Navigating the Families First Coronavirus Response Act

The recently passed Families First Coronavirus Response Act, which takes effect April 2, could have significant impact on independent restaurants business already beleaguered by disruption to their businesses in the path of COVID-19.

As if you have not already had enough bad news lately, you should be aware of the Act's provisions and how to navigate them. The law is temporary and remains in effect only until December 31, 2020. This article highlights the provisions of the law relevant to startup and independent operators.

As if restaurateurs haven't already taken a big hit in the path of the Corona virus (COVID-19), recently passed legislation could add insult to injury. Here is an overview of a few employment laws you need to keep your eyes on.

First, some background is in order. If you are familiar with the Family Medical Leave Act (FMLA), you might be aware it applies to employers with 50 or more employees. As described by the U.S. Department of Labor, which is the federal agency that regulates and enforces it, the FMLA provides certain employees with up to 12 weeks of unpaid, job-protected leave per year.

The FMLA allows eligible employees to take a leave for up to 12 workweeks in any 12-month period for the birth or adoption of a child, to care for an immediate family member with a serious health condition, or to take medical leave for the employees' own serious health condition. Employees are permitted to take FMLA leave on an intermittent basis, allowing them to work on a reduced schedule in certain circumstances.

Employees who take FMLA leave also have the right to return to the same or equivalent position, pay and benefits at the conclusion of their leave. It is important to note that many small businesses are exempt from the FMLA, as it applies to businesses with 50 or more employees within a 75-mile radius. If you are a small operation, the FMLA might very well have flown under your radar. The Families First Coronavirus Response Act significantly amends and expands FMLA on a temporary basis, and is called the Emergency Family and Medical Leave Expansion Act (EFMLA). And it is particularly significant to small businesses, including independent restaurateurs, as it covers employers with fewer than 500 employees. Contrary to the FMLA, the EFMLA does not have a required minimum number of employees for an employer to be subject to its provisions.

The EFMLA also lowers the eligibility requirement such that any employee who has worked for the employer for at least 30 days prior to the designated leave may be eligible to receive paid EFMLA leave. Thus, as an independent restaurateur, while it is unlikely you have been subject to the FMLA, as of April 2, you might be required to provide job-protected leave to employees for a COVID-19 coronavirus-designated reason under the EFMLA. Under the act, any individual employed by the employer for at least 30 days (before the first day of leave) may take up to 12 weeks of job-protected leave to allow an employee, who is unable to work or telework, to care for the employee's child (under 18 years of age) if the child's school or place of care is closed or the childcare provider is unavailable due to a public health emergency.

Specifically, as noted by the Department of Labor (DOL) on its website, "the Act provides that covered employers must provide to all employees it has employed for at least 30 days, including part-time employees:

• Two weeks (up to 80 hours) of expanded family and medical leave at the employee's regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis. [Editor's note: In this case, sick leave pay is capped at $511 per day for 10 days]; or
• Two weeks (up to 80 hours) of expanded family and medical leave at two-thirds the employee's regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine (pursuant to Federal, State, or local government order or advice of a health care provider), or care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor.
• Up to an additional 10 weeks of expanded family and medical leave at two-thirds the employee's regular rate of pay where an employee is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.

The act caps the two-thirds pay benefit at $200 per day and $10,000 in the aggregate per employee. In addition, employers with 25 or more employees will have the same obligation as under traditional FMLA to return any employee who has taken EFMLA to the same or equivalent position upon their return to work. However, employers with fewer than 25 employees are generally excluded from this requirement if the employee's position no longer exists following the EFMLA leave due to an economic downtown or other circumstances.

The DOL website that addresses the provisions of the act can be found at: https://www.dol.gov/agencies/whd/pandemic/ffcra-employee-paid-leave

While the act is compassionate to employees whose livelihoods have been curtailed or eliminated by this pandemic, it could be extremely expensive to independent restaurants struggling to remain in business based solely on take-out and delivery sales.

The EFMLA does not disregard the plight of small business owners. Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern. Restaurants should file for an exemption with the Secretary of Labor.

It is impossible to predict with certainty, given the many restaurants struggling to remain viable in the wake of government mandates to close their doors to any business other than take-out and delivery, nevertheless, it would seem these businesses would qualify. At the time of a March 19, 2020 publication of Atlanta- based law firm Taylor English Duma LLP, it was unclear what, if any, exemptions the Secretary will grant, and whether those exemptions would be on a per business or per industry basis. Further, even if the Secretary grants an exemption, the exemption would not apply with respect to the other grounds for paid sick leave.

It is small consolation under the circumstances; however many operators have terminated all but a few staff members, reducing their exposure to EFMLA claims. Bear in mind, retained employees could be eligible for EFMLA if they became ill or cannot arrange for child care. Still, with a skeleton crew, your exposure to claims is reduced.

As you would expect, the new law includes consequences for employers that fail to comply. Employers who violate the sick leave provisions will be subject to liability under a specific section of the Fair Labor Standards Act (FSLA), which authorizes liquidated damages and attorneys' fees.

Other Emerging COVID-19 Employment Legal Issues

Unemployment insurance benefits - Unemployment insurance benefits are governed by state law and, of course, vary from state to state. Some operators are terminating hourly workers and converting managers to hourly employees to keep key staff members on payroll at a reduced rate of compensation. A majority of states offer unemploy- ment benefits for significant reductions in hours or pay; e.g. greater than 25%. It might behoove operators to assist remaining employees with applying for these benefits while they are staying on board to keep the business going. And some states, such as Georgia, actually require the employer to file the claim for unemployment benefits on behalf of the employee when the employer has reduced the number of hours available to an employee. Significant reduction of pay would include tips earned by front-of-the-house staff.

If handled strategically, the operator might be able to arrive at a threshold for salary reduction that will cut the business's labor costs while maximizing the staff's income supplemented by unemployment insurance. Of course, you should confer with a labor attorney in your state to review local laws.

The WARN Act -- The federal Worker Adjustment and Retraining Notification (WARN) Act offers protection to workers and their families by requiring employers to provide 60 days' notice to the employees and certain specified government agencies and officials in advance of covered mass layoffs and plant/office closings. There are also "mini" WARN Acts at the state level.

The WARN Act defines a "closing" as the permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment, if the shutdown results in an employment loss at that single site of employment during any 30-day period for 50 or more employees. An employment loss not only covers termination of employment, but also situations in which an employee is to be laid off for 6 months or more or expected to have a reduction of hours of a specific amount for six months or more.

The WARN Act does not apply to many independent operators, since it covers only employers with 100 or more full-time employees. That said, there are a number of multi-unit operators who might fall in this category. The federal WARN Act does allow for three exceptions to the 60-day notice period with the burden of proof on the employer, including unforeseeable business circumstances, which applies to both closings and layoffs that are caused by business circumstances that were not reasonably foreseeable at the time notice would otherwise have been required. COVID-19 would fall under this exception.

This article is for general information only. You should confer with a local attorney for advice specific to your business. Take for example a question by one operator with an employee on FMLA leave and was currently quarantined due to COVID-19. The operator wanted to know if the business could consider the employee covered by EFMLA to take advantage of the tax credit. A qualified labor law attorney can help guide you through particular circumstances arising under the laws.