes do you see small business owners making out of a lack of understanding about the changes in the act?

Peter Frattarelli: First, employers must make sure each employee is notified of their rights by publishing the U.S. Department of Labor poster. Second, employers need to be cautious before requesting medical documentation.

For example, one reason for the two weeks of paid leave is so that employers can give their employees the time needed to deal with COVID-19 symptoms along with the employee ‘seeking’ medical diagnosis.

The act has no requirement in the scenario of an actual diagnosis or a medical visit. The intent was that it might be difficult under the circumstances to see a doctor or to get a COVID-19 test. So, employers cannot insist on documentation in that scenario, which may be quite common, given that some employees might be unable to get a doctor’s appointment.

Secondly, employers likewise should be cautious about demanding a medical note even for a recovered COVID-19 patient. Receiving such a note is obviously the safest route for their coworkers, but the government has discouraged this, again due to the possibility of it being difficult to get to see a doctor.

Instead, employers should ask for a note, but then pursue alternatives if the employee cannot obtain one (such as checking for symptoms).

Third, employers should also accommodate employees who refuse to work out of fear of COVID-19. The new law does not prohibit an employer from requiring that an employee with no symptoms or other qualifying reasons come to work. But, if an employee refuses, the employer should consider placing the employee on unpaid leave rather than terminating them due to anti-retaliation protections of federal law (which do not require the employee to be entitled to the leave to be protected) and myriad state laws that would potentially be violated, as those actions could be viewed as a discriminatory act.

ROI: How long might these new laws be in place? Are they permanent?

PF: This is unclear. There does not seem to be any current sentiment among Republicans in Congress to permanently offer this paid leave. The laws are currently in place through Dec. 31. If the pandemic remains at the end of 2020, it would not be surprising if this provision is extended. Also, it might be that a version of this paid leave could be extended to future pandemics. But, without a significant restructuring of Congress, or without an immense amount of public pressure, it seems highly unlikely that there would be sufficient majority votes in Congress for federal paid leave to be made permanent.

ROI: Have you heard of any employees taking advantage of this situation? If so, in what way?

PF: The only circumstances I have encountered where an employee arguably tried to take advantage of the situation are employees who have approached their employers and asked to be laid off or terminated.

They might do this with the thought that they could collect unemployment along with the $600 per week unemployment supplement available through the third federal COVID-19 stimulus law recently passed.

But, I say ‘arguably’ because my clients’ experience has been that, when employees come to employers and ask to be laid off, it is out of fear of being exposed to COVID-19. That seems to be the motivation for asking for a layoff, much more so than someone trying to take advantage of gaining extra unemployment compensation.

ROI: What details and implications of the Families First Coronavirus Response Act are most pressing or confusing for business owners with fewer than 50 employees?

PF: It is just a world — the FMLA — that small businesses never had to deal with, and now do, for this limited reason.

There are two main areas of confusion or concern for small businesses:

First, the circumstances and procedure under which a business with less than 50 employees qualifies for the small business exemption.

The statute says the business must show that providing paid leave would affect the viability of the business. Guidance that defines viability issued by the Department of Labor was not that helpful.

It gave three categories regarding the loss of workers or key employees, but added a requirement that the paid leave would affect the ability of the business to operate at ‘minimum capacity.’

That leaves open the question of what if the business was able to operate, but would have to pay overtime or more costs for a temp agency’s employees — does that satisfy the requirement?

It is unclear if this is a volume requirement; i.e., does it mean an employer could allow paid leave for, say, two or three employees, but if it had to do the same for five or six employees, does that affect its ability to operate at minimum capacity? Can businesses deny leave for all six, or only some from that group?

Additionally, the law seems to contemplate asking for approval for the exemption, but the guidance issued after the act was signed actually said not to ask for approval, but for a corporate officer to make the determination as to whether the exemption applied. And, presumably, it would be decided later if it was valid based on seeking a ruling after an employee challenged it.

This is a risky way for a company to operate. My advice has been to proceed very cautiously and to make every effort to provide the paid leave and then get reimbursed.

Under this law, small businesses must provide FMLA leave for school/child care closures. But, small businesses have always been exempted from FMLA completely, because the FMLA requires 50 full-time employees before it could apply.

So, small businesses today must deal with concepts such as possible intermittent leave, seeking documentation to substantiate the leave and providing employees with notice of their rights under this law. These are not familiar grounds for many.

ROI: How do these two items differ from how these rules were interpreted prior to COVID-19?

PF: As noted above, small businesses must now deal with FMLA leave for school/child care closures, despite never having to deal with these issues before. That is one change.

Second, for businesses with fewer than 500 employees, the biggest change is that the paid leave (two weeks) and the emergency family leave (up to another 10 weeks) is now paid to employees.

FMLA leave has always been unpaid, and the first two weeks of paid leave is a benefit never required before, at least on a nationwide basis.

ROI: What can employers do to ensure that they are rightfully reimbursed?

PF: Employers need to stay abreast of any new guidance or regulations that are issued, particularly as to getting reimbursed. Employers should be in contact with their counsel and their payroll companies to make sure this is happening. Also, they should ask if a quarterly tax refund may be obtained in the event the federal tax offset is not sufficient to cover the paid leave.

Read more from ROI-NJ on coronavirus:

ROI-NJ Staff | editorial@roi-nj.com | @roinjnews