Whether a Business May Continue Operating Under Stay-at-Home Orders ... (and what is "CISA"?)

In the past days, states and municipalities have issued various emergency and stay-at-home orders to require isolation and, where appropriate, social distancing. These orders effectively close many businesses except for a few minimum operations. The main order now in place for California employers is Governor Newsom's March 19 Stay-at-Home order, which is posted online here.

This leaves employers wondering whether they may continue operating, and what will happen to their workforce.

Governor Newsom's order, like other similar statewide orders appearing this week, prohibits non-home-based work in businesses not specifically allowed under its terms. It allows continued operation of businesses within the "Essential Critical Infrastructure."

"Essential Critical Infrastructure" refers to a broad set of sixteen "Sectors" and their interdependent businesses and resources. The concept behind the system is that many types of disasters (such as terrorism, military attack, natural events, and pandemic) could cripple entire categories of national operation (such as healthcare or transportation) by degrading even small important parts of the system. Each Sector is dependent on certain other Sectors (such as water and energy).

This system is defined and administered by the Cyberstructure and Infrastructure Security Agency ("CISA"), an arm of the Department of Homeland Security.

The various essential Sectors, descriptions of their operations, and the documents defining each Sector are on CISA's website, located here. The site contains guidance:

"intended to support State, Local, and industry partners in identifying the critical infrastructure sectors and the essential workers needed to maintain the services and functions Americans depend on daily and need to be able to operate resiliently during the COVID-19 pandemic response."

CISA maintains a page providing guidance here (which is cited in multiple state-wide orders such as CA and IL), and Governor Newsom's office has published its own guidance here.

Employers should review these materials, which actually permit a very broad set of infrastructure-important activities, to determine whether they arguably fall within the COVID-administered system.

We also believe that employers should continue their compliance with local ordinance, such as those discussed in our blog posting here, in addition to the state order(s) except where they conflict with state mandate. For example, we believe that a worker needed to support state-approved critical infrastructure in one county may travel out of or through another to work.

We also encourage employers to prepare a document employees may carry explaining that they work for the business in a particular position, that the business performs certain essential infrastructure functions, a description of the functions and why they are allowed, the address of the business and areas where the employee works, and a contact at the business for further information. This may assist employees traveling from home to work or while performing their duties. The same document should be carried by staff performing essential minimal operations under local orders, such as securing inventory or processing payroll while business is suspended.

We will continue watching developments and update this post as necessary.

Congress Passes Sweeping Law Requiring Employers to Provide Up to Twelve Weeks of Paid Leave

Introduction

On March 18, Congress passed and the President signed the Families First Coronavirus Response Act, H.R. 6201, 116th Cong. § 2 (2020), to address issues caused by the current pandemic. For employers, the law radically amends the federal Family and Medical Leave Act (“FMLA”) to require paid “Public Health Emergency Leave” for private employers with fewer than 500 employees and most public agencies. The law also requires these employers to provide up to ten days of “Emergency Paid Sick Leave” per year.

H.R. 6201 is designed to reimburse private employers (but apparently not public agencies) for 100% of the cost of paid leave through refundable payroll tax credits.

The new law takes effect 15 days after enactment, on April 2. Its full text can be viewed here.

Amendments to FMLA – Public Health Emergency Leave

H.R. 6201 Passes the Senate

Under the relevant terms of H.R. 6201, private employers with fewer than 500 employees (and most public employers) will be required to provide paid leave to most employees when they are:

“…unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.”

“Child care provider” includes people who receive compensation for providing child care services on a regular basis. “School” includes both elementary and secondary schools. “Public health emergency” includes “an emergency with respect to COVID-19 declared by a Federal, State, or local authority.”

Unpaid and Paid Leave Required

H.R. 6201 requires an employer to provide qualifying employees with unpaid leave for the initial ten days and paid leave for each subsequent day up to twelve weeks of total time off. Federal Emergency Paid Sick Leave, discussed below, can be used for the initial ten-day unpaid period. Unlike other parts of FMLA, an employee need only have been employed for 30 days and need not have worked any minimum number of hours over the past year.

