President Trump last week signed into law the Families First Coronavirus Response Act [1] to assist employees during the Covid-19 pandemic. While the language of the Act is mostly aimed at direct employees, organizations with contingent workers should carefully review it with their legal counsel for possible responsibilities regarding temporary hires.
The FFCRA, which goes into effect on April 1, requires employers with fewer than 500 employees to provide 80 hours of paid sick leave to employees who are symptomatic with Covid-19; are required or advised to quarantine or self-isolate; who have to care for a family member under such an order or advice; or who must care for a child whose school or childcare provider is unavailable due to the pandemic.
Government workers are also covered. However, the US Department of Labor may exempt healthcare providers and small businesses with fewer than 50 employees from the paid sick leave requirement.
The US Department of Labor’s Wage and Hour Division on Tuesday announced its first round of published guidance to provide information about the FFCRA. The guidance includes a Fact Sheet for Employees [2], a Fact Sheet for Employers [3] and a Questions and Answers [4] document. The information includes how an employer must count the number of their employees to determine coverage; how small businesses can obtain an exemption; how to count hours for part-time employees; and how to calculate the wages employees are entitled to under this law.
The act also provides 12 weeks of Family and Medical Leave Act rights for employees of all companies with fewer than 500 employees if they are unable to work or telecommute due to school or childcare closures related to Covid-19. The first two weeks of leave are unpaid, and the employer pays the remaining 10 weeks at two-thirds the employee’s regular rate.
The catch? The new program requires that employers pay the benefits up front.
Delayed reimbursement. Employers will be reimbursed for the cost via payroll tax credits — payroll withholdings from each employee paycheck—such as FICA and FUTA deductions — would remain in the employer’s account. But many staffing providers already face cash-flow issues due to the current pandemic environment; slow-paying customers and long payment terms also sometimes affect their cash flow.
Under the FFCRA, businesses have to pay their costs immediately and then wait to be repaid, explains George Reardon, an attorney working with the staffing industry. He likens it to the character Wimpy in the Popeye cartoon series, who was known for his love of hamburgers and his proclamation: “I’ll gladly pay you Tuesday for a hamburger today.”
Wimpy’s statement encapsulates the issue, Reardon says. “I do think [lawmakers] realize the problem and they are working on the cash-flow problem, but that isn’t done yet.”
[Editor’s note: The White House and Senate leaders announced early Wednesday that they have agreed on a $2 trillion stimulus package [5], CNN reports. The deal reportedly includes $350 billion in small business loans, $250 billion in unemployment insurance benefits and $500 billion in loans for distressed companies.]
Employee threshold. Discussions also center on the qualifying figure of fewer than 500 employees.
Small businesses are feeling the pressure as the pandemic brings consumer activity to a grinding halt, MarketWatch reported [6]. And unlike big businesses that have reserves of funds to help them through tough times and turnaround periods, many small businesses don’t have a safety net. According to Gwendy Brown, VP of research and policy at Opportunity Fund, many small businesses have only enough resources on hand to last 45 days or less, it reported.
“I think there are some thoughts that the main threshold of less than 500 employees is very strange,” said Rebecca Bernhard, a partner at the international law firm Dorsey & Whitney in its labor and employment practice. “And nobody can figure out what the rational for that is.”
Bernhard believes there is “some expectation” that the 500 number could get adjusted at both sides; it could exclude employers with fewer than 50 employees, similar to the existing Family and Medical Leave Act rules, and then mandate that employers with more than 500 employees pay for the leave provision themselves. But politicians are still battling over whether the large corporations, many of which already provide paid leave, should now be provided with tax breaks for doing so, Bernhard explained.
Watch out for your H-1Bs. When making personnel policy changes in the era of Covid-19, be particularly careful with workers — including contingents — who are here on “H” visa status, especially H-1B visas, advises Eric H. Rumbaugh, a partner with the law firm of Michael Best & Friedrich LLP, headquartered in Milwaukee.
The biggest problem is that in most cases, employers you can’t “bench” these workers, explains Rumbaugh, who represents employers in labor, employment and employee benefits law matters. “You can’t reduce their pay or lay them off. You may have to just pay them anyway.”
Employers with substantial H-1B or other visa worker populations should talk to counsel immediately, he advises. They may not be able to treat them like typical direct employees or contingents when it comes to things like layoffs, reduced pay and benefits.
They also cannot always move H-1B visa holders to new locations to fit demand without additional paperwork. “When you apply [for the H-1B], you specify a work location,” Rumbaugh says. “And if they are going to be working at another location, you are going to have some compliance steps to take.” If the location is within reasonable commute distance from their prior location, it may be as simple as “putting a posting up in the hall,” he said. But if it is outside a reasonable commute distance, an amendment needs to be filed.
As a general matter, an H1-B visa is approved only for the work specified in the application. You cannot move the worker over to do different work. If you need to have them perform different work, you should consult with counsel.