Racing to respond to the devastating impact from the COVID-19 pandemic, Congress passed the Families First Coronavirus Response Act (FFCRA). The FFCRA created Emergency Paid Sick Leave (EPSL) and Emergency Paid Family and Medical Leave (EFML) to employees unable to work for qualifying reasons due to COVID-19. For more information on the FFCRA, see Lane Powell’s FFCRA Legal Update on our COVID-19 Resource Center.
To its credit, in the days following passage of the FFCRA, the U.S. Department of Labor (DOL) immediately began posting guidance for employers and employees on its website. Among other things, the DOL’s guidance stated that employees who were laid off from work before April 1, when the law became effective, would not be eligible for FFCRA leave. On April 1, mere weeks after the President signed the FFCRA,1 the DOL issued rules providing much needed interpretive guidance. This work-availability limitation was adopted in the DOL’s rules.
The New York State Attorney General later sued under the Administrative Procedure Act (APA), challenging portions of these regulations, and arguing that the DOL exceeded its authority. A federal court for the Southern District of New York agreed with the New York Attorney General, and issued a ruling on August 3, striking down several of DOL’s rules. The reach of the court’s order remains unclear, particularly for employees working outside of New York State. Nevertheless, if broadly applicable, the court’s interpretation of the FFCRA represents a sea change on when leave must be granted under the FFCRA.
The Court’s Analytical Framework
Under the APA, courts must defer to an agency’s interpretation of a statute if: (1) the statutory language at issue is ambiguous; and (2) the agency’s interpretations are “reasonable.” To determine whether the agency’s interpretation is reasonable, courts must determine whether the rule is arbitrary or capricious, or manifestly conflicts with the statute. Courts will not accept any rule where the agency appears to arrive at the interpretation with no stated explanation, even if it might be deemed reasonable on an unstated ground.
The “Work-Availability” Requirement
Under the FFCRA, an employee is only entitled to EPSL or EFML leave if they are “unable to work (or telework).” The DOL interpreted this to mean, first, the employer must have work available for that employee to perform (the “work-availability” requirement), and that, second, the employee must be unable to perform this work due to one of the qualifying reasons for EPSL or EFML leave. The New York federal district court struck down this part of the rule. The DOL’s stated reasoning for the “work-availability” requirement was simple: if an employee would be unable to work even if they did not have a qualifying condition, they were not entitled to FFCRA leave. The court was dissatisfied with this reason and concluded it was a “terse, circular regurgitation” of the DOL’s own reasoning that did not demonstrate reasoned decision-making. Under the court’s interpretation, so long as the employee is unable to work or telework due to one of the qualifying reasons for leave, the employee is entitled to the leave even if the employer had no work for that employee.
Under the court’s ruling, it is unclear if employees on furlough or those with reduced hours would be entitled to EPSL or EFML leave based on their previous work schedules. Likewise, it is unclear if an employee on a separate leave who then has a qualifying reason for FFCRA leave would be able to receive paid FFCRA leave. For example, would FFCRA leave be available to an employee with a high risk condition protected under Washington Governor Inslee’s High Risk Proclamation who has stayed home, even though work was available?
Health Care Provider Defined
The FFCRA allows employers to exclude “health care providers” from being eligible to use EPSL and EFML leave. The FFCRA incorporates the federal Family and Medical Leave Act’s definition of a “health care provider,” which includes a “doctor of medicine or osteopathy authorized to practice medicine or surgery in the state,” or “any other person determined by the Secretary [of Labor] to be capable of providing health care services.” Drawing on the Secretary’s authority to define a “person . . . capable of providing health care services,” the DOL broadly defined “health care provider” as anyone employed at a facility providing health care services, or any individual employed by an entity that contracts with such institutions to provide services or maintain or support operations. The New York federal court rejected this definition, concluding that the FMLA authorizes the Secretary of Labor only to identify which employee is capable of providing health care services by examining an employee’s role. It found that the DOL exceeded this authority by adopting a definition that was based on the employer’s operations. In the wake of the court’s decision, the question remains which positions will be “capable of providing health care services.”
Intermittent Leave Predicated on Consent
The DOL’s regulation only allows employees to take intermittent leave under the FFCRA under some circumstances2, and then only if the employer consents. The court agreed with the DOL that public health and safety concerns justified prohibiting intermittent leave where the qualifying reason implicated a risk of viral transmission. However, for the remaining qualifying reasons allowing intermittent leave, the court concluded that predicating such leave on employer consent was unreasonable because the DOL provided no explanation for this requirement.
