There are several new developments at the federal and state level regarding the Coronavirus (COVID-19) outbreak and its impact on California employers and workers. The United States House of Representatives passed the “Families First Coronavirus Response Act,” (H.R. 6201), tentatively creating new paid leave obligations related to the coronavirus for many employers. Moreover, two California government agencies have issued important new guidance on coronavirus and its impact on employers and workers: The California Labor Commissioner’s Office issued an FAQ Memo and the California Employment Development Department (EDD) also issued relevant guidance.
The U.S. House Passes the Families First Coronavirus Response Act
On March 14, 2020, the U.S. House of Representatives passed the “Families First Coronavirus Response Act,” (H.R. 6201). While the Senate must still pass the bill, it is expected to do so this week. President Trump has also publicly expressed his support for the bill. Once enacted, the bill would take effect fifteen days later. Thus, the new federal law will not go into effect until at least some time in April 2020.
In terms of its impact on employers, the bill contains a number of requirements affecting many (but not all) businesses. Significantly (and rather oddly), the bill contains paid family medical leave and sick leave provisions which only apply to employers with fewer than 500 employees.
Paid Sick Leave. Under the bill, employers with fewer than 500 employees must provide full-time employees with two weeks (80 hours) of paid sick leave to quarantine or seek diagnosis or preventative care for the coronavirus. Part-time employees are entitled to paid sick leave equal to their average number of hours worked over a two-week period.
Paid sick leave is also available to care for a child who is at home due to school or childcare closure. The paid sick leave provided under the federal law is in addition to any existing sick leave under any state law or company policy. It does not carry over to a subsequent year (and indeed the law has a sunset provision of December 31, 2020) and unused leave is not paid out at termination.
Paid sick time must be compensated at employees’ regular rate of pay. While employees who are sick or quarantined are entitled to full pay for the 80 hours of sick leave, employees who are caring for a family member are paid at 2/3 of their regular rate of pay.
Paid Family and Medical Leave. This provision also only applies to employers with fewer than 500 employees. Employees on the job for at least 30 days have the right to take up to twelve weeks of job-protected leave under the Family and Medical Leave Act (“FMLA”) to quarantine due to exposure or symptoms of the coronavirus; to care for an at-risk family member who is quarantining; or to care for a child if the child’s school or place of care is closed due to the coronavirus. While the first 14 days of the leave may be unpaid, the employee may elect (but is not required) to substitute any accrued vacation, personal, or sick leave during the time. After these first 14 days, the employer must compensate the employee in an amount that is not less than two-thirds of the employee’s regular rate of pay.
Helpfully, tax credits are available to employers who now need to provide such paid sick leave and paid family leave. The tax credit for paid sick leave is up to $511 per employee per day and for paid family leave, up to $200 per employee per day (or up to $10,000 per employee in the aggregate).
If the law is enacted, MSK will provide a further update.
The Labor Commissioner’s FAQ:
The Labor Commissioner’s FAQ Memo touches on issues related to taking time off and paying workers who are impacted by the coronavirus. Here are the top five takeaways in the FAQs for employers:
- An employee may use California Paid Sick Leave due to the coronavirus. If the employee has paid sick leave available, leave can be used for absences due to illness, the diagnosis, care or treatment of an existing health condition or preventative care (potentially including self-quarantine) for the employee or the employee’s family member.
- An employee may use other paid leave if he/she exhausts, or does not qualify to use, paid sick leave. If there is a vacation or paid time off policy, an employee may choose to take such leave (provided that the terms of the vacation or paid time off policy allows for leave in this circumstance).
- An employer cannot require a worker who is quarantined (but who is not sick or caring for a sick family member) to exhaust paid sick leave. If the worker decides to use paid sick leave, the employer can require they take a minimum of two hours of paid sick leave per day.
- Employers may require a worker to provide information about recent travel to countries considered to be high-risk for exposure to the coronavirus.
- Employees who report to work and are sent home are entitled to compensation. Generally, if an employee reports to their regularly scheduled shift but is required to work fewer hours or is sent home, the employee must be compensated for at least two hours or no more than four hours of reporting time pay.
