Corporate Law: The Impact of the Families First Coronavirus Response Act on SMEs

Corporate Law: The Impact of the Families First Coronavirus Response Act on SMEs

Are you the owner of an SME (Small Medium Enterprise) or a Startup? If so, are you wondering how the recently passed Families First Coronavirus Response Act is going to affect your company’s liquidity and ability to stay in business?

Before we discuss the impact that this law will have on your business operations, let’s consider a snapshot of the world as we know it today.

COVID-19: The Coronavirus and its impact on our world

The novel coronavirus is a virus that causes a respiratory illness (COVID-19) that spreads from person to person. It is extremely contagious and has currently infected 803 000 people across the globe with 39 000 fatalities.

As seen in Wuhan, China, one of the only ways to control the rampantly spreading virus from overwhelming the world’s health systems is social distancing or self-isolation. Thus, most of the world’s governments have issued varying degrees of lockdown orders. All non-essential businesses have been closed and people are only allowed out of their homes to purchase food and seek medical attention.

The economic impact on the United States and the rest of the world is devastating. 28 February 2020 statistics show that the $6 trillion (USD) in value was wiped out in six days. And, according to, COVID-19 has caused the US Central Bank to adjust its target range for the Federal funds down to 0% to 0.25% as an attempt to mitigate the damage caused by the virus to the US economy.

The Families First Coronavirus Response Act and your business

According to the website, and echoed by the Warren business lawyer, this act is in response to the “COVID-19 (i.e., coronavirus disease 2019) outbreak by providing paid sick leave, tax credits, and free COVID-19 testing; expanding food assistance and unemployment benefits, and increasing Medicaid funding.”

This act is popularly, also known as the “paid sick leave act.” And, this description begs the question of what impact it will have on US small businesses?

At the outset of this discussion, it is vital to note that this act applies to small businesses that are not part of the US Federal and state government. And, these companies must have less than 501 employees. Both full-time and part-time employees are eligible for these benefits. Finally, there is no waiting period

Thus, the straightforward answer to this question is that employers who fit this category are required to provide paid sick leave under the following circumstances:

  • If an employee is required to stay at home because of a federal or state lockdown order.
  • If the employee is required to self-quarantine by a medical provider because of COVID-19 concerns.
  • The employee is experiencing COVID-19 symptoms and is waiting for the results from the test.
  • If an employee needs to stay at home and look after one or more minor children because the normal child-care arrangements are no longer available because of the COVID-19 pandemic lockdown order.

Final thoughts

There is no doubt that these are challenging times, and no one knows what the future holds. Thus, the best thing to do is to consult your business attorney should you have any questions about the impact of the Families First Coronavirus Response Act.

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