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Paid Leave Provisions of COVID-19 Bill Will Hurt Small Businesses

03/17/2020

The Senate will consider the Families First Coronavirus Response Act, H.R. 6201, at some point this week, possibly as soon as today. The House already passed the bill in the early hours of Saturday morning, with members having little time to read the legislation before voting on it. The abysmal process concerns aside, the Families First Coronavirus Response Act includes provisions that would certainly have devastating unintended consequences.

Paid family leave has been a focus of House and Senate Democrats. The Democratic presidential hopefuls, former Vice President Joe Biden and Sen. Bernie Sanders (I-Vt.), are proposing different ideas. Biden wants 12 weeks of paid leave. Sanders has also proposed 12 weeks and additional time for certain circumstances. Both are private-sector mandates that will have a negative impact on businesses and employees.

Some Republicans, such as Sen. Mike Lee (R-Utah), have offered different takes, through the Child Rearing and Development Leave Empowerment (CRADLE) Act, which hasn’t been introduced, and the Working Families Flexibility Act, S. 1043. Both of these proposals address the issue in a unique way, without burdensome private-sector mandates. Rep. Andy Biggs (R-Ariz.) has introduced the Freedom for Families Act, H.R. 2163, which would allow families to use funds in a health savings account (HSA) for family leave.

Division C of the Families First Coronavirus Response Act places a paid family and medical leave mandate on employers with fewer than 500 employees. According to the Small Business and Entrepreneurship Council, 99.7 percent of businesses in the United States have fewer than 500 employees. On Monday, the House agreed to H.Res.904 by unanimous consent. This was the so-called "technical correction" to H.R. 6201. H.Res. 904 includes language that could soften the impact on businesses with fewer than 50 employees. Under this provision, the Department of Labor has the authority to issue regulations to exempt these businesses from the burdensome mandate under Division C. Some may view this as a positive development, but Congress has the ability under the Congressional Review Act to nullify regulations issued by an agency, although such a joint resolution would require the signature of the President. Division E provides paid sick leave for two weeks and two-thirds of pay for ten weeks after.

As passed by the House on Saturday, this section of the Families First Coronavirus Response Act mandates that these businesses provide 12 weeks of family and medical leave for employees who have been on the job for at least 30 days. A business would be required to provide two weeks of paid leave and ten weeks of leave at least two-thirds of the employee’s normal pay while an employee is quarantined, caring for an at-risk family member who is quarantined, or caring for a child if his or her school or childcare provider has been closed. It's a dream policy of House and Senate Democrats that could be implemented during the time of an emergency.

However, H.Res. 904 did limit the qualifying need to employees who are unable to telework and have a child whose school childcare provider is closed. Even with the technical correction, the paid sick leave provision of Division E still far-reaching, applying to any one of six reasons to qualify, including caring for an individual who has been isolated, self-quarantined, or caring for a child whose school or childcare provider has been closed. Those directly impacted would be entitled to two weeks of paid sick leave and ten weeks at two-thirds of their normal pay. Those who are caring for children or an impacted family member would receive only two-thirds of their pay.

Division G of the Families First Coronavirus Response Act does provide a refundable tax credit to employees equal to 100 percent of family and medical leave and paid sick leave. Family and medical leave is capped at $200 per day and $10,000 per quarter while sick leave is capped at $511 per day for certain qualified reasons and $200 per for others. Such a tax credit won’t have an immediate impact to help businesses cope with the losses of this new private-sector mandate.

The paid family and medical leave and sick leave provisions expire on December 31, 2020.

Everyone is still trying to grasp the impact of COVID-19 on the economy. A new mandate paid family and medical leave provision in the Families First Coronavirus Response Act could have unintended consequences. Some employers who are cash-strapped because of the disruption in business and related uncertainty may simply lay off workers rather than be forced to comply with a costly mandate.

Congress appears to be failing to learn from the mistakes of past attempts to intervene in the economy during a time of economic stress. The family and medical leave provision of the Families First Coronavirus Response Act is just bad policy that will hurt many small- and mid-sized businesses that are struggling to survive in this time of economic uncertainty may wind up hurting the very employees it’s intended to help.