CORONAVIRUS UPDATE: WHAT NEW YORK EMPLOYERS NEED TO KNOW ABOUT THE MOST RECENT LEGISLATION ENACTED TO ADDRESS THE EFFECTS OF THE CORONAVIRUS PANDEMIC
UPDATE: On May 29, 2020, Governor Cuomo announced that on June 8, 2020, New York City will enter into Phase I of re-opening. In addition, five regions of New York were permitted to enter Phase II of re-opening on May 29, 2020. For further information on Phase I and Phase II industries, please visit Phase I and Phase II, respectively.
Note – Because the situation is dynamic, with state, federal, and local governments considering additional legislation every day, employers should consult with counsel for the latest developments and updated guidance.
This alert summarizes the key provisions of the most recent legislation affecting New York employers enacted to address the effects of the Coronavirus pandemic, and answers employers’ most frequently asked questions.
IS OUR BUSINESS ALLOWED TO REQUIRE OUR EMPLOYEES TO COME TO WORK?
Only if the business is considered “an essential business providing essential services.”
According to Governor Cuomo’s March 20 Executive Order, beginning March 22, and at least until April 17, 2020, New York businesses are prohibited from requiring their employees to physically come to work, unless the business is considered an “essential business providing essential services.”
Employers that are considered an “essential business providing essential services” can continue to require employees to come to work. If they do, such employers must implement rules that help facilitate social distancing of at least six feet and must comply with any other Department of Health guidance and directives for maintaining a clean and safe work environment, as well as federal guidelines issued by the Center for Disease Control.
The Governor’s directive provides a list of 12 categories of businesses that are considered “essential businesses,” with specific examples in each category:
- essential health care operations,
- essential infrastructure,
- essential manufacturing,
- essential retail,
- essential service providers,
- news media,
- financial institutions and service providers for financial markets,
- providers of basic necessities to economically disadvantaged populations,
- essential services necessary to maintain the safety, sanitation, and essential operations of residences or other essential businesses, and
- vendors that provide essential services or products including logistics and technology support, childcare, and services.
The Governor’s March 20 guidance provides examples in each category.
WHAT IF ONLY PART OF OUR BUSINESS IS “ESSENTIAL”?
If an “essential business” provides both essential and non-essential services, the employer can only require in-person attendance for the aspects of the business which provide essential services (“necessary to support the essential services, supplies, or support”), but not for the aspects of the business which provide non-essential services.
Even if a business is an essential business providing essential services, a business may choose to permit its employees to work from home, instead of requiring in-person work performance, if such remote work is possible. All businesses including essential and non-essential businesses must utilize, to the maximum extent possible, any telecommuting or work from home procedures that the business can safely utilize.
If a business does not fall within the list of essential businesses, a business can request to be designated as an essential business by submitting an email application to the state, to permit the business to require in-person work. If you are unsure about your company’s status, you should consult with counsel regarding this or any further questions.
CAN WE TERMINATE EMPLOYEES DUE TO THE ECONOMIC DOWNTURN CAUSED BY THE PANDEMIC?
While you should check with counsel for further guidance in case the law changes, under the current law, a business can terminate any employee for failure or refusal to come to work if it is an essential business, or for any other legitimate business reason including a legitimate reduction in force due to negative economic reasons.
An employer can terminate an employee, even while they are on statutory paid or unpaid leave, as long as the employer can show the employer eliminated the position due to legitimate business reasons such as a company-wide reduction in force, and would have terminated the employee for such reasons even if the employee had not taken leave.
IS OUR BUSINESS REQUIRED TO PROVIDE THE 90-DAY NOTICE OF A MASS LAYOFF NORMALLY REQUIRED FOR CERTAIN EMPLOYERS UNDER THE STATE AND FEDERAL “WARN ACT”?
Most likely not, because the WARN Act notice requirements probably do not apply.
Generally speaking, if an employer engages in a “mass layoff,” a New York State law, referred to as the state WARN Act (Worker Adjustment and Retraining Notification), which is stricter than the federal WARN Act, requires the employer to give 90 days’ advance warning to employees.
For the law to apply, the mass layoff must result in a workforce reduction, lasting longer than six months at a single site, of either (1) 250 employees or more, or (2) 25 employees, if they comprise at least 33% of the workforce at that site.