Paid leave for the remainder of the 12 weeks of available leave must be at least two thirds of an employee’s “regular rate of pay,” which in most cases will be their base hourly rate (though this could become very complicated at the start and end of leave, and during any intermittent leave), capped at $200 per day. Where an employee’s schedule varies weekly, employers usually must average the number of hours worked per day in the 6 months prior to the start of leave. (If the employee did not work over that period, the employer must use “the reasonable expectation of the employee” when hired.)

The maximum total payment to an employee is $10,000 per leave.

Restoration to Position

Employees taking Public Health Emergency Leave must be restored to the same position upon return, if possible, with the limited exception for employers with fewer than 25 employees that (1) the position has since disappeared for bona fide reasons, and (2) the employer has made reasonable efforts to place the employee in an alternate position with equivalent benefits, pay, and other terms. If not placed back to work, the employee must be contacted if a position with equivalent benefits, pay and terms becomes available within one year of the start or 12 weeks of the end of the leave.

Health-Care Providers, Emergency Responders, and Certain Unionized Employers

Employers may exclude employees who are health-care providers or emergency responders from these requirements. There also are alternative compliance options for employers who are part of a multi-employer collective bargaining agreement.

Federal Reimbursement Via Tax Credits

The federal government plans to reimburse employers for 100% of paid leave provided under the law via a refundable payroll tax credit in the quarter leave was paid. Where the amounts paid by an employer exceed the payroll tax due (which would be the case with many small employers), the excess credit will be refunded.

Expiration

The law expires at the end of 2020.

Emergency Paid Sick Leave

Federal Paid Sick Leave

H.R. 6201 also contains the Emergency Paid Sick Leave Act, which requires all employers to provide up to ten additional days of paid sick leave when an employee is unable to work (or telework) because:

· The employee is subject to a government quarantine or isolation order;

· The employee has been advised by a health care provider to self-quarantine;

· The employee is experiencing symptoms of COVID-19 and seeking medical diagnosis;

· The employee is caring for an individual who is subject to quarantine or isolation;

· The employee is caring for a son or daughter whose school or place of care has closed, or whose care provider is unavailable due to COVID-19 precautions; or

· The employee is experiencing any other “substantially similar condition” specified by certain federal officials.

The leave must be made available to employees immediately.

This portion of the law also applies to private employers with under 500 employees and most public employers. Full-time employees are eligible for up to 80 hours of paid leave, while part-time employees are entitled to the number of hours worked on average over a two-week period.

Amounts Payable to Employees

The amount payable for each sick day is generally (1) the employee’s full regular rate of pay for hours an employee would have been scheduled (whether fixed, average, or reasonably expected), but not more that $511 per day, for an employee’s own illness or quarantine, or (2) two-thirds of the employee’s daily pay, but not more than $200 per day, for care of an employee’s family member(s).

These amounts are in addition to any amounts available under an employer’s existing policies or applicable law (such as California’s sick leave rules or local rules as in San Francisco).

Leave Conditions and Retaliation

Employers cannot require employees to use other types of paid leave, including other existing sick leave, before using the federal Emergency Paid Sick Leave for the purposes described above.

Employers may not require employees to help find a replacement when using paid sick time. They also must post a model notice to be prepared by the Department of Labor and, as might be expected, retaliation or other willful violation of the law would result in liability under the federal Fair Labor Standards Act.

Federal Reimbursement

Employers will be reimbursed for Emergency Paid Sick Leave under the same refundable payroll tax credit scheme applicable to Public Health Emergency Leave.

Conclusion

This law creates the most sweeping paid leave rights ever provided under federal law, while at the same time promising refundable tax credits offsetting employer costs.

The law will not fully reimburse employers because management must study, administer, and enforce its terms – each of which carries an unreimbursed administrative cost. It also remains to be seen how employers can advance pay on behalf of the government while continuing operations (when possible) with diminished staff and potential shutdowns under local shelter-in-place orders.

