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On March 18, President Trump signed into law the Families First Coronavirus Response Act. While the Act contains provisions authorizing funds for relief programs, it also includes some significant provisions impacting middle-market businesses. These provisions generally apply to employers with fewer than 500 employees, but the Department of Labor is authorized to issue regulations to exempt small businesses with fewer than 50 employees.
The Bill is written as short-term relief and is set to expire on December 31, 2020. The Act leaves many unanswered questions and delegates further rule-making authority to the Labor Department and the Treasury. We anticipate continuing guidance to be published over the coming weeks.
Key points of the Act are as follows:
Emergency FMLA Expansion
Provides Eligible Employees the right to take up to 12 weeks leave under FMLA. Under the Act, the first 10 days leave may be unpaid although the employee may elect to use other paid leave during those two weeks. The remaining 10 weeks must be paid by the employer at two-thirds of the employee’s usual rate of pay, capped at a maximum of $200 per day or $10,000 in total. Part-time employees are eligible for paid leave hours based on their average hours over a 6 month period or their scheduled or normal work hours over a 2 week period.
This leave is job-protected as with traditional FMLA. Eligible Employees are those employees who have been on the employer’s payroll for at least 30 days. Employees shall provide the employer with notice of such leave as is practicable. Employees may use emergency FMLA if they are unable to work or telework in order to care for a son or daughter younger than 18 if the child’s school or child care has been closed or unavailable due to a public health emergency.
Emergency Paid Sick Leave
Employers must provide full-time employees with 80 hours of paid sick leave if the employee is unable to work or telework because:
- The employee is subject to a government quarantine or isolation order related to COVID-19
- The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
- The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis
- The employee is caring for an individual who is subject to a government quarantine or isolation order or advised by a health care provider to self-quarantine related to COVID-19
- The employee is caring for a son or daughter of such an employee if the school or place of care has been closed or unavailable due to COVID-19.
- The employee is experiencing any other substantially similar condition specified by the Departments of HHS, Treasury or Labor.
Paid sick time is paid at the employee’s regular rates if for their own sick time. For the care of family members or children, the sick time is paid at a minimum of 2/3 of the employee’s usual rate of compensation. Emergency Paid Sick Leave would be capped at $511 per day and $5,110 in aggregate for a worker’s own quarantine, diagnosis or care. The cap is $200 per day and $2,000 in aggregate for provision of care for another individual or child. Part-time employees are eligible for paid leave hours based on their average hours over a 6 month period or their scheduled or normal work hours over a 2 week period.
All employees may utilize this provision as there is no minimum length of employment. Note that this 10 day paid sick leave is in addition to any other paid leave programs in place prior to the enactment of this Act. Employers can’t require employees to utilize other paid leave before using paid sick leave under this Act. Employers would be prohibited from discharging or discriminating against workers for requesting paid sick leave or filing a complaint against the employer.
Tax Credits
The following credit provisions have been included in the Act:
- Refundable tax credit for employers, available quarterly, equal to 100% of qualified family leave wages required to be paid under the Emergency FMLA provision allowed against employer’s share of quarterly Social Security taxes. The amount of wages allowed for each employee is capped at $200 per day and $10,000 per calendar quarter. No credit is available for wages in excess of these amounts.
- Refundable tax credit for employers, available quarterly, equal to 100% of qualified paid sick leave wages required to be paid under the Emergency Paid Sick Leave provision allowed against employer’s share of quarterly Social Security taxes. The credit is available for wages of as much as $511 per day while receiving paid sick leave for their quarantine or self-isolation, or $200 per day while they are caring for someone else who is quarantined or is a child whose school or child care is unavailable due to Coronavirus.
Additional provisions:
- Tax credits in excess of the quarterly Social Security taxes would be treated as overpayments on the payroll tax return eligible to be refunded.
- Beyond the wage limits above, both Emergency FMLZ and Emergency Paid Sick Leave credits would be increased to include amounts of employers pay for the employee’s allocable group health plan coverage while they are on leave.
- Credits would also be increased to cover employers’ 1.45% Medicare tax imposed on qualified Emergency FMLA and Paid Sick Leave wages paid.
- Wages paid under Emergency FMLZ and Emergency 14 Day Paid Sick Leave wouldn’t be subject to employer payroll tax.
- Credit is not available on employee wages paid under the FMLA established under the 2017 tax act.
- Credits are includible in employer’s gross income.
- Similar credits will be available to self-employed individuals against self-employment tax, with the same $511 (and $200) per day limit for Emergency Paid Sick Leave. Self-employed individuals would also be eligible for as many as 50 days of Emergency FMLA at the lesser of $200 per day ($10,000 in total) or two-thirds of compensation (based on average daily self-employment income). Treasury will establish the necessary documentation to be submitted, as well as rules for self-employed individuals who also receive sick-leave pay from an employer.