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UNDERSTANDING FORCE MAJEURE CLAUSES IN LIGHT OF THE COVID-19 CRISIS

UNDERSTANDING FORCE MAJEURE CLAUSES IN LIGHT OF THE COVID-19 CRISIS

Corona virus (COVID-19) is the major topic for most new stations today. In addition to having a tragic effect on the health of the world’s population, the virus, and the safety measures implemented in response to the virus, are having a negative effect on international businesses. Globally manufacturers and suppliers are scrambling to identify contractual relief as COVID-19 causes supply chains to crumble. The reason behind this disruption ranges from worker shortages and closures of manufacturing plants, to transportation bans and mandatory quarantines.

CONSEQUENCES OF COVID-19 ON YOUR COMPANY

How COVID-19 will affect your company may differ from how it affects the next company. Understanding your obligations and the related provisions within your contracts is essential when it comes to navigating supply chain disruptions and mitigating related losses. This is where the often-overlooked force majeure clause become important. These clauses identify those circumstances or events beyond the parties’ control, the occurrence of which makes performance under the contract impossible or impracticable. Typically, force majeure clauses either operate to excuse performance or extend the time to perform under a contract when an unforeseeable event, or one that is outside the contractor’s control causes project delays.
While majeure event provisions are not standardized in the United States, such provisions often use the phrases “acts of God” or “acts of Governmental Entities”, in addition to listing other possible delaying events such as war, riots, famine, strikes. It is not often that these provisions explicitly refer to epidemics and/or quarantine.

DETERMINE IF A COVID-19 FORCE MAJEURE EVENT HAS OCCURRED

To determine if a force majeure event has occurred, one must analysis the event using the terms of the contract. To start, you must first determine what events constitute a force majeure event under the contract. These events will either be generally or specifically identified in the contract, as shown above.
Should you determine that a qualifying event has occurred, you must then determine whether the provision completely relieves a party (you or the other side) of their obligation to perform or does the provision merely delay or suspend performance until the force majeure event has been resolved or is concluded. It is important to note that most force majeure clauses do not address adjustments in contract price should a force majeure event occur, instead they focus only on extensions of time to perform.

MITIGATION OF RISKS RELATED TO COVID-19

The next step requires you to determine if you are the only one required to take steps to mitigate the risk of any potential losses as a result of the force majeure event or if the other party under the contract is required to take steps to mitigate the potential losses as well.

NOTIFICATION TO INVOLVED PARTIES

The last part of the analysis, related to notice, is often overlooked and can cause major issues when over-looked. It is extremely important to determine the type of notice required to be given under the contract and when such notice is required. Certain provisions even require that regular updates be given. Failure to give the require notice can cause the protections granted by the provision to terminate.

TIPS ON HOW TO HANDLE COVID-19 FORCE MAJEURE EVENTS

In the event that your company is impacted by COVID-19, the following tips will help you manage the situation.

1) Identify the issues and document them. Accurate information is essential for making proper management decisions. In addition, your ability to identify the facts on which you based your decisions may be crucial for subsequent legal proceedings. It is essential that you fully identify the issues and the underlying facts and then properly document such.

If your company is a manufacturer or service provider, make sure that you understand and document the reasons why you are unable to supply/perform. Is it due to government-ordered factory shutdowns, quarantines (voluntary or required), staff illness, or other reasons? It is important that you identify the exact nature of the problem and that you secure evidence of the problem (or the cause of it).

If your supplier cannot supply you, make sure that you require your supplier to provide you with specific details as to how they are affected and why they cannot supply you. Do not accept an unspecific force majeure declaration from a supplier and do not take a position on a force majeure declaration until you have all the relevant facts.

2) Review your contracts and governing law to see how risk is allocated. Not every contract, and not all states, provides for a force majeure defense based on unforeseeable events outside a parties control and fewer specifically refer to epidemics or forced quarantines. As stated above, force majeure provisions differ from contract to contract, and from state to state, so each contract must be analyzed separately. Often a careful legal analysis of your specific situation is required and will depend on the exact supply problem, the specific terms of your contract and the applicable law.

