This guide is intended to help our clients who are making tough decisions in light of the COVID-19 pandemic and the resulting economic fallout. We hope these tips are helpful.
Tip No. 1. Remember, this too shall pass.
No one knows how long this health crisis will last or how long it will take the economy to recover after the virus has burned out. But this is the United States of America! If any country on earth can recover from this – we can. China is already on the mend. Its factories reopened seven weeks after going into lockdown. Our period of social distancing may be shorter or longer than that – but this much we know, it will come to an end. So, whatever plan you make, plan to survive. Plan to grow again. Plan to be better, stronger, and wiser on the other side.
Tip No. 2. You have options.
Crisis is the mother of ingenuity, so think creatively about your business. How can you generate new or alternate income? What expenses can you eliminate? Does this recent turn of events provide new opportunities? Do you finally have time to address all of the projects that have been sitting on the back-burner?
And when it comes to your employees, here are a few options:
Changed Compensation: Wages and benefits are not guaranteed. As an employer, you have the right to adjust salaries and benefit plans as business needs dictate. The only exception would be if you have written contracts with your employees that do not allow you to modify them. Even then, you may be able to negotiate changes. After all, most employees would rather have a lesser paying job than no job. We can help you suspend leave benefits or modify salaries and wages in a way that will allow you to weather this storm.
Work Furloughs: A furlough is a period of unpaid leave during which employees remain employed, but perform no services and receive reduced wages or no wages at all. A furlough allows employers to keep top talent, while reducing wage obligations. For employees, a furlough provides one important benefit – continued health insurance. Staying on your health plan could be critical to some or your employees, so consider offering a furlough before you move to a layoff.
Unemployment: On March 11, 2020 Governor Ducey issued Executive Order 2020-11 which significantly eased the requirements for obtaining unemployment. Employees no longer have to wait a week before applying, nor are they required to hunt for a job while receiving benefits. The executive order also precludes DES from considering unemployment benefits granted under the executive order against an employer’s account. These changes mean that any employee who has lost a significant portion of their wages or been furloughed as a result of the Coronavirus may be eligible for unemployment – even if they are still on your payroll. The maximum weekly unemployment benefit is $240 and any wages you pay employees will be deducted from that amount – so keep that number in mind when calculating the best option for you and your employees.
Shared Work Arrangements: If you reduce hours between 60-90% of normal, your employees can get some portion of the difference in their wages back through unemployment, provided you file a notice with the state that you may be limiting wages of your employees. For some employers this could be a win/win. You get to keep great employees while reducing their hours, and employees can make up some of the lost wages through unemployment. Most states have some sort of shared work arrangement. You can submit an application for a shared work arrangement in Arizona using the following link: https://des.az.gov/services/employment/unemployment-employer/shared-work-program-faqs
Layoffs: In some cases, the best option is a clean break. Layoff allows employees to get full unemployment benefits, and it is the most effective way to reduce employee expense. But layoffs can be tricky and are fertile ground for discrimination suits. We have a guide to safe layoffs we can provide upon request, so if you are considering a layoff, give us a call. For what it’s worth, there are two exceptions to the WARN act that should apply to this national crisis – so if you are considering a layoff, WARN should be the last thing you are worried about.
Availability Bonuses: If you must conduct a layoff or furlough, but don’t want to lose quality employees, consider offering an availability bonus to employees who report to work immediately when you need them again. The FFCRA includes a provision that will help you here; employees who take unemployment as a result of a coronavirus layoff will be excused from the typical job search requirements typically imposed on those who want unemployment benefits. So there is a high possibility your team will be waiting for your call when you are ready to rehire.
Tip No. 3. You may be able to afford the new Paid FMLA and Sick Leave benefits.
Admittedly, when Congress first passed the Families First Coronavirus Response Act, “FFCRA” on April 19, we were a little nervous for our small to mid-sized employer clients. After all, this was the first time Congress had waded into the paid-leave bog and it did so in hasty fashion. But having digested and analyzed the nuances of the law for a few days, we see some light at the end of the tunnel.
First, remember that these measures are temporary. Both benefits expire as of December 31, 2020 and the emergency paid sick leave entitlement does not carry forward into 2021. Plus, you’ll eventually get the money back in the form of a 100% refundable payroll tax credit.
Next, the law requires the Department of Labor to publish regulations that would exempt small businesses with fewer than 50 employees from FMLA leave and from sick leave to care for a child “when the imposition of such requirements would jeopardize the viability of the business as a going concern.” We don’t yet know what those regulations will look like, but if it comes down to staying in business or providing benefits under the FFCRA – stay in business.
