Since the Families First Coronavirus Act (FFCRA) passed in mid-March, small businesses have wondered how the U.S. Department of Labor would apply the act’s small business exemption from certain paid sick leave and supplemental family and medical leave benefits. With the Department of Labor’s recent release of its final rule interpreting the act, we finally have an answer.

Under the FFCRA’s small business exemption, certain small businesses with fewer than 50 employees can deny an employee paid sick leave or expanded family and medical leave under limited circumstances. Specifically, a small business can deny supplemental family and medical leave as well as paid sick leave requested to care for a son or daughter who is without school or childcare because of COVID-19 if an authorized officer of the business determines that the leave would jeopardize the viability of the business because:

  1. The leave requested would cause the small employer’s expenses and financial obligations to exceed available business revenue and cause the small employer to cease operating at a minimal capacity;
  2. The absence of the employee or employees requesting such leave would pose a substantial risk to the financial health or operational capacity of the small employer because of their specialized skills, knowledge of the business, or responsibilities; or
  3. The small business cannot find enough other workers who are able, willing and qualified, and who will be available at the time and place needed, to perform the labor or services the employee or employees requesting leave provide, and these labor or services are needed for the small employer to operate at a minimal capacity.

Establishing eligibility for the small business exemption

An employer can choose to exempt a single employee or a group of employees, depending on the circumstances. Businesses electing to apply the small business exemption are not obligated to send any documentation to the Department of Labor, however, small businesses applying for the exemption are expected to document why offering paid sick leave or supplemental family and medical leave under these conditions would jeopardize the company. All documentation should be retained for four years.

If your business plans to apply the small business exemption, it is worthwhile to consider reaching out to legal counsel before doing so.

Notice requirements still apply

If a small business exempts one or more employees from certain paid sick leave and supplemental family and medical leave benefits under the FFCRA, it still must provide notice to its employees of the rights the act offers. Customarily, this means posting the required FFCRA poster in a conspicuous place where it is clearly visible to all employees in the workplace or posting to an internal website, emailing or mailing the posting to employees working from outside the workplace.

Alternatives to small business exemption

Employers who choose to apply the small business exemption to avoid paying paid sick leave and supplemental family and medical leave will likely do so to ensure the longevity of their business after the COVID-19 crisis subsides. Fortunately, there are several other options besides the small business exemption to provide employers with relief.

Companies that provide paid sick leave and supplemental family and medical leave under the FFCRA can receive tax credits to reimburse 100% of costs paid to provide employees with leave. Additionally, the CARES Act allows small businesses to apply for a Paycheck Protection Loan of up to $10 million through which funds can be used to cover payroll, rent and insurance. All covered expenses over an eight week period after receiving the loan are eligible for debt forgiveness.

Information about COVID-19 and its impact on local, state and federal levels is changing rapidly. This article may not reflect updates to news, executive orders, legislation and regulations made after its publication date. Visit our COVID-19 resource page to find the most current information.