In light of these changes, employers should take immediate action to assess:
- Whether they remain a “covered employer” under FFCRA after accounting for employees for whom the employer has no work.
- Whether they need to revisit prior leave denials based on lack of available work, “health care provider” status, or intermittent need.
- Whether to issue new policies or guidance to employees regarding FFCRA rules and guidelines.
In light of the Court’s ruling, which applies at least to employers in New York but could be adopted by other courts, employers should consider working with counsel to develop contingency plans in the event other jurisdictions follow the lead of the today’s opinion.
The FFCRA and the DOL’s Final Rule
The FFCRA, which went into effect on April 1, 2020, provides two forms of paid leave – emergency paid sick leave (EPSL) and emergency family and medical leave (EFML) – to businesses with fewer than 500 employees in the U.S.
Eligible employees can use EPSL if they (1) are subject to a federal, state, or local quarantine or isolation order related to COVID-19, (2) have been advised by a health care provider to self-quarantine due to concerns related to COVID-19, (3) are experiencing symptoms of COVID-19 and are seeking a medical diagnosis, (4) are caring for an individual subject to a quarantine or isolation order by the government or a health care provider, (5) are caring for a child whose school or place of care is closed, or whose childcare provider is unavailable, because of COVID-19, or (6) are experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor. Eligible employees can use EFML if they are unable to work because they must care for a dependent child due to COVID-19.
On April 1, 2020 – the same day the FFCRA took effect – the DOL promulgated a final administrative rule implementing the statute’s provisions (the Final Rule). The Final Rule, which is effective through December 31, 2020, provides rules and direction relevant to the administration of the FFCRA’s paid leave requirements. Certain provisions of the Final Rule, such as the “work-availability” requirement and definition of “health care provider,” placed limits on which employees could use FFCRA leave. For instance, under the “work-availability” requirement, employees are not entitled to take leave if their employers do not have work for them. Meanwhile, the DOL defined “health care provider” expansively to include not just doctors, but also anyone employed by a healthcare-related institution or an entity that contracts with such institution. Next, the Final Rule generally prohibits employees from taking intermittent leave unless their employer agrees to the intermittent leave. Lastly, the Final Rule requires that employees submit to their employer, prior to taking FFCRA leave, documentation supporting the reason for and duration of their leave.
New York sues to invalidate several provisions in the Final Rule
On April 14, New York State Attorney General Letitia James filed a lawsuit against the DOL in Manhattan federal court alleging that the agency exceeded its rulemaking authority with respect to (1) the “work-availability” requirement, (2) the Final Rule’s definition of “health care provider,” (3) the prohibition on intermittent leave, and (4) the documentation requirements. Specifically, New York claimed that each of these four provisions either limited paid leave or burdened its exercise, forcing employees to choose between taking unpaid leave and going to work even when sick, therefore contravening the purpose of the FFCRA.
Following multiple rounds of motion practice, the Court substantially adopted New York’s position and rejected substantial portions of the Final Rule.
Work-availability requirement
The Court struck down the Final Rule’s “work-availability” requirement, ruling that the DOL did not provide sufficient justification for it. The Court went on to hold that the “work-availability requirement” is contrary to the FFCRA’s purpose because it “may considerably narrow the statute’s potential scope,” given the large number of businesses that have experienced temporary shutdowns and slowdowns of business nationwide.
For instance, if an hourly employee’s hours were completely reduced because of a COVID-19-related business slowdown, the employee may be entitled to leave, even if the employee is not scheduled to work.
The Court did not address whether its ruling would require employers to provide leave to employees who are furloughed. As a result, it is possible that employers may be able to utilize furloughs to avoid the financial liability of providing paid leave to employees for whom no work is available. However, given the lack of clarity in the Court’s order, it is possible that the Court (or a different court) could interpret the ruling to also apply to employees who are furloughed due to a lack of work, such that furloughed employees would be entitled to leave. This lack of clarity may create substantial challenges in determining whether employers are covered by FFCRA and whether to undertake reductions-in-force in lieu of furloughs to avoid FFCRA’s costs and administrative burdens.
