The Small Business Exemption Under the Families First Coronavirus Relief Act

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When the Families First Coronavirus Response Act (FFCRA) was passed, it contained a provision allowing the Secretary of Labor to issue regulations providing an exemption from the Act’s paid leave requirements for businesses with fewer than 50 employees.  On April 6, the USDOL published a temporary rule regarding Paid Leave Under the Families First Coronavirus Response Act containing such a small business exemption.  Section 826.40(b) of the temporary rule describes the small business exemption issued pursuant to the Secretary’s regulatory authority to exempt small private businesses from having to provide an employee with paid sick leave under the Emergency Paid Sick Leave Act (EPSLA) and expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act (EFMLEA).

While the exemption may be helpful to some businesses, the FFCRA exemption for a “small businesses” – defined as employers with fewer than 50 employees – is quite narrow and only applies to one aspect of the emergency paid sick leave and expanded family and medical leave benefit requirements.

Under the temporary rule, a small business is exempt from the paid sick leave and expanded family and medical leave requirements of the FFCRA only (a) if the leave is requested because the employee’s child’s school or place of care is closed, or child care provider is unavailable due to COVID-19 related reasons; and (b) if providing that employee the requested leave would jeopardize the viability of the employer’s business as a going concern.

A small employer can verify the first part of the test directly by confirming with the employee the specific reason for the requested leave.  If it is because of a school or daycare closure or unavailability of a child care provider, the first prong would be satisfied.  The second part of the test requires that an authorized officer of the business determine and document that at least one of the following three conditions is satisfied:

  • Providing the leave would result in the business’s expenses and financial obligations exceeding available business revenues and cause the business to cease operating at a minimal capacity;
  • The absence of the employee(s) requesting leave would entail a substantial risk to the financial health or operational capabilities of the business because of that employee’s specialized skills, knowledge of the business, or responsibilities; or
  • There are not sufficient qualified, willing, and able workers who will be available at the time and place needed to perform the labor or services provided by the employee(s) requesting such leave, and those labor or services are needed for the business to operate at a minimal capacity.

The small business employer may make the exemption election directly.  The temporary rule does not require the employer to send any documentation supporting the exemption to the USDOL (and, in fact, states that employers should not do so), but the temporary rule does require that those employers electing the small business exemption must document that a determination has been made under the exemption criteria stated above.  The employer is required to retain the supporting documentation and records in its files (presumably in the case of challenge or audit).

While an employer that satisfies the small business exemption criteria described above is not required to provide paid sick leave or expanded family and medical leave due to employee absence as a result of school or daycare closures or child care unavailability for COVID-19 related reasons, the exemption does not excuse the employer from providing other paid leave benefits under the EPSLA for other COVID-19 related reasons.  A small business must still provide up to 80 hours of emergency paid sick leave where the employee cannot work or telework because the employee:

  • Has been diagnosed with COVID-19 or advised by a health care professional to self-quarantine;
  • Is experiencing Coronavirus symptoms and is seeking a medical diagnosis;
  • Is caring for an individual who has been required to quarantine; or
  • Is subject to a government mandated quarantine or isolation order related to COVID–19.

If you have questions, please email Bill Sheils or Dawn Harmon.  Alternatively, Bill can be reached directly at (207) 400-8113 and Dawn at (207) 400-8119.