Updated July, 15, 2020
On March 18, President Donald Trump signed the Families First Coronavirus Response Act, a multibillion-dollar bill that requires businesses with 500 or fewer employees to provide paid sick leave and job-protected emergency family and medical leave for many workers. The measure goes into effect April 1st and expires on December 31, 2020.
The ruling requires small businesses to provide paid leave to their employees who meet certain criteria and are off work due to the coronavirus. Because this responsibility may strain many smaller companies, Congress has established tax credits to offset the leave payments. Elected officials also are considering aid that may provide additional relief for small businesses.
The U.S. Labor Department has the authority to exempt organizations with fewer than 50 employees from the new aid requirements if paying them would jeopardize the viability of the business. The DOL has not yet provided guidance as to how this exemption would be granted. So, for now, all employers should plan to comply.
Paid Sick Leave
The Families First Coronavirus Response Act grants paid leave to full-time and part-time workers. Employees are immediately eligible for this paid sick leave. There is no 30-day requirement. Employers cannot require employees to use any other form of paid time off prior to being eligible.
Conditions for Paid Sick Leave:
- The employee is subject to a quarantine or isolation order related to the coronavirus;
- A health care provider has advised the employee to self-quarantine due to COVID-19 concerns;
- The employee is experiencing COVID-19 symptoms and is seeking medical diagnosis;
- The employee is caring for another individual who needs to or has been advised to quarantine or stay in isolation;
- The employee is caring for a son or daughter whose school or place of care is closed or whose child care provider is unavailable due to COVID-19 and the employee is not able to work from home; or
- The employee is experiencing substantially similar conditions that will be specified by the Secretary of Health and Human Services. Guidance on these specifications from HHS will be forthcoming.
How Much Paid Leave is Required?
Full-time employees are eligible for 80 hours of the employee’s regular rate of pay, with a maximum of $511 per day and a cap of $5,110 per employee. However, for an employee caring for a family member (for reasons No. 4, 5 and 6 above), sick leave is paid at two-thirds the employee’s regular rate, with a maximum of $200 per day and a cap of $2,000 per employee.
Part-time employees are eligible based on the average number of hours the employee works over a two-week period.
It is important to note that any paid leave provided by the employer prior to April 2 cannot be counted toward the employee’s 10 days of paid sick leave entitlement.
Emergency Family Medical Leave Expansion
The Families First Coronavirus Response Act expands the Family Medical Leave Act (FMLA) to now include all employers, regardless of their size. The new ruling grants up to 12 weeks of job-protected leave for full-time and part-time employees who have worked at the company for at least 30 days. This leave is paid at two-thirds of the employee’s regular rate of pay, up to $200 per day with a cap of $10,000 per employee. The first 10 days of this pay is unpaid. However, employees can use their 10 days of paid sick, vacation or personal leave during this time.
Conditions for Paid Emergency Family Medical Leave:The employee is unable to work because his/her child’s school or care provider is unavailable due to COVID-19 and the employee is not able to work from home.
Emergency family medical leave is job-protected. This means the employer must restore affected employees to the same or equivalent positions upon their return to work. There may be exceptions for businesses that have fewer than 25 employees.
UPDATE: On March 31, 2020, the Internal Revenue Service took a hard line on an employee’s need for emergency paid sick leave (EPSL) and emergency paid FMLA (FMLA+), taking the position that only one caretaker can take leave for a child whose school or childcare is closed. Moreover, if the child is over 14 years old, the parent must explain the special circumstances requiring the employee to provide care.
The IRS takes the position that, if the employee wants to take EPSL and FMLA+, the employee alone must be providing care to the child, making clear that leave would otherwise be unavailable if both parents or another individual is present to care for the child. Also, in the case of a 15- to 17-year old child, the employee must identify “special circumstances” requiring the employee to provide care. If the employee cannot do so, they cannot take EPSL or FMLA+.
On June 8, 2020, the IRS issued Notice 2020-54, which provides guidance to employers on the required reporting of qualified sick leave wages and qualified family leave wages paid pursuant to the Families First Coronavirus Response Act. According to the IRS, the required reporting will provide self-employed individuals who also receive wages or compensation as employees with the information they need to properly claim any qualified sick leave equivalent or qualified family leave equivalent credits for which they are eligible. Click here to read more on the IRS' website.
Tax Credit Relief
To help small businesses cover the costs of providing these extended benefits, the new law provides tax credits equal to 100% of qualified family leave and sick leave wages. This would only apply to sick or family leave paid to employees after April 2.
The bill also allows for a credit equal to the amount of the employer’s qualified health plan expenses. This credit only applies to wages paid for emergency paid sick or family leave.
Guidance as to how the credits will be processed will be forthcoming from the IRS.
|For Our Clients: As soon as we receive the guidance, we will send communication that explains how you will receive the tax credit.|