COVID-19 Paid Leave: When Does the Small Business Exemption Apply?

The Families First Coronavirus Response Act (FFCRA) requires paid sick leave and expanded family and medical leave for employees who miss work for specific reasons related to coronavirus disease 2019 (COVID-19). These requirements generally apply to private employers with fewer than 500 employees, but there is an exemption for employers with fewer than 50 employees. As you will see, this exemption is narrow and limited to very specific circumstances.

An employer with fewer than 50 employees is exempt from the FFCRA’s mandated paid sick leave or expanded family and medical leave requirements ONLY IF:

If both conditions are satisfied, the employer may claim the exemption for the requested leave, but ONLY IF an authorized officer of the business has determined that:

  1. The requested leave would cause the business's expenses and financial obligations to exceed its business revenues and would cause the business to cease operating at a minimal capacity;
  2. The absence of the employee requesting such leave would entail a substantial risk to the financial health or operational capabilities of the business because of the 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 who is requesting such leave, and such labor or services are needed for the business to operate at a minimal capacity.

To properly elect the exemption, an employer must document the fact that the required determination has been properly made. This documentation must be retained in the employer’s files and should not be sent to the Department of Labor. Employers have relatively broad discretion to determine whether providing the required paid leave would jeopardize the viability of their business as a going concern. However, the Department of Labor encourages employers and employees to collaborate to reach the best solution for maintaining the business and ensuring employee safety.

To avoid costly violations of the FFCRA, employers should proceed cautiously when interpreting and applying the law’s exemptions. Employers should also consider Employment Practices Liability Insurance to protect against various employment-related claims.

The Human Equation prepares all risk management and insurance content with the professional guidance of Setnor Byer Insurance & Risk.

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