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Additional Guidance from the Department of Labor Including the Frequently Asked Question: “What is the ‘small business exemption’ under the Families First Coronavirus Response Act?
March 30, 2020


All articles in this COVID-19 Response Resource issue are effective as of March 30, 2020.

On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (the “Response Act”) into law. As we’ve previously written, the Response Act generally requires employers with less than 500 employees to provide paid leave to their employees in certain circumstances related to the COVID-19 pandemic.

What does that mean for small businesses who may not be able to afford to give paid leave to their employees? Recently, the Department of Labor (“DOL”) issued new guidance explaining when the small business exemption will be available and to which businesses. The DOL also noted that it “encourages employers and employees to collaborate to reach the best solution for maintaining the business and ensuring employee safety.”   

Further, under the DOL guidance, the time that an employee is on paid sick leave counts towards any waiting periods for health-care eligibility. In addition, the DOL has issued guidance regarding the potential exemption for “health care providers.”

Response Act’s Small Business Exemption

Of note is that the small business exemption appears to only apply if an employee is trying to take leave to care for a child whose school or daycare has closed due to COVID-19 reasons. The exemption will not apply when an employee is seeking to take paid sick leave for any other qualifying reason under the Paid Sick Leave provision of the Response Act.

According to the new DOL guidance, an employer with fewer than 50 employees “is exempt providing (a) paid sick leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons and (b) expanded family and medical leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons when doing so would jeopardize the viability of the small business as a going concern.” (emphasis added). To claim the exemption, an authorized officer of the business must determine the following:

(1) the paid sick leave or expanded family and medical leave under the Response Act would result in the employer’s “expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;”

(2) the absence of the employee(s) requesting leave under the Response Act would create a “substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities;” or,

(3) the employer does not have enough workers who are “able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the” employee(s) requesting leave under the Response Act, and such labor or services “are needed for the small business to operate at a minimal capacity.”

Only one of the above three factors must be determined to be present for the conditions for an exemption to be satisfied. The DOL has not yet indicated how it expects employers to document that they are taking or utilizing the exemption. We expect the DOL to come out with federal regulations on this subject before the law goes into effect on April 1, 2020. We will keep you updated on any developments.

Does an employee’s time on paid sick leave count towards any time periods required for health insurance coverage?

Yes. The DOL has issued new guidance clarifying that an employee’s eligibility for group health coverage is unchanged while he or she is on paid sick leave under the Families First Coronavirus Response Act (the “Response Act”). The Response Act does not alter any timeline (or other requirement) for eligibility for health coverage and the requirements apply the same as if the employee continued to work. Specifically, the days the employee is on paid sick leave count toward completion of any waiting period. Bottom line: if an employee can elect health coverage that takes effect after completing a waiting period, the health coverage must take effect once the waiting period is complete.

Who is a potentially exempt health care provider under the Response Act?

The Response Act allows employers of health care providers to exempt out of providing the benefits of the Response Act to health care providers. The DOL has interpreted this definition broadly and stated that a health care provider is anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, employer, or entity.

The definition also includes any individual employed by an entity that contracts with any of the above institutions, employers or entities to provide services or to maintain the operation of the facility. This also includes anyone employed by any entity that provides medical services, produces medical products or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles or treatments.

For answers to questions about these or other related matters, contact Sean Monson at (801) 536-6714 or send an email to smonson@parsonsbehle.com or call Liz Mellem at (406) 333-0530 or send an email to amellem@parsonsbehle.com.