Definition of “health care provider”
The State of New York next argued that the DOL stretched the definition of “health care provider” too broadly when it defined the term in its Final Rule to include not just doctors, but also essentially anyone who works for or contracts with a healthcare-related institution. This broad definition has allowed employers to deny FFCRA leave to a large number of employees who are not directly engaged in providing health care services.
In its order, the Court held the DOL’s expansive definition of “health care provider” improperly focused on the identity of the employer as a healthcare provider, rather than whether the individual employee is capable of providing health care services. The Court therefore vacated the Final Rule’s definition of “health care provider”.
As a result, the term “health care provider” is limited to how it is defined under the FMLA, as “a doctor of medicine or osteopathy who is authorized to practice medicine or surgery (as appropriate) by the State in which the doctor practices.” Again, this change fundamentally reshapes the FFCRA landscape. Employers must now consider revisiting prior leave denials and their FFCRA policies to sort employees into covered and non-covered categories based on the narrower FMLA definition.
Intermittent leave
The third provision of the Final Rule that the Court vacated permitted employees to take intermittent FFCRA leave only upon agreement between the employer and employee. While the Court agreed with the DOL that it is proper to constrain the exercise of intermittent leave to circumstances where there is minimal risk that the employee will spread COVID-19 to other employees, the Court held it is unreasonable to require an employer’s consent for intermittent leave.
In practice, the Court’s holding as to intermittent leave means that an employer must allow intermittent leave unless the employee’s specific circumstances appear to create with a higher risk of viral infection.
Documentation requirements
The fourth and final provision vacated by the Court was the Final Rule’s requirement that employees submit to their employer, prior to taking FFCRA leave, documentation indicating, inter alia, their reason for leave, the duration of the requested leave, and, when applicable, the authority for the isolation or quarantine order qualifying them for leave. The Court held that the FFCRA only requires employees to provide notice prior to taking leave, such that the Final Rule’s requirement that they also provide documentation imposed a different and more stringent precondition to leave that was inconsistent with the FFCRA’s notice provision. Consequently, employers may be prohibited from verifying the need for leave prior to an employee’s return from FFCRA leave.
Unanswered questions and looking ahead
Given the far-reaching implications of the order, it is likely that the DOL will appeal it to the Second Circuit and seek an emergency stay pending review. While the ruling works its way through the appellate process, a number of questions remain unanswered, creating a landscape of uncertainty for employers.
First, today’s ruling technically does not apply nationally, and is limited to the Southern District of New York, and perhaps the Second Circuit. Nevertheless, the Court’s opinion is inconsistent with what companies across the country have been doing to comply with the FFCRA since the beginning of April 2020. If the Second Circuit does not stay the Court’s decision pending appeal, then employers who operate in New York as well as other states will have differing obligations depending on where they operate. Employers in other jurisdictions are also urged to exercise caution as they may now be deemed to have notice that the Final Rule is not valid should the decision later be upheld or adopted in other jurisdictions.
Another area of uncertainty, as previously mentioned, is the impact of the order’s vacation of the work-availability requirement on furloughs. If furloughed employees are now eligible for leave, then they must be counted for purposes of determining whether a company falls within the FFCRA’s 500-employee threshold. If furloughed employees who were previously excluded must be now counted, this change could push an employer’s employee count above 500. In those circumstances, employers may be excused from FFCRA obligations. However, it is unclear whether employers may also be barred from claiming tax credits for FFCRA leave that has already been paid out.
Other states may quickly follow New York’s lead and file “copycat” lawsuits in an effort to duplicate the Southern District of New York’s holding in other areas of the country. A patchwork of differing rulings could soon emerge, imposing different and potentially inconsistent obligations on employers who have employees in multiple states. This is likely not the last or even highest court to interpret the DOL’s Final Rule, and litigation over the FFCRA and the DOL’s interpretation of the statute may continue for the foreseeable future.
Our Reed Smith Coronavirus team includes multidisciplinary lawyers from Asia, EME and the United States who stand ready to advise you on the issues above or others you may face related to COVID-19.
For more information on the legal and business implications of COVID-19, visit the Reed Smith Coronavirus (COVID-19) Resource Center or contact us at COVID-19@reedsmith.com.
Client Alert 2020-471
