Alert / Employee Benefits
Court strikes critical provisions of FFCRA regulations

Aug. 10, 2020

Changes may result in additional financial obligations and business disruptions

Employers subject to the Families First Coronavirus Response Act (FFCRA) potentially face additional hassles in the wake of a federal court decision that effectively struck down portions of the Department of Labor’s guidance related to FFCRA. The court ordered four specific changes to the DOL regulations, changes that will make it easier for employees to qualify for FFCRA paid leave and significantly affect employer administration of that leave.

The precise scope of the ruling, and its impact on employers not party to the litigation – the state of New York brought the challenge to the DOL guidance – remain unclear, however, so employers will want to discuss with their employment law counsel about how to proceed.

Lockton comment: As a reminder, FFCRA applies to private employers with fewer than 500 employees and to all public (i.e., governmental) employers. For a more detailed summary of the requirements under FFCRA, please see our alert on coronavirus legislation.

What did the court change?

The court directs the DOL to make four changes to its FFCRA guidance:

  • Remove the requirement that work be available for an employee for the employee to be eligible for FFCRA paid leave. This means the employer has an obligation to make paid leave under the FFCRA available to an employee, whether the employee could have been working for the employer or not.

Lockton comment: Under the DOL guidance, employers were not obligated to offer FFCRA leave if the employee would not otherwise have been able to work during the leave period (e.g., the employer had suspended operations or furloughed the employee). Under the court-ordered change to the guidance, employers that temporarily close, even due to government order, or who retain employees in a furloughed status, may have obligations to provide paid leave under FFCRA to those employees not currently working.

  • Modify the definition of “health care provider” to conform to a narrower definition used in the FMLA.

Lockton comment: FFCRA allows an employer otherwise obligated to provide the law’s mandated paid leave to exclude “health care providers” from eligibility for the leave. The FFCRA defines healthcare provider by referring to the definition included under the FMLA. That definition is basically limited to licensed healthcare providers who provide healthcare services. The DOL guidance had expanded that definition, and thus the scope of the exclusion, to include all workers employed by an entity that also employs such healthcare professionals.

The court concluded the DOL’s guidance erred in focusing on the nature of the work performed by the employer, and should have limited the exclusion to specific employees engaged in healthcare activities, rather than treating non-clinical employees as subject to the exclusion simply because they too work for the employer. In removing the DOL’s broad definition, the court has thus eliminated the ability of employers providing healthcare services to exclude from eligibility for paid leave those employees who are not licensed healthcare professionals.

  • Remove the requirement that employees obtain employer consent to take intermittent leave to care for a child.

Lockton comment: Under the DOL guidance, employers could deny an employee’s request for intermittent FFCRA leave in situations where there was not a heightened risk of transmission of the virus to or by the employee. The employer is no longer allowed to deny such a request unless the risk of viral transmission is heightened.

  • Remove the requirement that employees provide documentation of eligibility prior to taking FFCRA leave.

Lockton comment: The FFCRA allows an employer to require an employee to document the reason for leave after the first day of leave, in order to continue receiving payment for the leave. The law also requires that the employee provide the employer with such notice of leave as is practicable under the circumstances. The court concluded that an employer can still require this sort of notice and documentation but cannot require it before leave is taken.

Impact of the court-ordered changes to the FFCRA guidance

The court-ordered changes to the DOL’s FFCRA guidance will make more employees eligible for FFCRA leave and significantly alter the way employers administer that leave. Here’s a closer look at that impact.

  • Elimination of the requirement that work be available for the employee

This change to the guidance may have the most dramatic impact for many employers by potentially making employees who have been furloughed and employees of employers who have suspended operations, eligible for FFCRA paid leave. Happily, however, while this change might trigger additional up-front payroll costs for many employers, a federal tax credit is available to reimburse the employer for the paid leave it provides, unless the employer is a governmental employer.

Several unanswered questions remain. If an employee had been laid off (terminated), does the employee have rights to FFCRA paid leave? We suspect not because the employment relationship had been terminated. But what if the employee is laid off during a period of paid leave? It’s not clear whether the paid leave should continue after the layoff. And do employers face retroactive liability for not having offered FFCRA paid leave to furloughed employees to this point? If so, are tax credits available to reimburse the employer for providing back pay? That all remains to be seen.

  • Change in the definition of “health care provider”

This change will have dramatic impact on employers who provide healthcare services, with respect to their non-clinical employees. This aspect of the ruling will have significant consequences prospectively, but in addition, employers that previously excluded support workers from eligibility for FFCRA leave might face liability for back pay, and may even be required to reinstate employees who were denied FFCRA leave and then laid off or otherwise had their employment terminated. Here too it is unclear whether back pay for FFCRA leave can be reimbursed via a tax credit.

  • Elimination of the need for employer consent for some intermittent leaves

Employees now have the right to take leave on an intermittent basis without obtaining employer consent, absent a situation where the risk of virus transmission risk is heightened. Employers may need to plan for the disruptions such intermittent leaves might create. If intermittent leave was previously prohibited by an employer where there was no or modest risk of infection, the affected employee might have the right to additional leave due to the employer’s failure to consent to the intermittent leave request. Further clarification on this issue is needed.

Lockton comment: The court recognized employers’ need to limit exposure to employees who have or might have coronavirus so where such risk of transmission of the virus would be heightened were the employee to take intermittent leave, the employer still has the right to refuse to allow that leave.

  • Elimination of the requirement that documentation be provided before leave commences

This change in the DOL’s guidance will modify employers’ administrative procedures for granting and monitoring the extent of employees’ FFCRA leave. While employers can no longer require notice and documentation before the leave begins, they may require it while that leave is in progress.

But which employers does the ruling affect?

This is the million-dollar question. Typically, when a court invalidates a federal regulation, that ruling applies nationwide. But in this case, the state of New York, which brought the challenge, did not ask for the sort of relief that would normally result in application of the ruling to all employers, so it’s not entirely clear which employers might actually suffer the consequences of the ruling. And it’s also possible the DOL will appeal the ruling and obtain a stay of the ruling’s immediate impact. More guidance on these matters would be helpful, but in the meantime, employers may want to consult with their employment law counsel on how to proceed.

Other impacts of the ruling

During the pandemic many states, counties and cities have enacted laws and ordinances imposing paid leave obligations on employers –and many of those laws cross-reference to FFCRA and the DOL’s FFCRA guidance – to provide interpretive gloss on the state and local laws. For example, some ordinances define “health care provider” by reference to how the FFCRA defines it. As a result, the court’s ruling could send a ripple effect not just through employers’ administration of FFCRA leave, but also state and locally manded paid leave.

Summary

The only thing clear about the court’s ruling today is that it is poised to throw a massive wrench into the way employers have been administering FFCRA paid leave to date. But with so many related questions unanswered about things like the employers affected by the ruling, the retroactive effect of the ruling, employees’ ability to obtain back pay and the employer to obtain tax credits to reimburse such back pay, it’s important that employers move carefully. Again, we urge them to discuss these matters with their employment law counsel.

Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Services group are not privileged under the attorney-client privilege.

View this alert
    
< Back to Insights & Publications
Discover more Insights & Publications  |  Read more in the Lockton Newsroom  |  See our Client Stories
Read more in the Lockton Newsroom
See our Client Stories