In this episode, we are joined by Michael Slocum and Kristine Feher, Shareholders at Greenberg Traurig, to discuss issues that employers and employees face during the COVID-19 pandemic.
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Learn how to listen to The Hospital Finance Podcast® on your mobile device.Highlights of this episode include:
- Steps that some employers have taken to address COVID-related closings and business slow-downs.
- A review of government benefits and assistance available to help employers and employees whose businesses are impacted by COVID-19.
- What 5 programs under the CARES Act have expanded unemployment benefits?
- Background on the Payment Protection Loans program under the CARES Act.
- Additional options for employers who want to avoid layoffs.
- Visit Greenberg Traurig’s COVID-19 Resource Center for additional information.
Mike Passanante: Hi, this is Mike Passanante and welcome back to the award-winning Hospital Finance Podcast®. The COVID-19 pandemic has affected the employment of millions of Americans and forced businesses to take dramatic steps to stay afloat. On today’s show, we’re going to touch on a variety of issues that employers and employees face as they navigate this tumultuous environment and the types of assistance available to help them get to the other side. Joining me are Michael Slocum and Kristine Feher, shareholders in the Labor & Employment department at Greenberg Traurig, where they counsel employers on all aspects of the employment relationship and defend employment-based litigation. Mike and Kris, welcome to the show.
Michael Slocum: Thanks for having us.
Kristine Feher: Thank you, Mike Happy to be here.
Mike Passanante: Kris, let me turn to you first. What are some of the steps you’ve seen employers taking to address COVID related closings and business slowdowns?
Kristine Feher: Well, we’ve seen a lot of different steps, depending on the size and nature of the business and other business factors. For example, retail stores might be doing things differently than other kinds of businesses because they need to shut down their operations entirely. I’m going to focus on private non-unionized employers in all of my comments today, but I will give you an overview of some of the things we’re seeing, and some of these points carry over to public and unionized companies as well.
So the first thing we’re seeing is a lot of employers are reducing wages for existing employees. And they’re doing that in order to try to keep as many employees as possible employed, but there are some things you need to consider if you’re thinking about reducing wages. First of all, you need to make sure that all employees are still paid consistently with any applicable contracts or agreements. So if they have a collective bargaining agreement, or if they have an individual employment agreement, you still need to be aware of that and honor those terms.
You also need to make sure that folks are being paid at least minimum wage and keep in mind that minimum wage varies by location, so some states, and even cities, have a minimum wage that’s higher than the federal minimum wage. So need to make sure they’re being paid minimum wage, plus overtime if they’re eligible for it, although most folks are not working more than 40 hours a week these days.
If you’re reducing pay for exempt employees, those are the folks who are not eligible for overtime compensation because of their job duties and their pay level. There are some other things we need to consider there, including how that’s going to impact their exempt status.
Another thing we’re seeing employers do instead of, or in addition to reducing pay, is furloughing employees. So you might have heard that word furlough, and essentially what it means is a temporary layoff with the expectation that you’ll bring those employees back in the near future so hopefully, after COVID recedes a bit and allows us to reopen businesses.
So furloughing can be a really good approach for a lot of reasons, because it lets employees know that you still expect to have a job for them when this emergency is over. So from a morale perspective, it’s got some appeal. It also means you don’t have to go through the cost and expense of rehiring employees after the emergency. And there are some benefits that people might be eligible for when they’re furloughed. That varies, as most of my comments do today, based on the location of the business and what state laws and city laws apply and also based on the employer’s policy. But typically employees who are furloughed may be eligible to use any earned sick leave that they have available during the furlough so that they are getting paid- for that portion of the furlough. They may also be eligible to use any accrued vacation or paid time off that they have available, and they may be eligible for unemployment benefits as well. Even though they’re still technically employed, they’re allowed to apply for unemployment benefits, at least in most states. Most employers also continue employee health benefits at company expense during the furlough, so that can be a nice benefit for employees as well because they do worry a lot about that, as you can imagine. And unfortunately, some employers are also finding it necessary to lay off employees because they aren’t sure whether they’re going to have the ability to restore jobs at the end of the quarantine, and that’s also something that needs to be considered in light of any contracts that folks may have, including collective bargaining agreements, and also taking into account that there are some risks and potential costs that are associated with layoffs.
