COVID-19 (the “Coronavirus”), the Families First Coronavirus Response Act, and The Fall-Out to Your Business

Last Updated:  March 22, 2020

In light of the tremendous consequences to business and individuals associated with the growth of the coronavirus COVID-19 (“Coronavirus”), Neider & Boucher, S.C. has recently published an employment law FAQ on various workplace issues, a primer on Force Majeure clauses, and review of the Family First Coronavirus Response Act (FFCRA).  Our clients have reached out with a myriad of questions regarding ancillary issues associated with running a business during this pandemic.  Because the lessons learned by some could be invaluable for others, we will continue to try to address and share those lessons with our clients and our community.

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This article addresses two areas employers should be paying attention to over the coming days and weeks.

  1. What Employers Can Be Doing (and might be overlooking)

There is ample information available right now about what employers should have been doing with their businesses last year in the event of a pandemic:  Preparing an emergency response plan, building up a cash reserve, renegotiating contracts, etc.  However, not much of this does business owners any good now.  Nonetheless, there are proactive steps employers can and should be taking to help navigate the coming months.

  1. Unemployment Insurance Benefits and Mass Layoffs

Many businesses are being hit hard by the effects of the Coronavirus, particularly those in the service industry.  Very difficult business and labor decisions might need to be made and although the full extent of the additional resources that will be made available to employers by federal and state agencies is not yet known, becoming familiar with existing resources and proactively assisting/informing employees of said resources can help mitigate the effects of the current crisis to the business and its employees.

Please keep in mind the following materials are general guidance and individuals and business owners should consult with their own attorneys and accountants for an analysis of how these issues might apply to their own unique situation.

1. What Employers Can Be Doing (and Might be Overlooking)

Preparing financial and business information for potential grant and loan programs.

Although the federal government has passed the FFCRA, there will almost certainly be additional legislation passed at both the federal and state level.  For example, as of the drafting of this blog, the Wisconsin Economic Development Corp. (WEDC) just announced approval of Small Business 20/20, a program to distribute $5 million in grant assistance for existing recipients of community development financial institution loans who are adversely impacted by COVID-19. Grant recipients will receive assistance for two months of payroll and rent, up to a total of $20,000.  To be eligible, applicants must be a for-profit business and meet specific criteria (more details found here).

Moreover, the mechanics of the FFCRA and the various compliance and reporting obligations may take time to develop.  Being properly prepared to comply with these new rules will offer you peace of mind and the ability to respond quickly to change.  In that same vein, new loan programs, grant programs, and other disaster assistance will likely continue to come to fruition and the more you, as an organization and employer, are organized and ready to pounce on those opportunities, the greater your odds of succeeding through this crisis.

Leverage community resources and old technologies.

This is fancy way of saying “use the phone and reconnect to those in your community.”  Chances are, your local lender, accountant, attorney, alderman, etc. has heard about new initiatives from the local chamber of commerce, auxiliary group, or a particular local, state, or federal agency initiative that is not being well-publicized (or simply lost in the information storm of modern society).   These resources, and being nimble enough to take advantage of them, might be the difference between laying off your employees, breaching your contracts, or worse.

Communicate with your employees.

As you undoubtedly know, this is not just a time of uncertainty, fear, and stress for employers, but for employees as well.  Difficult decisions may need to be made, but employees by-and-large are reasonable, particularly when they do not feel mistreated or neglected.  Keeping them reasonably informed of the status of the company is a good way to build trust and understanding.

Relatedly, unemployment insurance and various employee benefit protections are likely benefits which your employees are entitled to in the event of a severe reduction in hours or termination from work.  Providing your employees with the tools necessary to take advantage of these safety net protections is a very proactive step employers should consider in order to calm employee fears and to message the employer’s commitment to employee wellbeing (health, financial, etc.).  Unemployment insurance will be discussed in further detail below, but other resources employers can make available include the Center for Disease Control’s (CDC) Guidance for Employers, the Wisconsin Department of Workforce Development’s (DWD) Employee Coronavirus FAQs, and information regarding the Internal Revenue Service’s Free Tax Filing Service (including the fact that the filing deadline has recently been extended to July 15, 2020.),

Communicating with your employees can also be productive in nature.  If your business is lucky enough to be able to foreseeably weather the next several months without major changes to your workforce, you are likely already embracing remote working.  Another similar initiative to consider is cross-training your employees to ensure that no critical function to your business is being provided by only one employee.  This process can and should be accompanied by unearthing potentially long-dormant projects that your business may have been putting off.  For example, reviewing, editing, and re-circulating your employee handbook and various employee benefit materials is a great way to stay productive and build value within your business even if sales are potentially suffering.  Similarly, reviewing supplier, customer, and financing contracts to better understand your business obligations and rights can help your business stay informed, nimble, and productive.  By communicating these initiatives and staying engaged with your employees, employers can hopefully maximize the efficiency of this potentially unusual working situation.

