The Families First Coronavirus Response Act
The Families First Coronavirus Response Act is composed of multiple parts with each part referred to as a separate Division or Act. The below information outlines key provisions of the new legislation.
Emergency Paid Sick Leave Act
The Emergency Paid Sick Leave Act requires many employers to provide up to two weeks of paid sick time to eligible employees who are unable to work or telework due to any of several reasons related to COVID-19.
What are the covered reasons for leave?
Who is an eligible employee?
Any full-time or part-time employee of a covered employer regardless of how long the employee has been employed by the employer. Unlike Emergency Family Leave, the employee need not have been employed for at least 30 days to be eligible.
Employers may exclude an employee who is a health care provider or an emergency responder from eligibility.
Who is a covered employer?
Covered employers include private sector employers with fewer than 500 employees, government employers and other non-private entity employers with at least one employee.
The Act gives the Secretary of Labor the authority to issue regulations to exempt small businesses with fewer than 50 employees from the requirement to provide paid sick time to care for a child whose school or child care is closed or unavailable when such payments would jeopardize the continued business operations of the employer.
How much paid sick time is covered?
Full-time employees are covered for up to 80 hours of paid sick time. Part-time employees are covered for a number of hours equal to the average number of hours that such employee works over a two-week period. The Department of Labor will issue guidelines regarding the methods for determining the amount of paid sick time.
If the period during which the reason for leave listed in (1) – (6) above under What are the covered reasons for leave? is shorter than these periods, paid sick leave applies only to the shorter period.
How much must the employer pay for covered sick time?
The amount that an employer must pay, and any applicable payment caps per employee, depend on the reason for the employee’s the sick leave. An employee who is on leave for any of the reasons described in (1) – (3) above under What are the covered reasons for leave? is entitled to be paid at the employee’s regular rate (or the federal, state or local minimum wage if higher). However, the payments per employee need not exceed $511 per day or $5,110 in the aggregate. An employee who is on leave for any of the reasons described in (4) – (6) above under What are the covered reasons for leave? is entitled to be paid at 2/3 of the employee’s regular rate (or the federal, state or local minimum wage if higher), not to exceed $200 per day or $2,000 in the aggregate.
Other Relevant Information
Emergency Family and Medical Leave Expansion Act
In General. Beginning April 1 until December 31, 2020 covered employers must allow 12 weeks of leave under FMLA (the first 10 days of which may be unpaid, but for which the employee may use paid leave available under the Emergency Paid Sick Leave Act) for eligible employees who are unable to work (or telework) due to a need to care for a minor child for whom school or childcare is cancelled or unavailable due to COVID-19.
Who is a covered employer? Employers with fewer than 500 employees (including those with less than 50 employees) with an exception for employers of healthcare providers or emergency responders that elect to exclude such employees from these provisions.
The Secretary of Labor also has authority to issue regulations (i) to exclude certain health care providers and emergency responders from this expanded FMLA coverage and (ii) to exempt small businesses with fewer than 50 employees from such expanded FMLA coverage if the coverage would jeopardize the viability of the business as a going concern.
Who is an eligible employee? Any full or part-time employee who has been employed for at least 30 calendar days.
What leave qualifies?
An eligible employee is entitled to 12 weeks of leave (the first 10 days of which may be unpaid) if the employee is unable to work (or telework) due to a need to care for the employee’s child under 18 because of school or childcare closure or unavailability of the child’s paid childcare provider as a result of a public health emergency declared by a Federal, State, or local authority with respect to COVID-19.
How is the amount of paid leave calculated?
Paid leave after the first 10 days will be calculated based on:
The amounts described in 1 or 2 are capped per employee at $200 per day and $10,000 in the aggregate.