Mike Passanante: What kinds of issues should employers be concerned about when they are considering the need to lay off employees?
Kristine Feher: Well, there are a lot of them. All of these are usual issues that you worry about when you’re doing a layoff that is not necessarily due to COVID, but for any reason. So one that you need to be aware of is contracts whether those are collective bargaining agreements or individual contracts. They’ll usually have some notice and termination provisions, or they might have severance provisions that you need to comply with. Another thing you need to do is make sure that you know what the state law requirements are in terms of paying out employees for any compensation that’s under state law or under a policy. For example, in some states, you need to pay employees out for all approved pay, all earned pay, as well as any PTO that they have available on the day that you lay them off, not just in the next payroll, but on the very day that you lay them off. in other states, you may need to pay out in the next payroll. And depending on your policies and state laws, you may have to pay people for PTO or not, and you may have other complications. You need to make sure you understand the legal requirements for payouts. Also, under federal law, there’s an act called the WARN Act, and most states have what we call a baby WARN Act, a companion act. And basically, all of those are about giving folks advance notice if you’re going to have a plant closing or a mass layoff. There are different numbers that trigger a WARN event, as we call it, but they can be as little as 25 employees impacted under some laws. And basically, what those laws require is that you either give people advance notice and the statutes to find how much notice. Usually, they’re 60 or 90 days. But if you can’t or don’t give them that notice, that you will give them pay in lieu of notice. There are exceptions that apply to some of the COVID-related circumstances. There’s an unforeseeable business circumstances exception under federal law, and there’s an exception under New Jersey law, for example, that applies. You really do need to look at that on a state-by-state basis to figure out if you have to give this advance notice. And of course, as in any layoff, you have to be wary of discrimination. So if you’re laying off employees, you have to make sure you’re not choosing employees based on protected characteristics. And that includes having taking leave that’s available to them under the FMLA, the Family Medical Leave Act, or under any of the COVID-related statutes. When folks are taking leave because they’re sick or caring for a child or a family member, that leave is protected, and you can’t decide to lay them off because they took that leave. But you also have to be aware of all the other protected characteristics that we typically worry about. So age, race, gender, national origin, religion, and things like national origin may not typically be a big concern, but now there is a lot of discrimination against Asian-Americans because of COVID, and so you have to be particularly careful in looking at your data to make sure you’re not having an unfair impact on any of those groups. And then secondly, you should think about the possibility of offering separation packages for employees when you’re letting them go. That assumes that you have some funds or some ability to give them some sort of separation package, but there’s no magic amount that it has to be, and if you do give them something they’re not otherwise entitled to, in exchange for that, you can get a separation agreement that will release all claims they could have relating to their employment and also to the separation. So that is a way of getting a clean break from folks and inferring that you’re not going to have lost the labor claims during the layoffs.
Mike Passanante: Kris, what kinds of government benefits and assistance are available to help employers and employees whose businesses are impacted by COVID?
Kristine Feher: A lot is the answer. We are seeing legislation at both the state and federal level that’s aimed at helping businesses and employees to weather the storm. And again, my comments are going to focus mainly on federal laws because state laws obviously vary by location, and it would be a much longer broadcast if I were going to talk about 50 different state laws. But both states and the federal government have enacted laws that provide for additional family and medical leave, expanded unemployment, and other benefits. So at the federal level, the primary new legislation that we’re seeing is two things. The Family First Coronavirus Response Act, or the FFCRA, and the Coronavirus Aid, Release, and Economic Security act, which is called the CARES act. And I’m pretty sure the federal government must employ somebody whose job it is to name statutes so that they can come up with catchy acronyms like CARES act. It’s a good job if you can get it, but Mike is going to talk to you a little bit more later about the CARES act, but I will give you a little overview of the FFCRA. So most people are already familiar, at least loosely, with the family and medical leave act, or the FMLA. That gives job protected leave to folks when they have or adopt a baby or they have a various health condition of their own or they need to care for a family member who has a serious health condition. FMLA is unpaid leave unless you get benefits from some other source like from short term disability or something. The FFCRA is basically the FMLA on steroids. So it gives you additional leave, it expands the reasons for which people can take leave, and it also provides for certain benefits during that leave. So the FFCRA applies to most employers including private employers with fewer than 500 employees. And of course, there are specific eligibility criteria for the employees too in terms of being eligible for these, and I’m not going to go through all the triggers and criteria, but just be aware that it’s not automatic. Folks do have to meet some criteria to be eligible for benefits. But essentially, it provides leave for more people who can’t work due to COVID including people who need medical leave because of their own COVID infection symptoms or exposure and people who need family leave to care for sick family members or for children whose schools are closed due to COVID.