We will continue monitoring interpretations, postings, and regulations developed under H.R. 6201.

Note: Richard Rybicki and Heather Bussing prepared this update and will continue to monitor developments.

UPDATED: Bay Area Counties Prohibit Travel and Close Non-Essential Businesses

Note: This post has been updated (again) effective March 18, 2020. A hard copy of this discussion can be downloaded here.

Adoption of Local “Shelter in Place” Orders

Six Bay Area counties and one local city have adopted “Shelter in Place” orders effective March 17, 2020. These orders severely limit group activities and individual travel in and through each county. The effect on most businesses is even more severe: unless designated as “essential” (or supporting “essential” activities), all businesses in each county must basically close.

Sonoma County has also adopted a Shelter in Place order effective March 18, 2020. Its terms are also virtually identical to other Bay Area counties except for an expanded list of essential businesses including agriculture, dairy, and beverage production (including winery and brewery operations), as well as businesses necessary to supply “agriculture, food and beverage distribution.”

Napa County initially decided not to implement a Shelter in Place order but has since implemented an order, effective March 20, with its own list of essential businesses including any “form of cultivation of products for personal consumption or use,” activities or businesses “associated with planting, growing, harvesting, processing, cooling, storing, packaging, and transporting such products, or the wholesale or retail sale of such products.” instead adopting a revised emergency order effective March 18, 2020. This list appears to cover virtually all agricultural, wine, and beverage-related activities (including both wholesale and retail sale, potentially such as winery hospitality and tasting rooms). The remaining terms of the order are similar to other counties apart from specific coverage of activities related to medical devices and cemetery/funeral services.

The orders were authorized and are enforceable under the California Health and Safety Code; violation by individuals or businesses could result in substantial civil fines, penalties, and even potential criminal prosecution. The orders are expected to remain in place through at least April 7, 2020.

Terms of the Orders

The initial orders are virtually identical and are published on the relevant municipal website, which can be viewed via the following links: Alameda, Berkeley, Contra Costa, Marin, San Francisco, San Mateo, and Santa Clara. San Francisco also published a set of Frequently Asked Questions, a source for interpreting each local order, which can be viewed here.

Sonoma County’s order is also published online here, with Frequently Asked Questions addressed here. Napa County’s shelter-in-place order is published here (and its initial emergency order, effective until March 19, is here).

Effect on Non-Essential Travel and Businesses

First, the orders require all residents to “shelter at their place of residence” with limited exceptions for “essential” activities and some non-group outdoor activities. This means that individuals living in an affected county are not allowed to travel away from home for non-essential work, even if it is outside the county. While this requirement may not be rigidly enforced, it does have a few immediate consequences:

· Individuals who live in an affected county may be fined or prosecuted for traveling to a non-essential business or activity; and

· Individuals who refuse to leave home and report to work at a non-essential activity may insist that they need not do so because leaving home violates the law. Individuals disciplined for failure to report to work at a non-essential business might, for example, make retaliation claims under California Labor Code section 1102.5, which prohibits retaliation for refusing to violate the law, or under California public policy.

Second, of immediate interest to businesses, the orders require all non-essential businesses “to cease all activities at facilities located within” affected counties. This means that they must stop all onsite activity immediately except for “Minimum Basic Operations” limited to:

· The minimum necessary activities “to maintain the value of inventory, ensure security, process payroll and benefits, and related functions; and

· The minimum necessary activities to “facilitate” employees working remotely from their residences.

This is a dramatic limitation meant to effectively shut down all non-essential businesses apart from the bare minimum operations necessary to protect an establishment, process payroll and benefits, and maintain IT access for off-site workers.