But the 90-day notice period may be reduced where the layoff is due to “unforeseeable business circumstances,” as a result of “some sudden, dramatic and unexpected action or condition outside the employer’s control.” The federal WARN Act contains similar exceptions. The Coronavirus pandemic likely falls under these exceptions. Nevertheless, even under these exceptions, an employer undertaking a “mass layoff” should give as much advance notice as reasonably practical.
WHAT SICK LEAVE IS OUR BUSINESS REQUIRED TO PROVIDE TO EMPLOYEES AFFECTED BY THE CORONAVIRUS?
Under the recently enacted state and federal laws, assuming an employer has not eliminated an employee’s position due to a legitimate company-wide reduction in force due to the virus, then employers must provide employees with the following sick leave, and must restore the employee to their prior position, assuming the company is still in business and the position still exists.
Employees Who Are Unable to Work Because They Are Either Subject to a Quarantine Order, They Have Been Advised by a Doctor to Self-Quarantine, or They Are Experiencing Symptoms of the Virus and Are Seeking a Medical Diagnosis
Under the recently enacted federal “Emergency Paid Sick Leave Act,” effective April 2, 2020, through December 31, 2020, employers with fewer than 500 employees must provide 80 hours of paid sick leave to such employees, paid at their regular rate of pay, capped at $511 per day and $5,110 in the aggregate.
In addition, under the already existing federal “Family and Medical Leave Act,” employees of businesses with more than 50 employees, who have been working for the company for more than one year, and who are unable to work due to a serious health condition, are entitled to take up to 12 weeks of unpaid leave.
New York State Law
Under the recent New York State legislation, enacted March 18, New York employers must provide the following sick leave to employees who are under a formal local health department mandatory or precautionary quarantine or isolation order who are symptomatic and physically unable to work. To qualify for these state law benefits, the employee must meet all three of these criteria: a) under a quarantine order, b) symptomatic, and c) physically unable to work in person or remotely.
- 10 or fewer employees as of Jan. 1, 2020, and net annual income less than $1 million: Unpaid sick leave until order ends.
- 10 or fewer employees as of Jan. 1, 2020, and net annual income more than $1 million: 5 days of paid sick leave, and unpaid leave until order ends.
- 11 to 99 employees as of Jan. 1, 2020: 5 days of paid sick leave, and unpaid leave until order ends.
- 100 or more employees as of Jan. 1, 2020: 14 days of paid sick leave during order.
If the employee already had additional unused accrued sick leave, the employer must allow the employee to use such unused accrued sick leave during the quarantine order.
Employees who are sick or must take care of a family member that is sick may be entitled to benefits under the employer’s Paid Family Leave and Temporary Disability Insurance policies. Under the new law, a person subject to a quarantine order may be eligible for Paid Family Leave and Temporary Disability Insurance benefits, even if they are not sick, and without waiting for the normal 7-day waiting period. Temporary Disability Insurance benefits are equal to 50 percent of the employee’s average weekly wage for the last eight weeks worked, but no more than the maximum benefit allowed, currently $170 per week, for a maximum of 26 weeks of disability during any 52 consecutive week period.
Given that the federal government has also mandated sick leave for employees affected by Coronavirus, the New York state law says that an employee who cannot work due to the Coronavirus will only receive New York State sick leave, Family Leave insurance benefits, and Temporary Disability insurance benefits to the extent that New York State law provides benefits greater than federal law.
New York City Law
Under New York City law, an employee who has the Coronavirus or any illness or health condition is entitled to either: up to five days of unpaid sick leave for employers with four or fewer employees, or up to five days of paid sick leave for employers with five or more employees. Employees accrue sick leave at a rate of one hour per 30 hours worked.
Employees Who Must Stay Home to Take Care of Someone Who Has Been Quarantined, or to Take Care of a Child Who is Home Because of a School Closure Due to the Pandemic
Under the recently enacted federal “Emergency Paid Sick Leave Act,” effective April 2, 2020, through December 31, 2020, employers with fewer than 500 employees must provide 80 hours of paid sick leave to such employees, paid at 2/3 their regular rate of pay, capped at $200 per day and $2,000 (10 days times $200 per day) in the aggregate. Employers with fewer than 50 employees are exempt from the requirement to provide sick leave to employees who must stay home to take care of a child who is home because of a school closure if the imposition of such requirement would jeopardize the viability of the business as a going concern.