Mike Passanante: Kris, you mentioned leaves of absence. Are those paid or unpaid?
Kristine Feher: Some of those– as I mentioned, traditional FMLA leave is unpaid, but the FFCRA provides two new kinds of paid leave. So the first one is emergency sick leave benefits– emergency paid sick leave benefits, and those are available to people who can’t work because they are either subject to a government isolation order or quarantine order directed to them individually or instructed by their doctor to self-quarantine or experiencing symptoms of COVID and seeking diagnosis or caring for a family member who meets any of those criteria or a child whose school or daycare is closed or childcare provider’s unavailable because of COVID. And there’s also a catch all for substantially similar conditions specified by the Secretary of Health and Human Services. So if we should meet any one of those triggers can be eligible for up to 80 hours of benefits, so basically, that’s two weeks of pay for full time employees and as many hours as a part time employee typically works during a two week stretch for part timers. Employees who can’t work because they need to care for a child whose school or daycare is closed, or the childcare provider is unavailable can also be eligible for 10 more weeks of paid leave. And this is under the Emergency Family and Medical Leave expansion act. So this is the part that amps up the paid leave that would otherwise be available under the FMLA to make it available to people who need it because of childcare concerns related to COVID and also to make a portion of it paid. And employees can also be eligible for other leave, paid or unpaid or both based on state law, employer policies, and also their individual circumstances. So that can include, for example, worker’s compensation if folks get COVID from the workplace, or short and long-term disability benefits if they’re sick themselves, as well as sick leave and paid vacation time. So there are a lot of different sources for benefits.
Mike Passanante: And how much pay are employees eligible for if they qualify for leave under the FFCRA?
Kristine Feher: Well, it actually depends on the reason that they’re unable to work and need leave. In total, they can be eligible for up to 14 weeks of leave and 12 weeks of those can be paid depending on whether they qualify. There are two components to the paid leave. The first one is emergency paid sick leave, and the amount of pay that an employee can get for emergency paid sick leave depends on whether they are out for their own medical symptoms, a government isolation order, or doctor’s instruction to quarantine that applies to them. If they aren’t, then they’re entitled to their regular pay or minimum wage, whichever one is higher, for up to 80 hours or the number of hours that they ordinarily work in two weeks if they’re part time. That is subject to a cap of $511 per day and $5110 total. If the employee needs emergency sick leave to care for a family member who’s required to quarantine or a child whose school has closed, then they’re eligible for pay at a slightly lower rate. They’re eligible for up to two thirds of their regular pay or the applicable minimum wage, whichever one is higher. But in that case, it’s limited to $200 per day or $2000 total. Now in addition to the emergency paid sick leave, there is also leave provided under the FFCRA, the expanded family leave. And for that portion, which I explained in the prior question, the first 10 days are unpaid leave, but during that unpaid portion, employees are allowed to use any other paid leave for which they might be eligible. So that includes things that they’re eligible for under the employer’s plan like vacation time or are on sick leave, but it also could include the emergency paid sick leave benefits if they’re eligible for those. After that first 10 days, they can be eligible for up to 10 more weeks of leave, and that would be paid leave, and again that’s paid at two-thirds of the employee’s regular rate of pay, up to $200 per day and $10,000 total. So it’s quite a generous benefit, and even though in the first two weeks those folks might receive a lower level of pay than the people who are sick themselves, overall, they’re eligible for up to $12,000 in benefits. And just one point to keep in mind here, as I said earlier, we are focusing on federal laws here, because there are so many different plans with respect to states and even city laws, but all of these benefits, under federal law, are intended to be in addition to and supplement to benefits that are available to employees under state laws and policies. So they keep their eligibility for those benefits as well.
Mike Passanante: Thank you, Kris. Mike, let me turn to you now. We’ve all heard about the record unemployment claims in the past few weeks. What kinds of benefits have been put into place to address these claims?