2. Unemployment Insurance Benefits and Mass Layoffs

Mass Layoff

Obviously different industries are being affected differently by the Coronavirus and the safety protocols recommended and forced upon the marketplace right now.  Some businesses are making the difficult decision to terminate large sections of their workforce or close down completely.  Typically, mass layoffs implicate federal and state labor protection laws, but as discussed below, the need to engage in drastic labor decisions will likely not be impeded by either federal or state law (at least in the case of Wisconsin). The question then arises as to what, if anything, the employer can provide to employees in order to assist them prior to, during and after a difficult termination or furlough discussion.  That said, before getting into those questions, a review of the federal and Wisconsin notice obligations is appropriate.

  • The WARN Act

Federally, the Worker Adjustment and Retraining Notification (WARN) ACT requires “covered employers” to provide at least 60 days’ advance notice of a “mass layoff” or plant closing.  “Covered employers” are employers with at least 100 employees.  The 100 employee threshold does NOT include part-time employees.  The termination threshold applies to any 30 day period but there are “aggregation” rules designed to prohibit employers from designing work-arounds from the WARN Act’s notice requirements.

The WARN act is very definition-oriented, and upon close examination, is relatively limited in application.  A “mass layoff” is defined as the reduction in workforce other than from a “plant closing” resulting in an employment loss at a single business location for (a) at least 33% of the employees and at least 50 employees or (b) at least 500 employees.  A “plant closing” means the permanent or temporary shutdown of a single business location or business unit.  The WARN Act does not apply to a “temporary shutdown” unless there is a sufficient number of terminations or the time period of the temporary layoffs exceeds six months.

In sum, whether a “furlough” or layoff is subject to the WARN Act depends on the employer’s size, the duration of the furlough, and the number of affected employees.  If an employer implements a layoff or furlough strategy because of COVID-19 and thinks it is not “reasonably foreseeable” that the temporary action will last longer than six months, no WARN Act notice is required.  However, if the coronavirus lasts longer than expected and the furlough or layoff lasts more than six months, the employer may be required to give a WARN Act notice when it becomes “reasonably foreseeable” that the conditions requiring such notice will be met.

Our firm is not aware of any cases addressing whether a virus or pandemic constitutes an unforeseeable business circumstance, natural disaster or physical calamity, but based on the definition of “unforeseeable business circumstance,” it would be reasonable for an employer to take the position that the coronavirus pandemic constitutes an unforeseeable business circumstance.

  • Wisconsin’s “Mini” WARN Act (the WBCML)

In Wisconsin, similar to the WARN Act, the Wisconsin Business Closing and Mass Layoff (WBCML) Act imposes certain mass layoff notices on employers.  The WBCML generally applies to employers who employ 50 or more employees in the State of Wisconsin and either (a) permanently or temporarily shut down a business location or business unit that affects 25 or more employees or (b) make a reduction in the workforce which affects at least 25% of the workforce or 25 employees, whichever is greater, or at least 500 employees.  The notice requirements include an obligation to report the proposed labor action to the Dislocated Worker Unit of the State’s Department of Workforce Development (DWD), as well as a separate notice to employees.  The law recommends optional “conditional notices” and “voluntary notices” where the employer has reason to believe a mass layoff will be occurring.  Information on the precise notice requirements can be found on the DWD’s WBCML website.

There are numerous and broad exceptions to the notice requirements of the WBCML including “unforeseeable business circumstances” and “natural or man-made disasters beyond the employer’s control.”  Much like the WARN Act, the WBCML will likely not serve as an impediment to employers making difficult and swift labor decisions.

Wisconsin Unemployment Insurance Resources

If neither the WARN Act nor WBCML mandates what information is communicated to employees at a mass termination or furlough event, employers may still desire to provide assistance and information to employees.  The coronavirus has created an uncertain future for many workers with accompanying anxiety and fear over unemployment and health decisions.  Employees will have questions and employers are often the employee’s first source of information for tackling what comes next post-employment.  For example, for employees who have not utilized this unemployment insurance before, how does this benefit work?

To answer this and similar questions, employers should take advantage of readily available public information and direct employees to those resources.  Employers must be careful not to provide opinions as to eligibility or availability of resources, but at least getting information into the hands of former employees helps demonstrate the employer’s compassion and advocacy of the employee’s interests.

An excellent resource to direct the employee to is the DWD’s COVID-19 Frequently Asked Questions  and Unemployment Insurance Application Portal.  As with most applications, gathering information can be a daunting task for individuals, particularly in times of high stress.  Therefore, employers should also proactively advise and potentially assist in gathering the following information (also discussed in the DWD’s FAQs):

  • A username and password for filing online
  • A valid email or mobile phone number
  • The employee’s
    • social security number
    • Wisconsin driver’s license or identification number.
    • Work history for the last 18 months including the employers’ names, addresses (including zip codes), phone numbers, the first and last dates of work with each employer, and the reason the employee is no longer working with each employer.
    • Current address. Employees need a valid mailing address to receive important documents about their claim.
  • If not a U.S. citizen, the employee’s alien registration number, document number and expiration date
  • If the employee served in the military in the last 18 months, Form DD-214
  • If the employee is a union member, the name and local number of your union hall

Once employers have identified which employees might be eligible for unemployment benefits, the employer should encourage the employee to apply online as soon as possible.  Technically, employees are eligible to apply for unemployment upon any of the following circumstances:

  • When the employee is totally unemployed;
  • When the employee becomes partially unemployed (when weekly earnings are reduced); or
  • When an employee expects to be laid off within the next 13 weeks.