Essential Business and Activity

A broad range of businesses have been deemed “essential.” These operations are allowed with “social distancing” limitations, including:

· Healthcare operations and essential infrastructure;

· Grocery operations including supermarkets, convenience stores, other retail grocery and food outlets (even including farmers markets), and pet supplies;

· Food cultivation such as farming and fishing;

· In Sonoma County Only: Agriculture; beverage cultivation, processing and distribution (presumably wineries, breweries and cider); dairies and creameries. These industries may remain open to “preserve inventory and production: but not for “retail business.”

· In Sonoma County Only: Businesses necessary to supply agriculture, food, and beverage cultivation, processing, and distribution;

· In Napa County Only: Any form of cultivation of products for personal consumption or use, activities or businesses “associated with planting, growing, harvesting, processing, cooling, storing, packaging, and transporting such products, or the wholesale or retail sale of such products;”

· In Napa County Only: Specific coverage of manufacturers, distributors, warehouse facilities, suppliers and servicers of medical devices, diagnostics, equipment and services, and activities required to maintain the supply chain;

· In Napa County Only: Specific coverage of cemetery and funeral service providers;

· Food and shelter services for disadvantaged individuals, and residential facilities and shelters for seniors, adults, and children;

· Food and shelter services for disadvantaged individuals, and residential facilities and shelters for seniors, adults, and children;

· Home-based care for seniors, adults, or children;

· Child-care facilities (but with dramatic limitations on the manner of care);

· Newspapers, television, radio, and other media services;

· Gas stations and auto-supply, auto-repair, and related facilities;

· Banks and related financial institutions;

· Hardware stores;

· Services necessary to safety, sanitation, and essential operation of residences and permitted businesses such as plumbers, electricians, exterminators, and other service providers;

· Mailing and shipping services, including post office boxes;

· Educational institutions;

· Laundromats, dry cleaners, and laundry service providers;

· Restaurants and other facilities that prepare and serve food but only for delivery or carry out;

· Businesses that supply products needed for people to work from home (this is undefined);

· Businesses that ship or deliver groceries, food, goods or services directly to residences;

· Airlines, taxis, and other private transportation providers providing transportation services necessary for essential and other authorized activities;

· Professional services, such as legal or accounting services, when necessary to assist in compliance with legally mandated activities; and

· Businesses that supply other essential businesses with the support or supplies necessary to operate.

This last category is the least well-defined, as it is not clear how much “support” or “supply” is enough to count as “essential.”

Maintaining operations in a non-authorized business could have serious civil and criminal consequences, including fines up to $1000 per day and even imprisonment. On the employment side, employees disciplined for failure to report to work at a non-authorized business could make the same types of whistleblower, retaliation, and public policy claims discussed above.

Other Consequences

The significance of employee layoffs due to ordered shutdowns is unclear. Employers will argue that employees have not been terminated or laid off, but authorities may argue that shutdowns longer than one pay period qualify as a “termination” requiring immediate payment of final pay and accrued vacation. It is far more likely that the federal government will adopt short-term paid leave requirements (pending in Congress this week) that clarifies employment status and provides tax credits for paid leave. Some of these dynamics are discussed in our recent blog post, which can be viewed here.

Even businesses deemed “essential” are likely to encounter workforce shortages due to employees’ family or childcare needs. Affected county schools are shut down, immediately creating childcare issue that working parents may not have anticipated. For employers with 25 or more employees, workers typically have a right to take up to forty hours per year off to attend to a “school emergency” (see Labor Code section 230.8), and workers at employers with twenty or more employees are likely to invoke either FMLA or state parental leave rights for child and family quarantines or illness.

Employers will also need to comply with benefit and coverage issues, from monitoring potential COBRA notices necessitated by loss of coverage during long-term closures to providing information on short-term unemployment benefits.

Conclusion

The effect of these orders is not yet fully understood and will develop over the coming days. If not followed, they may be replaced with even more dramatic limitations stopping almost all social activity.

Fortunately, both local and federal authorities seem poised to craft comprehensive relief programs designed to assist individuals – and hopefully businesses – affected by the pandemic event.

We will continue to monitor the situation and provide updates as events develop.