Michael Slocum: Sure. Thanks. Kris mentioned it briefly, and I’ll focus most of my discussion on this question on the expanded benefits that the federal government put in place under the CARES act, but the immediate answer is it’s the state unemployment benefits that have been in place for a long time. The benefits that states offer typically will cover 26 weeks of benefits. You need to have been, obviously, separated from employment or put on furlough or layoff. There are partial benefits in some state programs for when you are not necessarily laid off entirely, but your hours are severely cut. Again, this is all very state-specific. As Kris mentioned, it’s something where you need to take into account the particular rules that govern in the particular state where you’re working. But there are, generally speaking, benefits for great reductions in hours, temporary layoffs or furloughs as Kris mentioned, or just flat out separations.
Mike Passanante: You mentioned expanded unemployment benefits under the CARES act. Can you elaborate on that?
Michael Slocum: Absolutely. So there are about five different programs under the CARES act that expanded unemployment benefits. They’re all designed to supplement what the states already provide, so it’s important to remember that as you’re looking at these you need to sort of fold it into what the state you’re working in already has in place. There are also still some details which are coming out in regulatory guidance, so it’s not entirely settled yet what all will be available, and it is, again, going to be a state-specific inquiry.
But the five basic programs are these. The first one is an extension of an additional $600 a week of benefits to supplement state unemployment benefits through July 2020, so this is a very temporary, immediate program designed to fund additional unemployment benefits on top of what the state does for the next few weeks.
The second one is an additional one week of benefit that the federal government will supply in instances where the states waive what is sort of a standard one-week waiting period pre-eligibility. So when you are initially laid off, states tend to impose a one-week sort of waiting period before you’re allowed to start collecting benefits. Here, where a state will waive that requirement, the federal government will cover that extra week of benefits.
The third one is for workers who remain unemployed beyond that common 26-week state benefit period that I mentioned, and what this will do is offer an additional 13 weeks at $600 a week of benefits. And so rather than having what is effectively a six-month unemployment benefit period, this extends it at least partially on the funding backend for an additional quarter.
The fourth program that the federal government created has funding for states that either have already had in place or decided to implement a short-term compensation program where they offer partial benefits through the end of this year. And then the final sort of more catch-all called the Pandemic Unemployment Assistance Program, that was set up to afford unemployment benefits to individuals who for whatever particular factual circumstance they happen to be facing are not eligible for benefits under state law.
Mike Passanante: And Mike, what about health insurance benefits for laid-off workers? What sort of benefits are employers able to offer them?
Michael Slocum: And again, this is something Kris mentioned. And the answer is it’s a program that we’re largely familiar with already and it’s called COBRA. It is a benefits plan whereby an employee who is separated or laid off can choose to continue with their employer’s health care benefit plan and they need to pay for it themselves. But one thing that employers have done frequently in the past in the context of negotiated severances or we’ve seen a lot of it now where employers are trying to minimize the impact on their employees is the employers are able to subsidize or fund the COBRA payments. And so an employee who is laid off can continue on their employer’s plan and the employer continues to pay for all or at least some portion of it and their benefits are continued in that fashion.
Mike Passanante: And we’ve also heard reports about Payment Protection Loans under the CARES Act. Can you tell us about those?
Michael Slocum: Sure. And when we’re speaking this morning, everyone’s probably heard the original $350 billion that was allocated to that program ran out last week. And the SBA, the Small Business Administration reported there that approximately 1.6 million loans approved, and the money had simply dried up. And as we’re speaking this morning, the latest news is that there is legislation pending in Congress and the administration and the Congressional Committees have been negotiating an extension and a sort of a refunding package. And the latest that we’ve heard is that that is almost agreed to and they’re sort of ironing out the last few wrinkles. And as of this morning, they hope to have something signed later this week, but as we speak right now, it’s not exactly clear what form that will take. And presumably, it will be essentially just putting more money into the program and to follow the rules that were set in place to begin with.