Once an employee’s application has been submitted, they will receive a Claim Confirmation and Instructions form.  Keep in mind that all claims based on work done in Wisconsin are filed through Wisconsin, even if the employee lives in another state.  If the employee qualifies for unemployment benefits, the DWD will send a notice with the amount of benefits they can receive.  Wisconsin is in the process of expediting unemployment insurance claims through executive action and legislation, so again, employers should vigilantly follow these developments and communicate this information to employees to assist them through this difficult time.

COBRA and Wisconsin’s State Continuation Resources

Employers that have 20 or more employees and offer a group health plan to their employees are subject to the requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).  COBRA regulated employers must provide participating employees and their dependents with the opportunity to continue their insurance coverage under the employer’s group plan for a certain amount of time after these individuals would otherwise lose coverage.  Surprisingly, these regulations even apply to employers that offer only dental or vision insurance.   Employees’ right to continue to participate in the employer’s plans is limited by the fact that employees are responsible for the entire premium for their enrollment in the plan, not just their employee share.   However, two things to consider are the facts that (a) for many employees who have exhausted deductibles, staying on the plan can save significant money as opposed to resetting their deductible under a new plan, and (b) employers are permitted (but not obligated) to assist employees with their premium expenses.

COBRA regulations require that certain notices be provided to former employees and their beneficiaries enrolled in an applicable plan when the employee and/or beneficiary enrolls in the plan, but more importantly for this discussion, when a “qualifying event” would cause them to lose coverage.  The type of qualifying event determines who the qualified beneficiaries are for that event and the period of time that a plan must offer continuation coverage.

The following are qualifying events for a covered employee if they cause the covered employee to lose coverage:

  • Termination of the covered employee’s employment for any reason other than “gross misconduct”; or
  • Reduction in the covered employee’s hours of employment.

The following are qualifying events for a spouse and dependent child of a covered employee if they cause the spouse or dependent child to lose coverage:

  • Termination of the covered employee’s employment for any reason other than “gross misconduct”;
  • Reduction in hours worked by the covered employee;
  • Covered employee becomes entitled to Medicare;
  • Divorce or legal separation of the spouse from the covered employee; or
  • Death of the covered employee.

In addition to the above, the following is a qualifying event for a dependent child of a covered employee if it causes the child to lose coverage:

  • Loss of “dependent child” status under the plan rules.

COBRA establishes only the minimum requirements for continuation coverage.  A plan may always choose to provide longer periods of continuation coverage.

Once a qualifying event has occurred, the employer is required to notify the plan administrator (often the employer itself, a third-party administrator, insurance broker, or the insurance company through which the plan is offered) of the qualifying event, and the plan administrator must provide a COBRA Election Notice to the affected former employee and/or beneficiaries.  The COBRA Election Notice describes the former enrollee’s rights to continuation coverage and how to make an election.  The notice must be provided to the qualified beneficiaries within 14 days after the plan administrator receives the notice of a qualifying event.  More details on COBRA and the necessary election notices can be found on the Department of Labor’s COBRA website.

For employers in Wisconsin with less than 20 employees, Wisconsin Statute section 632.897 applies to employers offering group health insurance.  Wisconsin’s Office of the Commissioner of Insurance (OCI) offers an informative and simple “Fact Sheet” that can and should be provided to employees enrolled in the employer’s group health plan.  Much like COBRA, Wisconsin’s “Mini-COBRA” grants employees the right to continue participate in the employer’s group health plan so long as the employee pays for the full cost of enrollment.

Unemployment insurance and group benefit continuation rights are two of the most significant pieces of information an employer can share with their employees, and often certain information must be shared in order to stay in regulatory compliance.  That said, as a practical matter, keeping those lines of communication with employees open and proactively assisting can go a long way to truly assisting employees through difficult times, as well as building good will with those employees who you may wish to someday rehire.

If you have questions about this new law or other questions about how to address other Coronavirus-related issues, call the team at Neider & Boucher, S.C.  We’re here to help.

 

This article was authored by Attorney Joe Camilli, a graduate of the Hamline University School of Law, practicing business and employment law as part of Neider & Boucher, S.C.’s business team.  Attorney Camilli was recognized as a 2019 Up and Coming Lawyer by the Wisconsin Law Journal.

The guidance provided above is general in nature and readers are encouraged to reach out to Neider & Boucher, S.C., or to their own legal counsel to determine the applicability of these issues to their own personal and/or business needs.

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