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Employee compensation options during COVID-19

May 14, 2020

In our previous article, How to address the unintended consequences of PPP vs. unemployment compensation, we outlined the intersection of two federal relief programs, the Paycheck Protection Program (PPP) and unemployment compensation (specifically the extra $600/week through the end of July). As is the case in many government programs, they are well intended, but the practical application leaves a lot to be clarified. Some employees are making significantly more money on unemployment than at their actual jobs (however, temporarily), causing a big dilemma for employers with PPP loans.

Another compensation dilemma occurs when an employee has been advised by a healthcare provider to self-quarantine, if they become ill with COVID-19 (or any other serious health condition) or if they need to care for a similarly situated immediate family member.

Employers should consider the following “alphabet soup” of options when determining whether compensation may be available to a particular employee (or not):

Emergency Paid Sick Leave (EPSL)

Under the Families First Coronavirus Response Act (FFCRA), employees may be eligible for two weeks of EPSL if they are ill, a healthcare provider recommends they self-quarantine or they are required to quarantine by an official edict (e.g., cruise ships). But once that tax creditable EPSL is used, it’s gone and no longer available. 

Considering that COVID-19 is going to be around for a while, using this option first may be ill-advised (no pun intended). There are certain tax credits available to employers to recoup some or all of these costs, though they must be related to qualifying COVID-19 exposure or illness and not exceed set daily pay limits. 

PTO/vacation/sick pay

Employees may be able to use a variety of paid time off benefits provided by their employers, up to their maximum balance available. This could certainly cut into time off for vacations and other leisure pursuits in the future, but these are perilous times, and PTO can be earned back over time. This pay is usually at 100%. 

State/municipality-mandated paid sick leave

Some states and local governments require employers to provide paid sick leave benefits. Check with your HR professional or employment attorney for details. Payouts are typically much less than full pay up to a defined maximum, and for a specified period of time. 

Short-term disability insurance

Some employers provide insurance, or self-fund, for short-term illnesses or injuries. Plan terms and conditions vary widely. This applies only if it is the employee who is ill, though (not if there is concern about a family member). If insured, the insurance provider makes the determination if an employee is eligible for benefits. Payout levels are usually somewhere between 50-66% of an employee’s regular pay, up to a maximum defined in the plan. 

Family and Medical Leave Act (FMLA)

If an employee develops a serious health condition, then the provisions of federal and/or state FMLA will apply to covered employers (usually 50+ employees). Federal FMLA provides job-protected unpaid leaves of absence for up to 12 weeks, but employee benefits are protected. Unpaid time off is also available to care for an ill family member. Provisions of these laws are very complex and often intersect with other benefits. Check with a qualified HR professional or employment attorney for details.

There is a limited tax credit available for employers who provide paid FML that is above and beyond normal PTO plans, but the administrative cost may outweigh the benefits (see the IRS FAQ on this program).

Expanded FML

Under the FFCRA, expanded FML is only available for employees who have children they need to care for due to no school or childcare available. There is no provision in the FFCRA for an employee’s own illness or to care for an ill family member. Regular FMLA as noted above applies. 

Americans with Disabilities Act

Although we do expect to see ADA issues arise from COVID-19 for both physical illness concerns as well as mental health issues with anxiety and depression as return-to-work efforts begin, it is unlikely this would qualify a fearful employee for unemployment compensation (but future legislation could change that).

As with any potential request for a disability accommodation, it is the employer’s responsibility to conduct the “interactive process” with each individual employee, as required in the law, to determine what is a “reasonable accommodation” that does not impose an “undue hardship” on the business. Employees with underlying health conditions may have a disability claim that would qualify them for short-term disability insurance, though.

Workers’ compensation and OSHA

Unless employees are working in a first-responder role, right now it appears unlikely that employees could claim workers’ compensation for contracting COVID-19 at work. However, it is likely that some people will try to do this, and with this unprecedented pandemic, this could change tomorrow. All claims should be processed through your workers’ comp carrier as usual and let the system respond. 

OSHA may also become an issue here as employers have a “general duty” to provide a safe workplace. As businesses get ready to reopen and have employees return to work, it is likely anxiety will run high with some employees. Proactively addressing safety concerns (personal protective equipment, social distancing, cleaning processes and supplies, etc.) will be critical, but especially for employees (or their immediate family members) with underlying health conditions. Although this not related to compensation, it surely will impact employment planning, communication and cost. 

Suffice it to say, the interactions of various employment laws and benefit offerings need to be carefully coordinated to reduce risk exposure.

Employer responsibility to communicate

There are no easy answers to the above scenarios, though we have seen an uptick in interest from employers to implement PTO donation programs as they navigate through these unprecedented times. 

As stated in our previous article, Congressional intent was great in providing all the tools for employers to use for retaining and compensating employees, but it’s no wonder there is great confusion. Detail was sacrificed for speed of implementation. It becomes the employer’s responsibility to understand these options and facts and discuss them with their employees to ensure they understand why a course of action is being taken.

Need more help with COVID-19 issues?

We’re here to help you navigate the uncertainty of the COVID-19 pandemic and its impact on your people, finances and business. We have developed a library of resources in our COVID-19 resource center to help you stabilize today and prepare for tomorrow. We also have solutions that can help you manage your people strategy, operations, business finances and technology. We’re here to help. Contact us today.

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Deborah S. Marshall
Senior Manager
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Julia A. Johnson
Director, Organizational Performance
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