By now, public sector employers have navigated the first two weeks of employee eligibility for paid leave under the Families First Coronavirus Response Act (“FFCRA”). At the same time, public employers have tried to digest the CARES Act and whether its provisions provide any economic relief. Together, the two laws tell a single story – public sector employers have the same obligations as private sector employers but not the same level of financial support. You are generally on your own to figure out how to manage and pay for your workforce during these unprecedented times. Some aspects of the laws, however, can provide relief valves, provided the appropriate decisions are made and implemented.
First, despite early debates about whether the FFCRA applied to public employers with over 500 employees, the Department of Labor (DOL) has laid such questions to rest. Public sector employers are covered and must provide paid sick and paid family leave under the FFCRA, regardless of the number of employees on the payroll. However, the FFCRA allows employers to opt out of providing paid leaves to “emergency responders,” which most (if not all) public sector employers employ. The DOL’s temporary regulations make clear that “emergency responders” is defined broadly. The DOL intended “emergency responders” to include employees who (1) interact with and aid individuals with physical or mental health issues (including COVID-19), (2) ensure the welfare and safety of our communities, (3) have specialized training relevant to emergency response, and (4) provide essential services relevant to people’s health and wellbeing.
For public employers, this could be a substantial swath of their workforce and include everyone from police officers to corrections officers to child welfare workers. The choice to opt out of coverage for emergency responders is not an all or nothing proposition. The paid sick leave and the paid family leave are separate parts of the FFCRA, each giving employers the ability to opt out for emergency responders. As a result, some public sector employers have opted out of one (paid family leave – because it is 12 weeks) but provide the other (paid sick leave – because it is only 80 hours). Still other employers have chosen to effectively opt out of both but create new categories of paid leave themselves with fewer qualifying reasons for the leave (COVID-19 sickness only). Thus, it is not achieving exclusion through employee count that mitigates the impact of the FFCRA on public sector employers, but it is strategically opting out of coverage where and when appropriate.
For employees who remain eligible for paid sick leave and paid family leave, the next questions public employers face relate to tax credits and payroll deductions. Unfortunately, Congress saw it fit to explicitly exclude government employers from eligibility for tax credits. So, yeah, you’re on your own to foot those unbudgeted costs. With respect to payroll deductions, public sector employers do not need to pay the employer portion of the social security tax. All other payroll deductions, however, remain.
Finally, despite holding on as long as they can, for financial reasons many public employers have started to make the necessary decision to layoff large portions of their workforce. While the layoff terminates those employees’ eligibility for paid sick and family leaves under the FFCRA, they become eligible for unemployment compensation, including an additional $600 per week provided under the CARES Act. The layoffs remove the pressure from payroll, but they create new liabilities for unemployment compensation reimbursement. It’s here that the CARES Act does provide some benefit to public employers. It allows states to enter into an agreement to allow for government employers to be reimbursed for half of the payments made to the unemployment compensation system in lieu of contributions.
Public employers will continually evaluate and reevaluate these issues over the next several weeks – all with an eye toward striking the right balance between service and financial prudence. We are past the point of making easy decisions – but it is the ones we make now and over the next few weeks that could have the longest financial impact or benefit.