3) Keep everyone properly informed. Often a force majeure clause, or governing law, will require that you give prompt notice of a force majeure event; if you fail to do so, you will not be able to use it as defense. If there is a notice requirement, you may need to give notice before you have had the chance to complete the assessments identified in Steps 1 and 2 above. Whether you are drafting your force majeure notice or drafting a responding to a force majeure declaration from a supplier, it is important to avoid using any language that could prejudice you in the future should a dispute arise.

4) Try to overcome the supply problems. Many contracts, and several states, exclude a force majeure event if you can overcome the force majeure event. You must consider other potential sourcing options and/or transportation means which would allow you to satisfy your obligations under the contract. As stated above, most force majeure clauses do not address adjustments in contract price; if an event has not made performance under the agreement impossible, but instead, has made it more expensive, a force majeure defense may not be valid.

5) Be careful how you allocate existing supplies. If your reduced output allows you to supply only some of your customers, carefully check all your contracts and any applicable laws to see if they provide any guidance or impose any restrictions. Problems can arise if you choose to supply your priority customers and then give the rest force majeure declarations. If you receive a force majeure declaration, make sure to find out how your supplier allocated their remaining stock.

6) Manage disputes proactively. There is no doubt that the current COVID-19 outbreak will result in numerous lawsuits being filed related to the supply chain problems. Managing disputes proactively will increase the likelihood of such being resolving quickly and successfully. It is important to communicate with your customers and suppliers in a cooperative and reasonable manner; doing so will help to avoid escalating disputes and may resolves matter quicker.

PROTECTIVE STEPS

In order to lessen the severity of events like this in the future, we recommend taking the following three steps:

1. Have a Plan B (and a Plan C and Plan D). Those company that currently rely upon a single supplier are especially vulnerable to supply chain disruptions caused by events such as COVID-19. Good supply chain practice recommends having several suppliers in different countries and geographies.

2. Update your force majeure clauses. You should update your template force majeure clause for future contracts or renegotiated your current contracts to make certain it covers common problems in the event of a global pandemic or similar disruptive phenomena.

3. Update your dispute resolution and choice of law clauses. These clauses determine how and where you can enforce your rights. Certain courts, especially international courts, may not be the best forum for resolving disputes and pursing claims for damages.

FOR ADDITIONAL INFORMATION REGARDING COVID-19

To keep informed, and avoid misinformation, business owners should visit the official Center for Disease Control (CDC) and World Health Organization websites at CDC Coronavirus Website and WHO Coronavirus Website.
Sources:

1. https://www.seyfarth.com/news-insights/managing-project-risk-associated-with-the-coronavirus-outbreak-through-force-majeure-provisions.html

2. https://www.lexology.com/library/detail.aspx?g=cd88dc82-ac47-4d14-9f9c-1869929dd806

3. https://www.sidley.com/en/insights/newsupdates/2020/03/the-coronavirus-and-contract-disputes-10-tips-for-managing-legal-risk-from

UPDATED STAY-AT-HOME ORDER

On April 30, 2020, Governor Pritzker released Executive Order 2020-32, which extends the current stay-at-home order.  However, there are a few key differences in this new order that you should be aware of, not just in the workplace but personally while you are out and about, as well.

What Stays the Same

Despite all the updates, there are several aspects of the stay-at-home order that remain the same. For example, you can still leave home for essential travel, which includes reasons related to health and safety, necessary supplies and services (groceries, healthcare, etc.), outside activities, and to care for others. And, as before, non-essential travel, gatherings of 10 or more people, and the operation of public amusement facilities (zoos, museums, theme parks, etc.) remain prohibited.

Face Masks in Public

Perhaps the biggest change of them all is the new requirement about face masks. Any individual over the age of 2 is required to cover their nose and mouth with a face-covering when in a public place and unable to maintain a 6-foot social distance. Face-coverings are required in public indoor spaces, like the grocery store, regardless of whether social distancing can be maintained or not.

