A bill intended to help employees who find themselves affected by the COVID-19 emergency was signed into law on March 18, 2020. The Families First Coronavirus Response Act was the second legislative effort to address the crisis. As a small businessperson reviewing the new requirements placed upon his company, I have to wonder if this bill will crush the small businesses who employ the people it is intended to protect.
The new law contains a number of measures, including supplemental funding for food stamps and other assistance programs. It also provides money for additional testing as well as waivers of certain nutritional requirements and standards related to SNAP (food stamps) and other similar programs. In addition it provides $1 billion to stabilize unemployment systems affected by the economic impact of the virus.
That is all well and good. It is the section that imposes new requirements on specifically small employers that has me concerned. It is known within the bill as Division C, the Emergency Family and Medical Leave Expansion Act. In a nutshell, it requires businesses that employ fewer than 500 people to provide extended paid leave for time off due to COVID-19 related issues. Employers with more than 500 employees are, somewhat bizarrely, exempt from this requirement.
Specifically, the bill says that (courtesy of the Kaiser Family Foundation):
Qualified need related to a public health emergency (reason) for leave: The employee is unable to work due to a need for leave to care for their child because the school or day care has been closed or the child care provider is unavailable due to a public health emergency.
–Pay: Not less than two-thirds of the employee’s regular pay, up to $200/day and $10,000 over the benefit period. The first 10 days taken may be unpaid, but the employee may use other paid leave during that period, if available.
Duration of leave: 12 weeks, which includes job protection as required in the Family and Medical Leave Act (including amendments to it made by this Act with regard to job protection requirements for an employer who employs fewer than 25 employees). Benefits are not retroactive.
Eligible employees: Employee must have worked for the employer for at least 30 days. Employees shall provide the employer with such notice of leave as is practicable. An employer of an employee who is a health care provider or emergency responder may elect to exclude such an employee.
Applicable employers: Private businesses with < 500 employees and all public employers (see below for exemptions).
Authority given to the Secretary of Labor: To exclude certain health care providers or emergency responders from the definition of eligible employees and to exempt small businesses with fewer than 50 employees if compliance with the requirements would jeopardize the viability of the business as a going concern.
A “public health emergency” here means an emergency with respect to COVID-19 declared by a federal, state, or local authority.
Now, as noted, employers with fewer than 50 employees MIGHT be exempt if they can prove that compliance would be an undue hardship. Employers who endure expenses required by this act will be entitled to a tax credit.
Next year. When they file their taxes for 2020. Assuming they are still around.
So, in a nutshell, if child care is unavailable or there is a sickness in the family related to COVID-19, small employers will be required to continue to pay their employees for up to 12 weeks. We should note that many of these same small employers have seen their revenue stream grind to a halt in the past 4 weeks. According to an article in The Hill, “Small businesses have an average net profit margin of 5 percent. If they take in $500,000 a year in revenue, their average take home profit is only about $25,000.”
That doesn’t account for a sudden cessation of business, nor leave much room for ample FMLA benefits.
The Wisconsin Law Firm of Lindner & Marsack sent an advisory out to their clients yesterday, advising them of new posting notices required by the law. It read in part:
Please note the following about the Notice:
- The effective date for the new Act will be April 1, 2020.
- Covered employers (those with fewer than 500 employees) must post this notice in a conspicuous place on your premises.
- For employees who are already working remotely or are on leave, you may also satisfy your posting requirement by emailing or mailing a copy of the notice to employees, or posting it on your intranet.
- You need not provide the notice to employees who are laid off. You only need to provide notice to current employees.
- If you are hiring new employees, you must convey the notice to them, either by email, direct mail or by posting the notice on your premises. If new employees will not have access to your premises, we recommend conveying the notice by email or direct mail.
The posting notice, created by the Department of Labor, is available here.
It shows how these small employers may be responsible for paying each affected employee up to $10,000 for these benefits.
Personally, I am fortunate. My small company, which is subject to the legislation, has been able to continue operations during this crisis. Our revenue flow has not yet been affected – although the distraction caused by the crisis is definitely affecting current sales cycles. We also have no employees who will be affected by school closings or child care issues (a number of us have grown old together over the last twenty years. That used to be funny). We do not expect any significant negative impact from this new law, which will be in effect until December 31, 2020.
Don’t get me wrong. Most small employers don’t want to see their employees hurt financially. They want to do the right thing. They just don’t want to be destroyed financially in the process. Taking care of people during a time of crisis is wonderful, unless it eliminates their job entirely when the company fails. That is the risk now thrust on many small employers, when they can least afford to absorb it.
Why does this matter to us? These are our customers. Small business employs most of the people in this nation, and they pay the workers’ compensation premiums that largely fund our system. Add to that, many vendors that large TPA’s and insurers now depend on for a variety of services are these same small businesses. When this situation passes, and it will pass, we will want to make sure that services we all expect are still available.
And that both our customers and companies we depend on weren’t crushed by poorly conceived efforts to protect the people who make it happen.