Non-Profit’s Guide to the FFCRA

Amelia E. Elacqua
Associate, Corporate Department
Published: McLane.com
April 6, 2020
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The Families First Coronavirus Response Act (referred to as the Act) went into effect on April 1, 2020 and is generally applicable to non-profit and for profit businesses alike.  The Act provides emergency relief to workers impacted by COVID-19, including two weeks paid sick leave and expanded eligibility for up to twelve weeks of paid Family and Medical Leave. The Act also provides relief for employers who provide such leave in the form of tax credits. (McLane Middleton Resource Center)

Facing increased demands for their services, some non-profits are struggling to balance meeting those demands and doing what is best for their employees.  One option some non-profits with less than 50 employees have considered is claiming an exemption from the requirements of the Act under the small business exemption.  While the exemption may at first glance be appealing to many small businesses, including non-profits, they should proceed with caution before availing themselves to the exemption, as there are traps for the unwary.

Under the Act, a non-profit with less than 50 employees may claim an exemption only if compliance with Act would “jeopardize the viability of the business as an ongoing concern” based on the following criteria:

  1. The provision of paid sick leave or expanded family and medical leave would cause the non-profit to be unable to operate at minimum capacity;
  2. The absence of the employee would result in a substantial risk to the financial health or operational capacity of the non-profit due to their specialized skills, knowledge or responsibilities; or
  3. There are not sufficient workers available to perform the functions or services of the employee who is seeking to take leave and these functions or services are needed in order for the non-profit to operate at minimal capacity.

Non-profits should review the criteria on an employee-by-employee basis before determining whether to claim the exemption.  Also, keep in mind that the exemption only applies to leave sought because a child’s school or place of care is closed or childcare provider is unavailable due to the coronavirus.  A non-profit would still be required to provide leave for all of the other qualifying reasons under the Act.  In fact, the U.S. Department of Labor is encouraging employers and employees to collaborate to reach the best solution for both parties in the event an employee needs to take leave related to the coronavirus. The Department of Labor has not yet issued regulations clarifying what “collaboration” and “best solution” mean; however, this likely includes flexibility to determine the length of leave to be taken by an employee and the amount of pay the employee will receive while on leave.

In addition, the exemption is self-determined by an authorized person at the organization.  There is no advance “approval” by the Department of Labor.  As such, any employer choosing to avail itself of the exemption is taking a risk that they will be subject to a claim at a later date that they did not provide benefits under the Act that should have been provided.

It is also important to note that any employer that claims the exemption is not entitled to tax credits for any qualified leave wages that they are exempt from providing.  It is unclear at this time whether a non-profit may be entitled to a partial credit if it claims the exemption with respect to an employee but provides such employee reduced benefits.

Finally, while claiming the exemption may provide a non-profit with much needed flexibility, the bar to qualify is very high and claiming the exemption may not actually benefit the non-profit employer in the long-term.  A determination of whether to claim the exemption should take into account all of the resources available to the organization, including Paycheck Protection Program loans under the Coronavirus Aid, Relief, and Economic Security Act, also known as the “CARES Act” and the tax credits available under the Act.