It is important to note, however, that this requirement is not applicable to those who cannot medically tolerate a face-covering. Also, the order does not require any specialized masks, like the N95. Any mask or cloth that covers your mouth and nose will suffice.

Social Distancing and PPE in the Workplace

Business owners should be aware that they have new requirements under the stay-at-home order, as well. Essential Businesses and businesses engaged in Minimum Basic Operations must take proactive measures to ensure compliance with the state’s social distancing requirements. The executive order lists out several methods of accomplishing this that all businesses should implement where possible.

Signage, tape, and/or other means should be used to designate 6-foot spacing for employees and customers in line in order to show them how to maintain appropriate distance. When 6-foot spacing is not possible, employers should require their employees to wear face coverings. The burden to provide those face coverings lies on the employer. Where appropriate and necessary, an employer should provide employees with other PPE in addition to face coverings.

Businesses are also required to post online whether their facility is open and how best to reach the facility and continue services by phone or remotely. The state also says employers should implement separate operating hours for elderly and vulnerable customers. And, as has been the case during the situation thus far, employers should encourage employees to wash and sanitize their hands frequently throughout the day.

Again, these measures are only to be implemented where possible. These are not necessarily hard-and-fast rules, but they absolutely should be adhered to and practiced in your workplace if at all possible, even if they are somewhat inconvenient.

New Additions to Essential Business Category

The new stay-at-home order also expands the definition of Essential Business to include greenhouses, garden centers and nurseries, along with animal grooming facilities.

State Parks

As mentioned above, outdoor activity is permitted under the stay-at-home order, so long as social distancing is maintained and you wear a face mask. But the new order now specifies that outdoor activity can include travel to specific State parks that will remain open for certain activities. Which parks and what activities will be decided by the Illinois Department of Natural Resources. Fishing, boating, and golf are permitted only when following the guidelines provided by the Illinois Department of Commerce and Economic Opportunity.

Playgrounds will remain closed.

Changes for Retail Stores

Retail stores not designated as Essential Businesses can re-open to fulfill telephone and online orders through pick-up outside of the store and delivery. These are considered to be Minimum Basic Operations. Employees who work in the store must follow social distancing requirements and wear a face covering whenever they come within 6 feet of another employee or customer.

Retail stores that are designated as Essential Businesses (such as grocery stores) must, to the greatest extent possible, do the following: provide face coverings to all employees who aren’t able to maintain minimum social distancing at all times; cap occupancy at 50% of store capacity or at occupancy limits based on the store’s square footage; set up store aisles to be one-way where practicable and identify those one-way aisles with conspicuous signage or floor markings; communicate with customers through in-store signage and PSAs about the social distancing requirements within the executive order; and discontinue use of reusable bags.

On a personal note, households should limit the number of members who enter these stores to the minimum necessary. For example, it may be necessary for you to accompany an elderly member of your family to the grocery store, but that trip might not necessitate bringing along your spouse or children.

FFCRA Toolkit

Life for employers would probably be much easier if this executive order were the only thing to worry about, however recent changes in federal law have made things quite a bit more difficult for business owners to keep up and comply with. The Families First Coronavirus Response Act was passed several weeks ago, and mandates paid sick leave for several reasons, as well as expands the parameters of the Family and Medical Leave Act . Understanding this new act can be difficult, which is why WPD has put in the work to ease that burden. To get an idea of what all the law requires and the documentation you need, check out our blog article here.

If you haven’t yet, we highly encourage you to purchase our FFCRA Toolkit for a flat fee of $200. WPD has put together a full package of forms, policies, and checklists for you to use during the coronavirus pandemic. Our FFCRA Package has all the documents you need and more to help you stay in compliance with all these confusing laws. If you’re interested, contact Susan Dawson at sdawson@wpdlegal.com for more information.

Should you have any questions about the new stay-at-home order, business law, or any other laws that may affect your business, or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.

Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law, Collaborative Divorce & Mediation.

This article constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice.