Expanded FMLA
The “expanded” FMLA is actually quite narrow. To qualify for paid leave under the “expanded” FMLA provisions of the FFCRA, an employee must satisfy several criteria: 1) he or she can’t work (or telework); 2) due to a need for leave to care for a child; 3) because the child’s school or care facility is closed or the child care provider is unavailable due to COVID-19 and 4) the employee has worked for you for at least 30 days. This means the only employees who will qualify for this leave are employees who cannot work from home (telework) and who have minor children for whom they cannot find alternate care because of COVID-19. This is likely a pretty small segment of your workforce. Also, please note that this leave is not available to employees who are not working simply because there is no work.
The “expanded” FMLA is not full pay. At most, you will need to pay employees who take this leave only two-thirds of their pay – and that number is capped at $200 a week or $10,000 in the aggregate. Employees are notoriously unpredictable, but we believe most employees would rather work at full wages than stay home with the kiddos at $200 per week.
You can make change now to establish a new “normal.” FFCRA benefits are based on the hours an employee is “normally scheduled to work” and “regular rate of pay.” If you are worried there is not enough work to be done, change your work schedules now to reflect the reduced amount of work available. Any leave employees claim after the FFCRA becomes effective on April 1, 2020 will be based on this new “normal.”
Healthcare employers can opt out. Employers of health care providers and emergency responders may “elect to exclude” employees from the FMLA and Paid Sick Leave benefits of the FFCRA. The apparent goal is to ensure that employees in these fields are available to provide essential medical services during the crisis. If you want to make such an election, we recommend you do it now by letting employees know that their work is essential and you have elected not to provide these benefits as allowed by law.
Additional hope for smaller employers. The FMLA provisions preclude claims by individual employees against employers with fewer than 50 employees. This does not mean that smaller employers can ignore the FMLA provisions altogether because the Department of Labor could still bring a claim, but at least you don’t need to worry about greedy plaintiff lawyers coming after you.
Emergency Paid Sick Leave “EPSL”
Healthcare employers can opt out. Employers of healthcare providers and emergency responders may opt out of EPSL the same way they opt out of the expanded FMLA.
EPSL can only be used for a coronavirus related illness or absences and is capped. Although EPSL will be available to all employees who have coronavirus needs after April 1, 2020, the reasons for taking EPSL are limited as are the benefits:
Leave is at full pay (capped at $511/day, $5,110 aggregate) if the employee:
(1) is subject to a coronavirus quarantine or isolation order;
(2) has been advised by a health care provider to self-quarantine due to coronavirus concerns; or
(3) is experiencing coronavirus symptoms and is seeking a medical diagnosis.
Leave is at two-thirds pay (capped at $200/day, $2,000 aggregate) if the employee:
(4) is caring for an individual subject to quarantine order or self-quarantine restrictions;
(5) is caring for a child whose school or childcare is closed or unavailable due to coronavirus;
(6) is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.
You can make change now to establish a new “regular rate of pay.” EPSL benefits are based on an employee’s “regular rate of pay.” If you are worried that you cannot afford EPSL, you may consider adjusting your pay schedule to allow room for this benefit. In doing so, remember that the minimum wage in Arizona is $12 an hour.
EPSL benefits are temporary. EPSL benefits “cease” on the next scheduled workshift after the need for leave ends. So, for example, if employees are required to stay home due to a quarantine order, the benefit will end on the day the quarantine order ends. And, as mentioned above, this entitlement will end on December 31, 2020. The act does not require you to pay out EPSL upon termination (including a layoff) resignation or retirement, nor are you required to carry any unused leave into 2021.
Part-time employees get only a part-time benefit. Full-time employees get 80 hours of EPSL, but part-time employees only get an amount equal to the hours the employee works, on average, over a 2-week period.
You can change other sick leave or PTO policies. EPSL is in addition to any existing benefit employees are entitled to receive. So, consider modifying your existing benefit packages (including sick pay, PTO and other paid leaves of absence) to account for the new EPSL requirement. In doing so, you can’t eliminate any paid sick leave that is already required by law (such as the leave required under Arizona’s paid sick leave statute) but everything above that minimum can be suspended or eliminated.
Conclusion
We hope these ideas will help you weather the storm. Please call if we can provide any assistance in modifying your pay scales, policies, benefits, or contracts to address this new normal.
