Consecutive Sentences

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Additional Guidance for the Small Business Exemption to Paid Sick Leave and Expanded FMLA

By: Abbey Furlong

In mandating that employers with fewer than 500 employees provide 80 hours of emergency paid sick leave and emergency expanded leave under the Family and Medical Leave Act, the Families First Coronavirus Response Act references certain exceptions for small businesses with fewer than 50 employees. But without additional guidance or more specific criteria included in the Act, small business owners are left wondering how or if they qualify for the exception. Formal regulations are expected to come in the next several weeks but in the meantime, the Department of Labor recently issued some guidance on this issue.

A small business with fewer than 50 employees is exempt from providing (a) paid sick leave due to school or place of care closures or child care provider unavailability for reasons related to COVID-19 and (b) expanded family and medical leave due to school or place of care closures or child care provider unavailability for reasons related to COVID-19 if doing so would jeopardize the viability of the small business. Under the DOL’s additional guidance, to claim this exemption, an authorized officer of the business must determine that one (or more) of the following criteria is met:

  1. Providing paid sick leave or expanded FMLA leave would result in the small business’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 paid sick leave or expanded FMLA leave would pose a substantial risk to the financial health or operational capabilities of the small business because of employee’s specialized skills, knowledge of the business, or responsibilities; or
  3. There are not sufficient 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 paid sick leave or expanded FMLA leave AND these labor or services are needed for the small business to operate at a minimal capacity.

Here are the takeaways for small business owners:

  • For eligible employers, the small business exemption applies to the expanded FMLA leave but only applies to one of the six reasons (discussed in my previous blog) that eligible employees are permitted to take emergency paid sick leave. This means that even employers eligible for the small business exemption are required to provide emergency paid sick leave to their employees unless the employer’s reason for requesting paid sick leave is to provide care for a minor child whose school or place of care is closed or whose child care provider is unavailable for a COVID-19 related reason.
  • Only one of the above criteria needs to be met to qualify for the small business exemption, but the threshold is high.
    • The first and third criteria require determinations that providing the emergency paid sick leave or expanded FMLA leave would essentially cause the business to cease operations altogether. If the business can continue operating “at a minimal capacity” while providing the emergency paid sick leave or expanded FMLA leave, the small business will not qualify for the exemption based on criteria (1) or (3).
    • The second criteria does not go quite as far as the first and third in terms of the required determination on the impact on the business but is limited to employees whose absence would threaten the financial health or operational capabilities of the business because of their specialized skills, knowledge of the business, or responsibilities. This criteria is most likely intended for skilled trades or employees classified as exempt but the forthcoming DOL regulations may address this criteria in more detail.
  • Employers are not required to submit any materials to the DOL to qualify for the exemption but must document why the small business qualifies for the exemption based on the above criteria and retain that documentation for their records (potentially in the event of an audit). Employers should take steps to carefully document their financial circumstances (including expenses and revenues and any projections completed of the impact to the small business on providing paid sick leave or expanded FMLA leave to employees) and their ability to continue business operations at a minimal capacity to justify the exemption.

As is evident from our expanding collection of blog posts dedicated to the impact of the coronavirus pandemic, we are in a period of rapid change as our understanding of the novel coronavirus and the COVID-19 disease it causes continually evolves. We will continue posting updated information as it becomes available to serve the needs of our clients during this trying time.

Abbey joined Lane & Waterman in 2010. Her trial law practice primarily consists of professional malpractice, employment law, and products liability.