Waltz, Palmer & Dawson, LLC
3701 Algonquin Rd. Suite 300, Rolling Meadows, Illinois 60008
Phone: (847) 253-8800
Fax: 847-253-8822
View Map | Driving Directions

FFCRA: SICK LEAVE POSTERS AREN’T ENOUGH!

 

As you probably already know by now, the Families First Coronavirus Response Act (FFCRA) has put a lot of new obligations on employers regarding emergency paid sick leave (EPSL) and expanded Family and Medical Leave Act (FMLA) benefits. While the FFCRA does mandate that employers put up a poster to put employees on notice of the new sick leave laws, that isn’t the only document you need to worry about. In fact, there are quite a few other documents employers need to have in their possession to comply with the FFCRA.

Why Isn’t the Poster Enough?

The name of the game here during this age of coronavirus is document, document, document! Under normal circumstances, it is imperative for employers to keep accurate records of when employees request sick leave or accommodations, provide doctors’ notes, use PTO, etc. But now, more so than ever, it is extremely important for you to document not only your employees’ requests and the like, but your responses to them, as well. Not only for purposes of having a paper trail, but the also because the new laws require that you have certain things in writing.

For example, imagine you have an employee who calls off sick and requests EPSL, and your HR department allows for the paid leave. Then you find out later down the road that she merely had a head cold rather than any coronavirus symptoms. You just gave EPSL to an employee who was not entitled to it because no one asked her to describe her symptoms and the call was not documented.

Documentation is important not only as a best practice, but as requirement under the law. Verbal calls from employees who are requesting leave need to be put in writing, and employers need to collect specific information from employees when they are asking for time off. The information you are required to collect differs depending on what type of leave they are requesting. And all of these records related to coronavirus leave must be maintained for 4 years.

Putting up the notice poster only insulates you from one thing – getting in trouble for breaching the notice requirement under the FFCRA. But there are a lot of other requirements that you need to follow in order to stay compliant with current law, many of which are tied to keeping detailed records.

What Documents Should I Use?

To start with, you need policies to hand out to your employees. Even though the federal poster puts them on notice of their ability to take paid leave under the FFCRA, that poster doesn’t cover what your requirements are. What forms do they need to fill out to request leave? When do they need to provide a doctor’s note? Who do they turn in the request form to? All of these questions and more need to be answered so your employees know what to do. You’ll need a separate policy for EPSL and leave under the Emergency Family and Medical Leave Expansion Act (EFMLEA), because the conditions under which employees can take time off differ between the two.

You’ll also need request forms for employees to use so they can ask for EFMLEA leave or EPSL.  Any general sick leave or PTO you may have under an existing policy should be requested using a different form. These should be detailed so that you know what symptoms employees are experiencing, what type of leave they are requesting, how long they will be absent, etc.

There a few contracts you may want to have your employees sign, as well. Telecommuting is the new normal for a lot of businesses now that shelter-in-place orders are in effect. But working from home presents a lot of issues that otherwise wouldn’t exist if employees were in the workplace. Employees are now taking home company property in the form of laptops, tablets, cell phones and the like, along with all the confidential and proprietary information they may contain. You want to make sure that employees are still being responsible with your company’s sensitive information, now that it is more accessible than before.

You should also consider tweaking certain employees’ confidentiality obligations. It might be necessary to designate additional employees to handle leave requests. Perhaps your current HR staff is unable to handle the volume of requests coming in, or you only have one person handling leave forms during the day shift and you need someone doing the same at night. Whatever the case may be, if you need a non-HR employee to begin handling these leave requests, you should change their current confidentiality obligations to include safekeeping of employee medical information.

Lastly, you should be using a checklist to make sure you’re taking all the requisite steps to stay in compliance with the law. Did you put up posters in the workplace? Have you provided every employee with a copy of your new EFMLEA and EPSL policies? When you’ve collected a leave request, did you record it in the proper file? You should handle these cases in a methodical manner to make sure that you aren’t skipping any important steps. One other suggestion we have to help ensure all the necessary steps are taken is naming a pandemic coordinator. Putting someone in charge of understanding these laws and implementing your company policies can be a great help in streamlining the process and keeping communication clear.

