Coronavirus Paid Leave Law Small Business Exemption

The Families First Coronavirus Response Act mandates paid sick leave and expands family leave for companies with less than 500 employees. However, the recently approved federal law provides that in certain circumstances some of its requirements don’t have to be met.

The FFCRA allows exemptions for:

• Small businesses — employers with fewer than 50 employees including religious and nonprofit organizations
• Healthcare providers/emergency responders

The FFCRA was signed by President Trump on March 18 and took effect on April 1. It will expire on Dec. 31, 2020.

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Small business exemption

In general, small employers are exempt from providing emergency paid sick leave and expanded Family and Medical Leave Act paid leave under the FFCRA if doing so “would jeopardize the viability of the small business” and specified criteria is met.

But small businesses are only exempt from part, not all, of the FFCRA’s requirements. Right now, there are only 2 circumstances where qualified businesses can get an exemption. These are:

1. Paid sick leave due to school closure, place of care closure, or childcare provider unavailability for COVID-19-related reasons; and
2. Emergency paid leave under the FMLA

The United States Department of Labor estimates that there are 5,755,307 employers with fewer than 50 employees and that about 10% of those employers will take advantage of the exemption.

“A small business may be exempted from FFCRA requirements if it can show that there is not enough revenue coming in to afford the expanded benefits, not enough skilled workers to do the specialized work critical to the business, or not enough available workers to do the work to keep the business going.”

Not included in the exemption

Paid sick leave taken for the other reasons outlined in the federal law is not included in the small business exemption. Thus, according to law firm Littler Mendelsohn, even if a small business claims the exemption, it would not be exempt from providing paid sick leave under the FFCRA for reasons such as an employee who:

• Is subject to a local, state, or federal quarantine order related to COVID-19
• Must self-quarantine due to directions from a healthcare provider
• Is experiencing COVID-19 symptoms and seeking a medical diagnosis
• Provides care for an individual subject to a local, state, or federal quarantine or isolation order
• Is dealing with a “substantially similar condition”

Claiming the exemption

There is no application process nor does a business have to seek the Labor Department’s approval. Instead, an “authorized officer” of the business must determine whether specified criteria has been met, according to agency guidance updated on March 28.

The criteria states that a small business may be exempt from FFCRA requirements if it meets one of the following:

1. The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity
2. The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities
3. There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity

To sum up, “a small business may be exempted from FFCRA requirements if it can show that there is not enough revenue coming in to afford the expanded benefits, not enough skilled workers to do the specialized work critical to the business, or not enough available workers to do the work to keep the business going,” according to law firm SmithAmundsen.

Documentation

Small employers must document the facts and circumstances relevant to the small business exemption.

The Labor Department recommends that businesses seeking the small business exemption document how the business meets the criteria. It has suggested that employers include statements by employees requesting and supporting a request for paid leave. In addition, there should be documentation on the authorized business officer’s determination that the employer satisfies DOL’s criteria for exemption. Legal experts have also suggested that businesses document revenue and payroll costs, along with costs of meeting the FFCRA requirements.

DOL has said forthcoming regulations will provide more detail.

Employers should retain the documentation and not forward it to federal authorities. DOL has specifically suggested that businesses should not send the federal agency any of the materials or documentation.

If an employer denies a request for leave under the small business exemption, they must document the appropriate determination. It must include meeting the criteria for the exemption, and employers must keep this documentation for 4 years.

Regulatory scrutiny

The initial decision over qualification for the exemption rests with the employer as long as the specified criteria is met. However, small businesses that claim the exemption will probably face regulatory scrutiny somewhere down the road, according to legal experts.