Are Parts of Paid COVID-19 Leave Regulations in Jeopardy? Federal Court Rejects Parts DOL’s FFCRA Regulations, Employers Brace for Possible Fallout

On Monday, August 3, 2020, a New York federal judge issued a decision invalidating portions of the DOL’s regulations implementing the Families First Coronavirus Relief Act (“FFCRA”). The decision’s impact changes the legal landscape employers confront as they strive to comply with the FFCRA—a landscape that is unstable as the DOL and the courts sort out the legality of the disputed regulations.

Background

The FFCRA created certain rights for most employees of employers with less than 500 employees by enacting two other laws, the Emergency Paid Sick Leave Act (“EPSLA”) and the Emergency Family and Medical Leave Expansion Act (“EFMLEA”). The EPSLA permits eligible employees to take up to 10 days of paid leave for COVID-related absences. Under the EFMLEA, eligible employees may take another 10 weeks of paid leave at two-thirds’ pay for employees if they need to stay home to care for their children and cannot telework due to a COVID-related school closing or childcare unavailability. The cost of these leaves are subsidized by setoffs against the employer’s share of payroll taxes that would otherwise be due. Based on the unfolding pandemic, Congress wrote and enacted these laws in only two weeks.

Within two weeks of their enactment, and in record-setting time, the DOL promulgated regulations to fill-in many of the gaps left open by the legislation. This haste may have caused unintended consequences, but, at the very least, it created gaps for both the DOL and employers to address. Among the gaps that the DOL attempted to address through its regulations, and which are the subject of the New York lawsuit, were:

• A rule allowing employers of health care providers to exclude a broad range of employees from the FFCRA’s benefits;
• A rule denying FFCRA benefits to employees who are unable to work due to FFCRA-covered reasons when the employer does not have work for those employees (for example, when the employee would be on furlough status due to a COVID-related reduction in force or furlough);
• A rule allowing for intermittent FFCRA leaves, but only if the employee and the employer agree to the leave time to be used intermittently; and
• A rule allowing employers to require documentation of the need for FFCRA leave time prior to the leave’s commencement, as opposed to as soon as practicable.

The Court’s Holding

For various reasons, the court held that the DOL exceeded its authority by promulgating the above rules. If the court’s holding remains intact, employers may find that their practices—albeit consistent with the regulations—run afoul of the law.

Of particular significance is the impact on who an employer of health care providers may exclude from receiving FFCRA benefits. As defined by the FFCRA, health care providers include more than the FMLA’s narrow definition of that term: “(A) a doctor of medicine or osteopathy…; or (B) any other person determined by the Secretary [of Labor] to be capable of providing health care services.” The Secretary, through the challenged regulations, established an “expansive” definition to include anyone who is employed by or contracts with:

“[A]ny doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution.”

As a result of the expansive definition, employers could exempt many employees who do not directly provide health care services, including clerical employees, dietary employees, custodians, administrators, etc., from receiving FFCRA benefits. This, the court held, was too wide of a net thrown by the DOL.

The court also disagreed with the DOL’s position that employees are not entitled to FFCRA leaves if there is no work for them to perform during the time that leave is needed. Holding the regulations invalid, the court’s decision allows employees who meet the requirements for leave under the EPSLA or EFMLEA to be paid for leave during a time when the employer may not have work for that employee to perform, such as during a furlough, while other employees who do not have a qualifying reason for leave are not paid.

With respect to the regulations related to the use of EPSLA or EFMLEA leave on an intermittent basis, the court found that the DOL could not require employer consent for such intermittent leave and that the regulation requiring such consent is, therefore, invalid. The court did find that the regulation could prohibit intermittent leave “based on qualifying conditions that implicate an employee’s risk of viral transmission.” Such ruling appears, then, to allow the use of intermittent leave only for absences related to school closures and unavailability of childcare, without regard to whether the work is being performed at the worksite or remotely. 

Finally, although the court recognized that employees must provide appropriate pre-leave notice of the need for a qualifying leave, the court found DOL’s regulation requiring pre-leave documentation supporting the need for a qualifying leave to be invalid.

Impact on Employers and Employees

The ruling presents a quandary for all employers subject to the FFCRA, a quandary that—as of this writing—presents no simple guidance for employers, other than a general “beware” and “stay tuned.” New York has asked the court for an injunction prohibiting the invalid regulations from being used, but it is unknown whether any such injunction would apply to employers in New York state or the entire country. It is also unknown whether the court’s decision applies retroactively, which could require employers who previously denied paid FFCRA leave benefits to now provide pay to those who otherwise qualified for EPSLA and EFMLEA leaves. Further complicating these issues is the possibility of an appeal, the possibility that the court’s order could be stayed or put on a “legal hold” while the decision is appealed (if it is appealed), and the possibility that DOL could quickly issue new regulations, with the aim of conforming to the court’s conclusions.

In the meantime, employers are left with many questions, such as:

• Should employers outside of New York change their FFCRA leave practices (including any policies and related forms) to conform to the regulations, as modified by the court’s decision?
• Will employees denied leaves since the April 1 effective date of the regulations have the ability to seek pay or bring claims for time taken without pay per those regulations?
• Should employers await the outcome of an appeal before changing practices that were proper under the challenged regulations?
• Should employers now grant intermittent leaves without exercising any discretion as to the impact such leaves will have on their operations?
• Do employees have a right to paid FFCRA leaves despite the fact that work was or is not otherwise available for them to perform? If so, should employees with limited or no current operations move from employee furloughs (during which employees would, under the court’s order, receive paid FFCRA leaves) to terminations (following which employees would not be entitled to FFCRA leaves)? Could a decision to move from furloughs to terminations constitute prohibited interference with the FFCRA leave requirements?

Conclusion and What Lies Ahead

Although it’s too early to answer these questions, we hope that answers will be made available as the case moves forward and as the DOL reacts. Hopefully, we’ll know more in the next week or so.

Meanwhile, employers should be aware of this decision, and they should confer with counsel as they consider their options for moving forward, particularly as they confront the possibility of denying leaves to employees based upon regulations that the court in New York has found to be invalid. Lawsuits and claims may arise during this state of uncertainty, and more lawsuits outside of New York may be brought in other jurisdictions. 

If you have any questions about the information in this alert, please contact Rob Boonin (rboonin@dykema.com or 734-214-7650), Ray Bissmeyer (rbissmeyer@dykema.com or 210-554-5589), or your Dykema relationship attorney.

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