UPDATED MARCH 24, 2020
On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act (H.R. 6201). Employers are required to implement this law on April 1st. The cost of these benefits is funded by the US Treasury through a tax credit discussed below. By April 1st every affected employer will need to provide informational notice of these benefits to employees. The notice will be published by the government on March 25. All legislation ends on December 31, 2020. This blog outlines the key provisions that directly impact employers.
1. Emergency Family and Medical Leave Expansion Act – Under this act, eligible employees may take up to 12 weeks of leave if the employee is unable to work (or telework) because their child’s (under the age of 18) school or daycare provider is closed or unavailable due to a coronavirus emergency/declaration.
Eligible employees include those who work
for employers with fewer than 500 employees and government employers who have
been on the job for at least 30 days.
There is no distinction between full-time or part-time employees. All employees who meet the above are
covered. The legislation does authorize
an exemption for employers with less than 50 employees, only if the
requirements would jeopardize the viability of their business. Employers who are health care providers or
emergency responders may also elect to exclude their employees from this bill.
Under this bill, the first 10 days of leave
are unpaid. However, employers may
require employees to use any appropriate accrued leave (vacation, PTO, sick,
etc.). After 10 days employers are
required to pay the employee at an amount not less than two-thirds of the
employee’s regular rate of pay up to $200 per day or $10,000 in total.
Once an employee comes back to work
generally, they are entitled to be reemployed to the position they held when
the leave began or to obtain an equivalent position. For employers with fewer than 25 employees,
the employer does not need to return the employee to their position if:
The position does not exist due to changes in the employer’s economic or operating conditions caused by a coronavirus related situation;
The employer makes “reasonable efforts” to restore the employee to an equivalent position; and
If these efforts fail, the employer makes an additional reasonable effort to contact the employee if an equivalent position becomes available within a one-year window beginning on the earlier of a) the date the employer no longer needs to take leave or b) 12 weeks after the employee’s leave begins.
2. Emergency Paid Leave – Under this act employers must provide employees with two weeks of paid sick leave if the employee is unable to work (or telework) for the following coronavirus related reasons:
- The employee is subject to a federal, state, or local quarantine or isolation,
- The employee has been advised by a health care provider to self-quarantine,
- The employee experiences symptoms of coronavirus and is seeking medical diagnosis,
- The employee is caring for an individual who is subject to a quarantine or isolation order or has been advised to self-quarantine by a medical provider,
- The employee is caring for a child (under the age of 18) whose school or daycare provider is closed or unavailable due to coronavirus precautions, and
- The employee is experiencing any other conditions substantially similar to coronavirus, as specified by the Department of Health and Human Services.
Eligible employees include those working
for private sector employers with fewer than 500 employees, government
employers, and all non-private entity employers with more than one
employee. Employers are to provide
leave regardless of how long the employee has been employed and their
employment status (full-time or part-time).
All employees who meet the above are covered. The legislation does authorize an exemption
for employers with less than 50 employees, only if the requirements would
jeopardize the viability of their business.
Employers who are health care providers or emergency responders may also
elect to exclude their employees from this bill.
The bill outlines the following regarding
the amount of leave to be provided.
- Full-time employees are entitled to 80 hours of
paid sick leave;
- Part-time employees are entitled to the number
of hours that the employee works, on average, over a two-week period; and
- For employees who hours vary based on a
schedule, the employee’s paid leave rate should equal the average number of
hours that the employee was scheduled per day over the two-week period.
An employer may not require an
employee to use other paid leave provided by the employer before the employee
uses the paid sick leave available under the Act. Any unused paid sick leave
will not carry over from year to year and is not paid out if an employee
separates employment.
The paid
sick leave rate may not exceed $511 per day or $5,110 in total for an employee
who takes paid sick leave because they are subject to quarantine/isolation
related to a coronavirus situation, have been advised by a medical provider to
self-quarantine, or are experiencing coronavirus symptoms.
The paid sick leave rate may not
exceed $200 per day or $2,000 in total for an employee who takes paid sick
leave because they need to take care of another individual or child
experiencing coronavirus symptoms, or because they themselves experience
another substantially similar illness.