Under the recently enacted federal “Emergency Family and Medical Leave Expansion Act,” effective April 2, 2020, through December 31, 2020, employers with less than 500 employees, must provide 10 days of unpaid leave, followed by paid leave for the remainder of the period the employee is required to stay at home for such reason, based on 2/3 their regular rate of pay, not exceeding $200 per day and $10,000 in the aggregate (50 days times $200 per day), to employees who are unable to work (or telework) because the employee must take care of a child whose school is closed due to a public health emergency arising from the Coronavirus.
Under the recently enacted state legislation, New York employees can obtain Family Leave benefits under their employer’s Family Leave insurance policy, if the employee is subject to a quarantine order, or has to provide care for a minor dependent child who is subject to a quarantine order.
Given that the federal government has also mandated sick leave for employees affected by Coronavirus, the New York state law says that an employee required to stay home to take care of someone with the Coronavirus will only receive New York State Family Leave insurance benefits to the extent that New York State law provides benefits greater than federal law.
New York City Law
Under New York City law, an employee who has to stay home to take care of a family member with the Coronavirus or any illness, or to take care of a child whose school or childcare provider was closed due to the Coronavirus or other public health emergency, is entitled to either: up to five days of unpaid sick leave for employers with four or fewer employees, or up to five days of paid sick leave for employers with five or more employees. Employees accrue sick leave at a rate of one hour per 30 hours worked.
Employees Laid Off Due to a Reduction in Force or Closure of an Employer for Economic Reasons Related to the Pandemic
Employers must abide by their own established policies with regard to payment of unused accrued sick leave or vacation time. For example, if the employer has a policy of paying for such unused leave when an employee is terminated, the employer must pay terminated employees for such unused leave. Conversely, if the company’s policy is not to pay for unused leave, the company does not have to pay terminated employees for such unused leave.
With regard to New York unemployment insurance, the recently enacted state law provides that an employee who is terminated for economic reasons arising from the pandemic is entitled to obtain unemployment insurance benefits immediately, rather than waiting for the normal seven day waiting period.
WILL THE GOVERNMENT HELP PAY FOR THE MANDATED SICK LEAVE OR FINANCIAL LOSSES?
Federal Payroll Tax Credits
Employers who are required to pay the federally mandated sick leave and family leave due to the Coronavirus will receive a payroll tax credit for the amount of the wages paid by the employer up to the federally mandated leave amount. An employer can take the tax credit as a deduction against the amount which the employer owes for Social Security taxes. If the tax credit exceeds the amount owed for Social Security taxes, the excess will be treated as an overpayment that shall be refunded to the employer. Self-employed individuals can take a tax credit against their income taxes, in an amount equal to the amount the individual would have been allowed to receive for such leave if they were an employee.
The Small Business Administration is currently offering Economic Injury Disaster Loans to small businesses of up to $2 million to help overcome the temporary loss of revenue due to the pandemic. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid because of the pandemic’s impact. The interest rate is 3.75% for small businesses. The SBA offers long-term repayment schedules, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
Other Federal Assistance
Congress is currently considering additional significant financial assistance to individuals and companies suffering financial hardship as a result of the Coronavirus pandemic.
WILL OUR BUSINESS INTERRUPTION INSURANCE COVER OUR FINANCIAL LOSSES?
Unfortunately, probably not, but you should check your policy, document your losses, and file a claim.
To determine whether your business interruption insurance covers the hardship caused by the Coronavirus pandemic, you need to review the particular terms of your policy. Most business interruption insurance policies issued in the last few years typically exclude “viruses,” which may mean that claims arising from the Coronavirus may not be covered. In recent years, particularly in the aftermath of the SARS epidemic, many insurers added specific exclusions for bacterial or viral infections to their coverage. Accordingly, any business that has suffered lost income or incurred extra expenses may not be able to recover its losses under a business interruption insurance claim.
It is possible that this gap in coverage and resultant economic loss will soon be addressed at the state level by governments that are considering legislation to force insurance companies to pay Coronavirus related business interruption claims, even when “viruses” are specifically excluded from such policies.
In the meantime, companies should go ahead and file a claim with their insurer, and should document their business losses.