Where Can I Get These Documents?

You’re in luck! WPD has put together a full package of forms, policies, and checklists for you to use during the coronavirus pandemic. Our FFCRA Package has all the documents described above and more to help you stay in compliance with all these confusing laws. We’re offering a package of 12 documents for a flat-fee of $200. If you’re interested, contact Susan Dawson at sdawson@wpdlegal.com for more information.

Should you have any questions about business law or any other laws that may affect your business, or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.

Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law, Collaborative Divorce & Mediation.

This article constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice.

Waltz, Palmer & Dawson, LLC
3701 Algonquin Rd. Suite 300, Rolling Meadows, Illinois 60008
Phone: (847) 253-8800
Fax: 847-253-8822
View Map | Driving Directions

FURLOUGH VS. TERMINATION: EMPLOYER OBLIGATIONS REGARDING WAGES, BENEFITS, AND OTHER ISSUES

The coronavirus pandemic is creating quite a lot of chaos within the labor and employment world. Employees are wondering how they are going to get paid and employers are wondering how they are going to pay their employees. Money is tight and everyone is worried. But these moments of high stress are the ones that matter most. It can be easy to make mistakes and run afoul of the law or sound business practices when you feel rushed to take action, especially when it seems like there is a new federal law or municipal order being released every day. One of the biggest points of confusion for many employers is whether they should terminate or furlough their employees, and what the implications are with each regarding payroll and benefits.

What is a Furlough?

A furlough is simply a suspension from work without pay. The United States Treasury and other government agencies define furlough as the “placing of an employee in a temporary non-duty, non-pay status because of lack of work or funds, or other non-disciplinary reasons.” While it is a term of art there is no hard and fast rule on its duration. It can be for as long or as short of a period as the employer requires.

While furloughs can and often are used in the private sector context, they are most commonly seen in the public sector when government shutdowns occur. The longest government shutdown in American history was just over a year ago, and resulted in 34 days of inactivity from the end of December through the middle of January. Estimates differ, but news sources largely reported that hundreds of thousands of government employees were furloughed during this period.

Private sector furloughs often spike during times when the economy is taking a nosedive. However, there are some industries that see them regularly, such as construction companies that furlough their employees during the winter when conditions are harsh or a snow shoveling business that furloughs employees spring through fall but reopens each year during winter.

The key here is that it is not considered a termination of employment, merely a suspension from work. It is a temporary period wherein an employer suspends work and pay of its employees with a plan (though not a commitment or guarantee) to start the work back up at a later period when the company can afford the payroll costs. Employers usually communicate a specific end date to the furlough, or conditions that must be met before it ends.

In short, furloughs are for when employers can’t afford employees, but don’t want to lay them off.

Do Employers Have to Pay Out Vacations or Provide Benefits During a Furlough?

While other states may vary, Illinois requires that employers pay out any accrued but unused vacation time or PTO once an employee is terminated. However, there is no such requirement in Illinois for employees who have been furloughed. So no, if you need to furlough some of your employees, there is a good argument to be made that you are not required to pay out their vacation or PTO. But if you later realize you cannot afford to end the furlough and decide to terminate them, that time must be paid out.

It is also important to note that, because a furlough is not a termination, employees are entitled to use their company-provided vacation, PTO, and sick leave as they normally would.

As for benefits, their continuation largely depends upon what the plan terms are – minimum hours worked, paid vs. unpaid, and short-term or long-term are all considerations taken into account. You want to make sure you speak with your providers for clarification.

Furloughed employees may also be eligible for unemployment benefits and COBRA coverage, even though they have not been terminated.

Do Not Allow Your Employees to Work During a Furlough!

And on the subject of payments, you should definitely consider instituting a “no-work rule” during a furlough. While non-exempt employees only have to be paid for their hours worked, exempt employees are entitled to a full week’s worth of pay, even if they engage in only a single hour’s worth of work during that week.

