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updated: 4/16/2020 8:43 AM

Small business owners’ new obligations to employees

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  • ADRIAN MENDOZA

    ADRIAN MENDOZA

 

The clock is ticking.

The Families First Coronavirus Response Act, enacted last month, established April 1 as the date by which small- and mid-sized businesses needed to comply with provisions regarding new family medical leave and emergency paid sick leave during the COVID-19 pandemic.

Fortunately, the Department of Labor has granted a 30-day nonenforcement period for employers to meet these obligations, provided they have "acted reasonably and in good faith" to meet the requirements. But don't think of that as an automatic extension. Business owners should act quickly to avoid the penalties that can result.

The requirements of the Act pose serious challenges. Small business owners are now required to continue paying workers and providing benefits even as their companies experience a historic decrease in revenue. And the impact is widespread: small- and mid-sized businesses are defined as employing fewer than 500 employees. The Small Business Administration reported that as recently as 2017, these companies made up more than 99 percent of American companies.

The Act requires employers to provide up to 80 hours of paid sick leave to any eligible workers who are unable to work because they are quarantined or seeking diagnosis or preventive care for COVID-19; or who are caring for a family member who is quarantined as a result of COVID-19, or who are caring for their minor child whose school or place of care is closed because of COVID-19.

The rate for this paid leave is set at an employee's normal salary, up to a maximum of $511 a day. Those who are not themselves ill, but are caring for others, must receive two-thirds of their normal salary, up to a daily limit of $200.

In addition, employers must provide 12 weeks of family medical leave to eligible employees who are unable to work because they are caring for their minor child whose school or place of care is closed because of COVID-19. Employers need not pay for the first 10 days of this period, but they are responsible for payments during the remaining 10 weeks (although at a reduced rate).

For the very smallest businesses -- the 88 percent of American companies with fewer than 50 employees -- these requirements may well strain cash reserves. Such businesses may apply for exemption if they can prove that paying benefits "would jeopardize the viability" of the business as a going concern. Businesses should consult with legal counsel if considering this exemption to ensure that the request addresses the criteria set forth by the Department of Labor.

No matter the size, all small- and mid-size employers can obtain reimbursement of the paid leave sums in the form of refundable payroll tax credits, which will also cover contributions to workers' health insurance premiums during the paid leave period. If the outflow exceeds the taxes owed, the company will receive a check for the remaining expenditures mandated by the Families First Act. (The timeline for this reimbursement has not yet been set.)

And don't forget: part-time workers also are included under the Act's provisions. Employers must pay part-time workers the amount they would usually make in a two-week period.

Small- and mid-sized employers should immediately consider the following.

First, make an assessment of which employees' jobs can be performed remotely; employees who can perform their jobs remotely may not be eligible for paid leave under the Act.

Second, try to identify which remaining employees can take on extra responsibilities, which will ease the transition into maintaining your business despite having employees on paid leave.

Third, ensure that you obtain reimbursement of benefits paid.

There is a lot of information circulating about COVID-19 and the small business community opportunities and obligations. Be sure to have trusted advisers at your side as you plan and respond to this unprecedented health crisis.

•Adrian Mendoza is a partner at Lillig & Thorsness in Oak Brook, where he focuses primarily on focuses on business litigation and employment law matters. Law and Politics Magazine has recognized him numerous times as an Illinois Super Lawyer, most recently in 2020.