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Does the Families First Act go far enough for SMB employers?

Following the bill’s passage, one expert suggests short-term layoffs could provide better benefits than the paid sick time in the law.
By: | March 19, 2020 • 4 min read
worker-friendly legislation

The Senate voted 90-8 Wednesday on a House-passed multibillion-dollar coronavirus aid package, providing paid leave and expanding unemployment benefits, among other provisions.

In response to the recent viral outbreak, the Families First Coronavirus Response Act, signed into law by President Donald Trump, focuses on the anticipated economic toll of the COVID-19 pandemic on employees.

The law calls on employers to provide 14 days of paid sick leave to employees to help deal with virus-related issues. Additionally, part-time employees are entitled to the number of hours of paid sick time equal to the number of hours they work, on average, over a two-week period.

Changes introduced in the Senate, however, exempt companies employing over 500 workers from the provision extending paid sick leave.

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“Some critics will say [the law] did not go far enough; for example, why are large employers—those with over 500 employees—exempt from the new law?” says Rebecca Bernhard, a partner at the international law firm Dorsey & Whitney in both its labor and employment practices.

“Many note that it is smaller employers who are more vulnerable to the economic difficulties and employees of those smaller companies that are most likely to need federal mandated benefits,” she says.

However, imposing mandatory economic obligations onto small employers is not something that would have received such quick bipartisan and presidential support, Bernhard adds. “Compromises have to happen. That still leaves us wondering why large employers were exempt.”

In addition to sick leave, the law also provides FMLA job protections. The first two weeks of leave may be unpaid, though the employee may choose to substitute accrued paid time off or other medical or sick leave.

After the first two weeks of unpaid leave, employers must continue paid FMLA leave at a rate of no less than two-thirds of the employee’s usual rate of pay. The benefits will expire after a year, and the federal government will fund the bill through payroll tax credits.

Employers with fewer than 50 employees can also lobby for an exemption through the Labor Department if they believe granting the benefit would “jeopardize” their business, according to the law.

The law also provides $1 billion in grants to states for emergency unemployment insurance. Half of that amount, $500 million, would be reserved for emergency grants to states that experienced at least a 10% increase in unemployment. But, to receive access to that portion of the grant, states must, among other things, make it easier for individuals to obtain unemployment compensation by waiving work-search requirements and waiting periods.

“To me, the most interesting provision is the unemployment access section,” Bernhard said.

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The effect of this provision is that more applications for unemployment benefits are likely to be granted,” she notes. “Many states have already passed emergency executive orders to reduce or eliminate barriers to applicants seeking unemployment benefits and, with this new law, we expect more will follow suit.”

The final provision regarding unemployment should help states assist the employers in their states navigate those waters without fear of increased tax assessments or other adverse consequences to the strain on the unemployment system, she added.

“The practical combination of the unemployment provisions and the limits on the additional paid sick time create a perverse incentive for small employers to do better by their employees to implement short-term lay-offs; such employees can then receive unemployment benefits, where those same employees will not see any relief from the emergency leave and FMLA modifications in the new law,” Bernhard adds.

In addition to paid leave, the bill does offer coverage for people looking for free COVID-19 testing, including the uninsured, added House Speaker Nancy Pelosi. “Our legislation also increases funding for Medicaid to support local, state, tribal and territorial health systems so that they have the resources needed to combat this public health emergency.”

“While I’m glad we finally passed this second round of relief, there continues to be an enormous amount we’ve got to do to ensure that workers, families, those on the front lines of our healthcare system and small businesses have the resources and support to deal with the enormous challenge the coronavirus presents,” said Senator Patty Murray (D-Wash.).

“In the next phase of our work, I’m going to continue fighting to make sure we respond directly to the public-health crisis we face, and to put the people and communities hurt most directly first in all our efforts,” she said, adding “that includes ensuring every worker can get paid leave and every business gets immediately reimbursed for it.”

Lawmakers are working on a third stimulus package, which would include suggestions from the Treasury Department that include industry-specific bailouts and payments to individual taxpayers.

Nick Otto is HRE’s senior digital editor. He is a professional communicator with more than a decade of demonstrated accomplishments in newspaper and trade publishing. He has spent the past five years covering the employee benefits space and holds bachelor’s degree from the University of Florida. He can be reached at notto@lrp.com or follow him on twitter @Ottografs.

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