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Department of Labor Temporary Rule Defines and Explains Small Business Exemption to Employer Paid Leave Requirements Under Families First Coronavirus Response Act

On Wednesday, the United States Department of Labor (“DOL”) posted a temporary rule issuing regulations implementing the paid sick leave and expanded family and medical leave requirements established by the recently enacted Families First Coronavirus Response Act (“FFCRA”), which went into effect this week.

The Department’s temporary rule, which is available here, covers significant ground in terms of delineating workers’ and employers’ rights and responsibilities under the FFCRA, as well as how employers must go about determining what obligations they have thereunder. Included in the numerous topics and aspects of the new law addressed and explained is one particular question (among many, many others) that almost everyone has been asking since the President signed the FFCRA into law just over two weeks ago: Is there a “small business exemption” for employers with fewer than 50 employees and when and how does that exemption apply to exclude a small business from the provisions of the FFCRA? In short, as explained below, yes, there is a small business exemption available to private employers that have fewer than 50 employees, but it only is available under certain circumstances and is not a full-blown exclusion. Even qualifying small businesses are not absolved of all paid leave obligations under the Act.

Anyone who doesn’t live under a rock—and perhaps anyone who does—is aware, at least generally, of the federal government’s efforts to provide a level of protection and relief both to the workers and businesses in our country during these unprecedented times. As described in greater detail here (and as those reading this probably already know), the FFCRA provides certain benefits to eligible employees of covered employers by creating two new paid leave requirements in response to the COVID-19 crisis, including requiring (i) paid sick leave under certain scenarios for employees impacted by COVID-19 (the “Emergency Paid Sick Leave Act” or “EPSLA”), as well as (ii) expanded and enhanced family and medical leave benefits, for specified reasons related to COVID-19, that apply to employers and employees not previously covered by FMLA (the “Emergency Family and Medical Leave Expansion Act” or “EFMLEA”).

While the FFCRA applies generally to all private employers that have fewer than 500 employees (as well as certain public employers), it vests the U.S. Secretary of Labor with authority to issue regulations exempting certain “small businesses” – defined as employers with fewer than 50 employees – from some (but not all) of the emergency paid sick leave and the expanded family and medical leave benefit requirements when compliance would jeopardize the viability of the business as a going concern. The Secretary has exercised that authority, and the scope, applicability, and availability of that small business exemption are set forth in the temporary rule issued by the DOL this week.

Importantly, not all small businesses are exempted or excluded in some fashion from the requirements of the FFCRA, and neither the statute nor the DOL’s implementing regulations exempts or excludes any such small businesses from all the requirements under the new law.

Rather, a small business (i.e., an employer with fewer than 50 employees) is exempt from certain paid sick leave and expanded family and medical leave requirements if and only if: (a) leave is requested because the employee’s child’s school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons; and (b) providing that employee such leave would jeopardize the viability of the employer’s business as a going concern. The first part is relatively straight forward. As for the second part (jeopardization of the viability of the business as a going concern), in order for a small business to claim this exemption, an authorized officer of the business must determine that at least one of the following three conditions is satisfied:

  • Providing such leave would result in the business’s expenses and financial obligations exceeding available business revenues and cause the business to cease operating at a minimal capacity;

  • The absence of the employee(s) requesting such leave would entail a substantial risk to the financial health or operational capabilities of the business because of that employee’s specialized skills, knowledge of the business, or responsibilities; or

  • There are not sufficient qualified, willing, and able workers who will be available at the time and place needed to perform the labor or services provided by the employee(s) requesting such leave, and those functions are needed for the business to operate at a minimal capacity.

Although the DOL is not, at this time, requiring small businesses electing or attempting to elect the small business exemption to send any proofs, materials, or other documentation to the DOL at the outset, those employers with fewer than 50 employees that are electing the small business exemption are required to document that such a determination has been made and should document why and how their business satisfies the DOL criteria.

An employer claiming the exemption should retain those records in its files, and it could be required to submit such documentation down the road for any number of different reasons, including, but not limited to, if a worker who is denied emergency paid sick leave or expanded family and medical leave under the FFCRA challenges the propriety and availability of the small business exemption to his or her employer under the circumstances.

To reiterate, while an employer that otherwise satisfies the small business exemption and the criteria described above is not required to provide paid sick leave or expanded family and medical leave due to school or place of care closures or child care unavailability for COVID-19 related reasons, the exemption does not exclude the employer from providing certain paid leave benefits under the FFCRA for other COVID-19 related reasons, such as the up to 80 hours of emergency paid sick leave where the employee cannot work or telecommute because the employee:

  • Has been diagnosed with COVID-19 or advised by a health care professional to self-quarantine;

  • Is experiencing coronavirus symptoms and is seeking a medical diagnosis;

  • Is caring for an individual who has been required to quarantine; or

  • Is subject to a government mandated quarantine or isolation order related to COVID–19.

Under such circumstances, the small business exemption may not be applicable at all.

The DOL estimates that of the nearly 6,000,000 privately owned businesses in the country with fewer than 500 employees, over ninety-five percent (95%) of those potentially impacted firms have fewer than 50 employees and, therefore, could potentially be affected at some point by the availability and applicability of the small business exemption.

Employers and workers alike also are encouraged to review the various other resources, including Questions and Answers, Fact Sheets, and other COVID-19 related materials available on the DOL’s website.

Additionally, the DOL will be posting a recorded webinar accessible on that page on Friday, April 3, 2020, which will provide interested parties additional information regarding all aspects of the FFCRA and compliance with its obligations.

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About this Author

Cory Rand litigation lawyer New Jersey Stark Law
Associate

Cory A. Rand is an Associate Attorney and member of Stark & Stark’s Litigation Group.  He concentrates his practice in all areas of commercial and civil litigation, representing clients in all phases of litigation, from pleadings through appeal, with a special emphasis on appellate work.

Prior to joining Stark & Stark, Cory served as a law clerk for the Hon. Marie Lihotz, New Jersey Superior Court, Appellate Division, and served as a judicial intern for the Hon. Robert Kugler, U.S. District Court for the District of New Jersey. While attending the University of Virginia...

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