Will FMLA job protection apply to eligible employees? – FMLA job protection provisions for employees who take leave for a covered public health emergency do not apply to employers with fewer than 25 employees if (i) the position held by the employee when leave commenced does not exist due to economic conditions or other changes in operating conditions that affect employment and are caused by the public health emergency, (ii) the employer makes reasonable efforts to restore the employee to an equivalent position with equivalent benefits, pay and other terms of employment, and (iii) if the reasonable efforts described in (ii) fail, the employer makes reasonable efforts for a period of one year following the earlier of 12 weeks from the date leave commences or the date the qualifying need for leave ceases to contact the employee if an equivalent position becomes available.
Employer and Self-Employment Tax Credits
Employers are allowed a refundable credit against the employer portion of payroll taxes for amounts paid under the Emergency Family and Medical Leave Expansion Act (Emergency Family Leave) and the Emergency Paid Sick Leave Act (Emergency Sick Leave). Self-employed individuals are permitted a refundable income tax credit with respect to days they are unable to work for corresponding reasons.
What taxes and when? For each calendar quarter during which Emergency Family Leave wages or Emergency Sick Leave wages are paid between April 1, 2020 and December 31, 2020, the employer may claim a credit for such wages against the employer’s portion of Social Security and Medicare taxes. The credit may be applied against such tax payments that would otherwise be required with respect to wages of other employees or wages of the affected employee payable outside of leave. Thus, provided an employer has other employees earning amounts at least equal to the amounts of creditable leave pay, the employer will not be out of pocket for the emergency leave wages. If the creditable emergency leave wages exceed the employer’s Social Security and Medicare tax liability for the quarter, the excess is refundable to the employer.
How much is the credit?
For Emergency Sick Leave, the maximum creditable wage amount for any individual is $511 per day in the case of sick leave for a quarantine/isolation order, a self-quarantine advised by a health care provider or to seek a medical diagnosis of COVID-19 symptoms. Where the employee is on leave to care for a child or another individual, the creditable wages are capped at $200 per day. The total amount of creditable wages is capped at 10 days, so the maximum number of days for any quarter is 10 days minus the number of days already taken into account for that employee in previous quarters.
For Emergency Family Leave, the maximum creditable wage amount for any individual is capped at $200 per day and $10,000 for all quarters.
The Secretary of the Treasury is given authority to prescribe regulations to waive penalties for failures to deposit employment taxes in anticipation of the allowance of the credits permitted by the Act.
Additional Credit for Certain Health Plan Expenses
The employer’s tax credit is increased by the amount that the employer pays to provide and maintain a group health plan to any employee on emergency leave to the extent that the expenses are properly allocable to the Emergency Family Leave wages and Emergency Sick Leave wages for which credits are allowed. In general, an allocation of such expenses will be proper if made on the basis of being pro rata among covered employees and pro rata on the basis of periods of coverage relative to time periods of leave.
Who qualifies? Any self-employed individual who would be eligible for paid Emergency Family Leave or Emergency Sick Leave if the individual were an employee of an employer.
What taxes? The self-employed individual can take credits for the qualifying amounts against his or her income taxes.
How much is the credit?
For Emergency Sick Leave, in the case of sick leave for a quarantine/isolation order, a self-quarantine advised by a health care provider or to seek a medical diagnosis of COVID-19 symptoms, the maximum creditable amount is the lesser of $511 per day or the individual’s average daily self-employment income for the year (net earnings from self-employment for the year/260). Where the individual is unable to work because he or she must care for a child or another individual, the creditable amount is the lesser of $200 per day or 67% of the average daily self-employment income for the year. The maximum number of days for which the credit can be claimed is 10.
For Emergency Family Leave, the maximum creditable amount is equal to the number of days (not to exceed 50) during which the individual cannot work because he or she is caring for a child multiplied by the lesser of (i) $200 or (ii) 67% of the individual’s average daily self-employment income for the taxable year.
The foregoing is for informational purposes only and should not be construed as legal advice. If you have question regarding how these new laws impact your business, please contact one of our Schell Bray corporate attorneys.
Schell Bray is pleased to provide important resources on business and tax measures to help you and your business through COVID-19. Information changes rapidly, so please check these resources regularly for news and updates.