The EDD’s Guidance:
The EDD’s guidance discusses the support services provided to workers and employers impacted by the coronavirus. Here are the top five takeaways for employers:
- Employers experiencing a slowdown in their businesses or services as a result of the coronavirus impact on the economy may apply for the Unemployment Insurance (“UI”) Work Sharing Program. This program allows employers to seek an alternative to layoffs — retaining their trained employees by reducing their hours and wages that can be partially offset with UI benefits.
- Employers planning a closure or major layoffs as a result of the coronavirus can get help through the Rapid Response program.
- Employers experiencing a hardship as a result of the coronavirus may request up to a 60-day extension of time from the EDD to file their state payroll reports and/or deposit state payroll taxes without penalty or interest.
- Employees whose employer has reduced hours or shut down operations due to the coronavirus may file an Unemployment Insurance (UI) claim.
- Employees who are unable to work due to having or being exposed to COVID-19 (certified by a medical professional) may file a Disability Insurance (DI) claim for short-term benefits.
More On Potential Closures or Layoffs: Cal-WARN Act considerations:
The Labor Commissioner’s FAQs do not address the potential scenario of an employer’s closure of its business or layoff of a significant number of employees due to the coronavirus and the EDD’s guidance just briefly touches upon it. If a California employer is considering either of these scenarios, it should consult with counsel, as California WARN Act (Cal-WARN) may apply.
What is Cal-WARN?
Under Cal-WARN, if more than 50 employees at a covered establishment are laid off within a 30-day period, this will constitute a mass layoff and trigger notice obligations. “Employee” “means a person employed by an employer for at least 6 months of the 12 months preceding the date on which notice is required.” A “covered establishment” “means any industrial or commercial facility or part thereof that employs, or has employed within the preceding 12 months, 75 or more persons.” “Mass layoff” “means a layoff during any 30-day period of 50 or more employees at a covered establishment.”
Significantly, while the federal WARN Act does not apply to layoffs for periods less than 6 months, Cal-WARN applies to all temporary layoffs, even “furloughs” of shorter duration. (Arguably, however, merely cutting hours alone should not be treated as a “layoff” under Cal-WARN). However, it should be noted that if an employer is contemplating a shutdown of an entire facility (called a “plant closing” under the federal WARN Act and a “termination” under Cal-WARN), both the federal and state statutes may apply to such facility shutdowns, if certain thresholds are met.
What are Cal-WARN’s Notice Requirements?
An employer may not order a mass layoff unless, 60 days before the order takes effect, the employer gives written notice of the order to “employees of the covered establishment affected by the order,” the California Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the mass layoff occurs. During the notice period, the employees are entitled to receive the full pay and benefits they would otherwise have received.
What if an Employer Cannot or Does Not Provide 60 Days’ Notice?
An employer may provide pay and benefits in lieu of notice in order to comply with Cal-WARN. Specifically, the law states that if required notice is not provided, then the employer must pay those employees eligible for notice as follows:
- Back pay for up to 60 days.
- The value of the cost of any benefits to which the employees would have been entitled to receive during the 60-day period, including the cost of any medical expenses incurred by the employee that would have been covered under an employee benefit plan.
Employers may also be subject to a civil penalty of not more than five hundred dollars ($500) for each day of the employer’s violation, unless they pay their employees all amounts owed within three weeks from the date the layoff is ordered.
Does Cal-WARN apply even in a pandemic?
One possible argument (that has yet to be tested) that Cal-WARN does not apply is rooted in the definition of “layoff” under Cal-WARN. A “Layoff” is “a separation from a position for lack of funds or lack of work.” If the layoffs are necessitated due to a government ordered shutdown, it could certainly be argued that such a shutdown is not an employment loss based on “lack of funds or lack of work”.
In addition, Cal-WARN states that “an employer is not required to provide notice if a mass layoff . . . is necessitated by a physical calamity or act of war.” While the term “physical calamity” has never been interpreted by a court, it is commonly understood that this refers to a natural disaster, such as an earthquake or hurricane. It is thus unclear whether this definition would extend to layoffs occasioned by a public health emergency.
Because neither the California Legislature nor the Governor have taken any steps (yet) to ensure that Cal-WARN is not interpreted to apply to employers who must lay off a significant number of employees during these challenging times, it remains a possibility that the statue could apply given the manner in which the statute is drafted.