The Paycheck Protection Program or PPP Loans themselves were designed to be available one time to any business with fewer than 500 employees and the count for that includes both full-time and part-time. And again, you have to bear in mind that it is a one-time loan, this is not something where employers can go back three months from now or six months from now and ask for the loan. It is set up such that it was on a first come, first serve basis which is part of why the money ran out and it will run through June of 2020. Whether that’s going to be impacted by the new legislation, we will have to wait and see. The program was designed to offer employers up to 250% of their average monthly payroll expenses, largely salaries, expenses in doing payroll, in processing payroll, and it also allows additional funding to contribute to certain approved operating expenses such as mortgage, rent obligations, health benefits, utility payments, things like that. There’s a list of approved uses for this money. Provided that the employers who take out these loans use them for the approved purposes and do not use them for unapproved purposes, then the loans can be forgiven. To the extent employers, for whatever economic reasons, the realities of the situation, may need to use any portion of the loan monies for unapproved purposes, then the forgiveness aspect can be dialed back to the point where the loan is either only partially forgiven or not forgiven at all. It’s important to remember that with this loan program, not only is it a onetime loan program but it cannot be taken in conjunction with another program that the CARES Act set up which is a tax credit for continuing wages, and I’ll talk about that in a moment. So employers need to look at the economics of either the loan and whether that’s going to be, long-term, a better economic benefit to them and better enable them to continue their operations, continue meeting payroll or continue keeping the lights on, literally, or is it going to be better for them, assuming they’re eligible, to take the tax credit instead.
Mike Passanante: And Mike, are there any other options for employers who want to continue avoiding layoffs?
Michael Slocum: Yes. A couple of them I just mentioned. The first is the tax credit. This is another program that the CARES Act put in place. It’s available to businesses of any size. A lot of the CARES Act, a lot of the other legislation, only impacted private employers with 500 or fewer employees. The tax credit program is available to employers of all sizes, although the rules are going to vary a little bit depending on what size employer you are. 100 employees is sort of a key threshold. So you need to bear in mind that the particular rules and requirements will differ depending on what size your company is. The tax credit is set up to offer a 50% refundable tax credit on wages that are paid to employees who are closed due to governmental orders or who have significant gross receipt declines. Those are sort of the two qualifying triggers. The gross receipts are defined as you look at a quarter of 2020. Given that this law was passed in late March, no one’s really going to be looking at Q1. It’ll probably be Q2 of 2020 and compare that to your gross receipts of Q2 in 2019. If it is a 50% or more reduction in your gross receipts, that will be a trigger for eligibility under this tax credit program. The tax credit is capped at $5000 in wages per employee. So given that we’re talking about a 50% tax credit, effectively $10,000 in wages that you pay to an employee, $5000 of those $10,000 will be available and as a refundable tax credit.
It’s applicable to wages paid from mid-March through the end of this year and, as I said, there are some restrictions that most significant of those being, you cannot take out a PPP loan and also take advantage of the tax credit. You can, however, take out what’s called an Economic Injury Disaster Loan or an EIDL. Those were available under existing authorities through the SBA again. There are a maximum of 2 million dollars as opposed to the larger loans that are available through the PPP. That can go up to 10 million and the terms of those are obviously going to change depending on who your lender is and they are available to employers operating in states that have been declared disaster areas. That’s more or less all the states at this point but those are the three big options available to employers who are trying to navigate through this situation.
Mike Passanante: Kris and Mike, I appreciate all of the great information you shared today. And if someone wanted to learn more about you and what you do, where can they go?
Kristine Feher: Well, they can look at our firm’s website which is www.gtlaw, L-A-W, dot com. And we actually have a Coronavirus sort of page on there that they can look at that has all of these alerts that our firm has issued and other information about Coronavirus. And if they want to find Mike or I, they can also do that on there by searching attorneys. My name, as you said, is Kristine Feher, F as in Frank, E-H-E-R and Mike’s last name is Slocum, S-L-O-C-U-M and, of course, we’d be happy to help.
Mike Passanante: Kris Feher, Mike Slocum, thanks very much for joining us today on the Hospital Finance Podcast.
Michael Slocum: Thank you.
Kristine Feher: Thank you for having us.
COVID-19, better known as Coronavirus, has spread throughout the world. Symptoms of this respiratory disease may include fever, cough, and shortness of breath. These symptoms may show up 2 to 14 days after exposure. If you are experiencing these symptoms and have come into contact or are in an area with an ongoing outbreak, please call a hotline and/or consult with a physician. Clean and disinfect high-touch surfaces. For more information, please visit cdc.gov/covid19. Thank you.