Answering an email or taking a work-related call can result in you being obligated to pay a week of salary to your exempt employees. So, if you want to institute a proper furlough, make sure you communicate to your employees that absolutely no work is to be done during its duration.

What About Payment of Sick Leave?

In normal circumstances, this would be the end of the conversation regarding employee benefits. However, the coronavirus outbreak has sparked new federal legislation that mandates paid sick leave under certain circumstances and expands FMLA coverage. On March 18, 2020, Congress passed the Families First Coronavirus Response Act (FFCRA), which contains the Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act.

The short of it is that employers of a certain size have to provide paid sick leave (around 2 weeks’ worth, but potentially less for part-time workers) to employees who satisfy one of several specific conditions, such as falling ill from the coronavirus, being subject to mandatory quarantine, etc. And under the FMLA, employees who are caring for a child whose school has closed are eligible for paid and unpaid leave.

So, this leaves us with the question of whether employers have to pay out such sick leave for their furloughed employees? And the answer is likely yes. The FFCRA makes absolutely no mention of furloughs. Further, nothing in Illinois employment law addresses furloughs in the context of sick leave, either. The FFCRA doesn’t worry about whether your employees are getting paid – only whether they are considered an employee. So, it could be argued that even furloughed individuals are arguably entitled to paid sick and FMLA leave

Absent guidance on the matter, the soundest business practice is to pay the sick leave to your furloughed employees if they are eligible. If you don’t, you run the risk of violating several wage and hour laws. Those violations could result in an even greater financial burden on your company during an already precarious time. If you want to avoid falling under the FFCRA and having to pay out such sick leave, it is important to let your employees know that their employment is being terminated. The use of the term “layoff” is also acceptable, as it is commonly understood to mean termination of employment that is not due to any performance-related issue.

How Long Can I Furlough My Employees?

As mentioned above, there is no hard and fast rule on the duration of a furlough. However, while there are no set legal restrictions attached to how long you can furlough, there are several matters of best practices that you should keep in mind when asking this question.

You can’t string people along forever – understandably, your employees would be upset if you institute a 2-year long furlough. Your company reputation is important, so saving face and only using furloughs for reasonable periods of time can go a long way in allaying employee fears, staving off anger, and maintaining your reputation.

Also remember that your employees are free to find employment elsewhere during a furlough period (employees under contract might present a different matter). If your furlough period is too long and your employees cannot survive without their paychecks, they can move on to the next company. You may run the risk of losing competent, hard-working individuals who you expended time and resources to train.

Should you have any questions about business law or any other laws that may affect your business, or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.

Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law, Collaborative Divorce & Mediation.

This article constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice.

Waltz, Palmer & Dawson, LLC
3701 Algonquin Rd. Suite 300, Rolling Meadows, Illinois 60008
Phone: (847) 253-8800
Fax: 847-253-8822
View Map | Driving Directions

 

 

 

 

DOL Releases Initial FFCRA (Families First Coronavirus Response Act) Guidelines

 

To see the full list of Questions and Answers provided by the DOL see their website. Below we’ve provided a quick summary of answers provided to the more pressing questions we received and/or see as concerns for our clients.

WHAT WAS ANSWERED:

  • Effective Date officially April 1, 2020

In previous articles and webinars, both provided by WPD and circulating on the web, you’ve seen April 2, 2020 as the effective date. What happened? As we pointed out in our website the Act says it must be effective “no later than” 15 days after enactment. Which meant April 2 was the last day it could possibly take effect. The DOL has now announced that this will take effect on April 1 – which means you have until March 31 to make some very important decisions about your staffing levels and what you can afford to pay.

  • Overtime hours must be included

The Emergency Family and Medical Leave Expansion Act requires you to pay an employee for hours the employee would have been normally scheduled to work even if that is more than 40 hours in a week. However, the Emergency Paid Sick Leave Act requires that paid sick leave be paid only up to 80 hours over a two-week period. For example, an employee who is scheduled to work 50 hours a week may take 50 hours of paid sick leave in the first week and 30 hours of paid sick leave in the second week. In any event, the total number of hours paid under the Emergency Paid Sick Leave Act is capped at 80.