Employers must post information
about the emergency paid sick leave and its eligibility requirements within
seven days of the enactment of the bill.
Model notices will be provided by the Secretary of Labor.
Employers may not discharge,
discipline, or discriminate against any employee who takes paid sick leave or
files a complaint or proceeding or testified in ay proceeding related to Families
First Coronavirus Response Act (H.R. 6201).
3. Tax Credit (information from the IRS)
The U.S. Treasury Department, Internal
Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that
small and midsize employers can begin taking advantage of two new refundable
payroll tax credits, designed to immediately and fully reimburse them,
dollar-for-dollar, for the cost of providing coronavirus-related leave to their
employees (Families First Coronavirus Response Act).
- Key Takeaways
- Complete Coverage – Employers receive 100% reimbursement for paid leave pursuant to the Act
- Health insurance costs are also included in the credit
- Employers face no payroll tax liability
- Self-employed individuals receive an equivalent credit
- Fast Funds – Reimbursement will be quick and easy to obtain.
- An immediate dollar-for-dollar tax offset against payroll taxes will be provided
- Where a refund is owed, the IRS will send the refund as quickly as possible
- Small Business Protection – Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or childcare is unavailable in cases where the viability of the business is threatened.
- Easing Compliance – Requirements subject to 30-day non-enforcement period for good faith compliance efforts.
- To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.
- Eligibility
- Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave under the Act.
- Eligible employers will be able to claim these credits based on qualifying leave they provide between the effective date and December 31, 2020.
- Equivalent credits are available to self-employed individuals based on similar circumstances.
- Emergency Paid Sick Leave Tax Credit
- Eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days if the employee took leave for one of the following.
- The employee is subject to a federal, state, or local quarantine or isolation
- The employee has been advised by a health care provider to self-quarantine
- The employee experiences symptoms of coronavirus and is seeking medical diagnosis
- Eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days.
- The employee is caring for an individual who is subject to a quarantine or isolation order or has been advised to self-quarantine by a medical provider
- The employee is caring for a child (under the age of 18) whose school or daycare provider is closed or unavailable due to coronavirus precautions
- The employee is experiencing any other conditions substantially similar to coronavirus, as specified by the Department of Health and Human Services
- Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
- Child Care Leave Credit
- eligible employers may receive a refundable childcare leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate.
- Up to 10 weeks of qualifying leave can be counted towards the childcare leave credit.
- Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
- Prompt Payment for the Cost of Providing Leave
Under guidance that will be released
soon, eligible employers who pay qualifying sick or child care leave will be
able to retain an amount of the payroll taxes equal to the amount of qualifying
sick and child care leave that they paid, rather than deposit them with the
IRS.
The payroll taxes that are available
for retention include withheld federal income taxes, the employee share of
Social Security and Medicare taxes, and the employer share of Social Security
and Medicare taxes with respect to all employees.
If there are not sufficient payroll
taxes to cover the cost of qualified sick and childcare leave paid, employers
will be able file a request for an accelerated payment from the IRS. The IRS
expects to process these requests in two weeks or less. The details of this
new, expedited procedure will be announced soon.
Equivalent child care leave and sick
leave credit amounts are available to self-employed individuals under similar
circumstances. These credits will be claimed on their income tax return and
will reduce estimated tax payments.
Small businesses with fewer than 50
employees will be eligible for an exemption from the leave requirements
relating to school closings or childcare unavailability where the requirements
would jeopardize the ability of the business to continue. The exemption will be
available on the basis of simple and clear criteria that make it available in circumstances
involving jeopardy to the viability of an employer’s business as a going
concern. Labor will provide emergency guidance and rulemaking to clearly
articulate this standard.
Labor will be issuing a temporary
non-enforcement policy that provides a period of time for employers to come
into compliance with the Act. Under this policy, Labor will not bring an
enforcement action against any employer for violations of the Act so long as
the employer has acted reasonably and in good faith to comply with the Act.
Labor will instead focus on compliance assistance during the 30-day period.
This is a summary of the
provisions in the legislation enacted on Wednesday, March 18. We understand
that this new law raises many questions about administration of these benefit
plans. We will continue to monitor information as it is provided by the
government and other resources and will be providing regular updates via our
website and social media.