Documentation as Precondition to Leave
The DOL regulations require employees to provide documentation to their employer before using FFCRA leave. However, the statute itself states that employees seeking to use EFML leave must provide as much notice to employers “as is practicable,” and employees seeking to use EPSL must provide notice “[a]fter the first workday (or portion thereof) an employee receives paid sick time” under the Act. Requiring notice as a precondition to leave, the court concluded, was too stringent and, therefore, inconsistent with the FFCRA. However, the court expressly let stand the DOL’s substantive requirements that the documentation state the reason for leave, the duration of the requested leave, and, when relevant, the authority for the isolation or quarantine order qualifying them for leave.
The New York federal district court’s decision creates some dilemma for employers who seek to grant leave in compliance with the FFCRA and may seek tax credits for doing so.
Open Questions
- Does the court’s ruling apply nationwide? The court ruled on motions for summary judgment and did not appear to issue nationwide injunctive relief. Therefore, it is unclear what impact this has on employers and employees outside of New York.
- Will other states follow suit (pun intended)? If there is no nationwide impact, will other state attorneys general (including from Washington, Oregon and Alaska) initiate similar lawsuits? Likewise, will employees file suit challenging the DOL’s regulation if leave was denied for one of the reasons in the DOL’s regulations, such as work-availability?
- How will the ruling impact employees on furloughs or reduced hours? Under the ruling, the court appeared to adopt the New York Attorney General’s position that an employee may be entitled to paid FFCRA leave even when the employer has no work for that employee. This appears to impact employees on furlough or those working reduced hours. Under most circumstances, these employees would likely be collecting unemployment benefits. If so, does that mean that employers must provide paid FFCRA leave to their employees even when they are closed and have no revenue source?
- How will the IRS calculate the tax credit? A key component of the FFCRA’s paid leaves is that the employer would receive dollar-for-dollar tax credits. See IRS guidance on paid sick leave (Question 22: employer calculates paid leave based on “employee’s hours,” and referring to DOL guidance which still includes the work availability requirement) and paid family and medical leave (Question 27: “calculating it based on the hours “the employee otherwise would have been scheduled to work.”). It is unclear whether the IRS will challenge an employer claiming FFCRA tax credits where the employer believed the applicable paid leave was required under the FFCRA and due to this court ruling, but where the DOL's position eventually prevails.
- Will the DOL issue updated regulations with enhanced reasoning? The court struck down the work-availability requirement because the DOL’s stated reasons were insufficient. Similarly, it struck down the health care provider rule because the substance focused on the entity’s operations rather than the employee’s role. It is possible the DOL will re-issue the regulations that remedy these deficiencies.
What Employers Should Do Now
- Revisit their FFCRA documentation policies. The court struck down the DOL’s requirement that employees submit documentation as a precondition to leave. Employers should review their notice requirements to eliminate any suggestion that notice is a precondition to receiving leave, and instead follow the statutory language: (1) as soon as practicable for EFML leave, and (2) following the first day after EPSL leave.
- Prepare forms for FFCRA leave. The court let stand the DOL’s documentation requirements, so employers should prepare forms seeking this information so that they can get the tax credit from the IRS.
- Stay tuned! If the pandemic has taught us anything, it is that there are no guarantees. The legal landscape in the wake of COVID-19 continues to shift and change and the latest court ruling, in many ways, adds to that uncertainty. Lane Powell is monitoring this activity, so stay tuned for more updates as they come by subscribing to our labor, employment and benefits mailing list here.
Determining how best to meet your business needs during these uncertain times can be challenging. Lane Powell’s team of attorneys are here to help you develop and implement the strategy that supports your business and your employees. For more information, consult Lane Powell’s COVID-19 Resource Center or contact Priya Vivian, Christine Thelen, Katheryn Bradley or Justin Hobson.
1 The President signed the Act on March 18.
2 These circumstances occur when the employee works onsite and: (1) is subject to a federal, state or local quarantine or isolate order related to COVID-19; (2) has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; (3) is experiencing symptoms of COVID-19 and seeking a medical diagnosis; (4) is caring for an individual who is subject to an order as described in reason 1 or has been advised as described in reason 2; or (5) is experiencing any other substantially similar COVID-19 condition as specified in rules from the Department of Health and Human Services. Employees teleworking or seeking leave to care for their child if their school or childcare has been closed or is unavailable due to COVID-19 may take intermittent leave.