But – according to the DOL “that pay does not need to include a premium for overtime hours under either the Emergency Paid Sick Leave Act or the Emergency Family and Medical Leave Expansion Act.” So it appears the pay rate is based on the regular hourly rate – not time and a half. We’ll dig into this more to get a clearer answer. However; the daily and aggregate caps placed on any pay for paid sick leave and expanded family and medical leave may make the question of time and a half rate a moot point.

  • Regular rate of pay is based on a 6-month average.

Many businesses have considered reducing employee salaries and hourly rates during this period. The DOL has clarified that “For purposes of the FFCRA, the regular rate of pay used to calculate your paid leave is the average of your regular rate over a period of up to six months prior to the date on which you take leave.” So this reduction would have little impact on what you are required to pay to long-term employees. Reduction could have more of an impact for new employees as for employees with under 6-months of tenure at your business “the regular rate used to calculate your paid leave is the average of your regular rate of pay for each week you have worked for your current employer.”

The DOL also clarified that “if you are paid with commissions, tips, or piece rates, these wages will be incorporated into the above calculation.”

  • Sick leave under the Act is capped at 80 hours – not 80 hours per qualifying event.

The DOL stated that an employee “may take up to two weeks—or ten days—(80 hours for a full-time employee, or for a part-time employee, the number of hours equal to the average number of hours that the employee works over a typical two-week period) of paid sick leave for any combination of qualifying reasons. However, the total number of hours for which [an employee may] receive paid sick leave is capped at 80 hours under the Emergency Paid Sick Leave Act.”

  • FFCRA Sick and FMLA leave will run consecutively.

The Emergency Paid Sick Leave Act provides for an initial two weeks of paid leave. This period can be used to cover the first ten workdays of the expanded family and medical leave (FMLA), which are otherwise unpaid unless an employee elects to use existing vacation, personal, or medical or sick leave instead. If employees qualify, they can then use the expanded FMLA leave. Note that means an employee could use existing sick/vacation time for the first two weeks, then take their FMLA leave and then take the 2 weeks sick leave – so they could stretch this to fourteen weeks paid leave (more if they have additional vacation/sick leave to tack on at the end). Keep in mind that employees can only receive the additional ten weeks of expanded FMLA leave to care for a minor child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons.

  • If you already gave employees sick leave for qualifying events under the new Act – you still have to give them their FFCRA leave (if they qualify).

The DOL confirmed that The Emergency Paid Sick Leave Act imposes a new leave requirement on employers that is effective beginning on April 1, 2020.

  • The paid sick leave and expanded family and medical leave requirements are not retroactive.

This was confirmed by the DOL.

  • Paid leave only applies to the new FMLA leave provision – not all FMLA leave.

The DOL confirmed that the only type of family and medical leave that is paid leave is the leave taken because the employee must care for a child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons.

  • Employed for at least 30 calendar days by the employer is now clarified.

An employee is considered to have been employed by you for at least 30 calendar days if that employee has been on your payroll for the 30 calendar days immediately prior to the day your leave would begin. For example, an employee that wants to take leave on April 1, 2020, would need to have been on your payroll as of March 2, 2020.

WHAT WAS NOT “ANSWERED”

What does “jeopardize the viability of my business as a going concern” mean.

How did the DOL answer this question which is – based on the number of calls I’ve received this week – clearly the most pressing question businesses with under 50 employees want answered? Basically “stay tuned”. The DOL says this one will be “addressed in more detail in forthcoming regulations” And asks you to “not send any materials to the Department of Labor when seeking a small business exemption for paid sick leave and expanded family and medical leave.”

Should you have any questions about the FFCRA or any other laws that may affect your business, or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.

Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law, Collaborative Divorce & Mediation.

This article constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice.

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