The Families First Coronavirus Response Act (“FFCRA”) has passed the Senate and signed into law by the President. It will go into effect on April 1, 2020. Among the measures included as part of the FFCRA are the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act, which are aimed at:
- expanding paid employee leave in connection with the coronavirus emergency; and
- providing employers with tax credits to cover the cost of those benefits.
Emergency Paid Sick Leave Act
The Emergency Paid Sick Leave Act requires employers with fewer than 500 employees to provide paid sick leave to all employees (whether full- or part-time and regardless of the employee’s length of employment), where an employee is unable to work (or telework) because:
- the employee is subject to a federal, state or local quarantine or isolation order related to COVID19, or is caring for an individual subject to such order;
- the employee has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19, or is caring for an individual who has been so advised;
- the employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
- the employee is caring for his or her son or daughter whose school or childcare provider is closed or otherwise unavailable due to COVID-19 precautions; or
- the employee is experiencing any other “substantially similar conditions”, as specified by the Secretary of Health and Human Services in consultation with the Secretary of Treasury and the Secretary of Labor.
In general, the Act provides that an employee is entitled to 80 hours (two weeks) of paid sick leave, and for workers who work less than full time, the typical number of hours they are scheduled to work in a two-week period.
Employees who take paid sick leave because they are subject to a quarantine or isolation order, have been advised by a health care provider to self-quarantine, or are experiencing coronavirus symptoms and seeking medical diagnosis must be paid at their regular pay rate or at the federal, state or local minimum wage, whichever is greater. The paid sick leave rate is capped $511 per day, or $5,110 in aggregate.
Employees who take paid sick leave to care for another individual or child or because they are experiencing another substantially similar illness (as specified by the U.S. Department of Health and Human Services) are entitled to be paid at two-thirds their regular rate. In these circumstances, the paid sick leave is capped at $200 per day, or $2,000 in aggregate.
The Paid Sick Leave Act also places certain restrictions on covered employers regarding these paid sick leave benefits, including that the employer cannot:
- require its employees to use existing paid time off prior to utilizing the paid time off provided by the Paid Sick Leave Provisions (i.e., the employee determines the sequencing of the paid sick leave he or she will utilize); or
- terminate, discipline or in any other manner discriminate against any employee who takes paid sick leave under the Paid Sick Leave Provisions.
Paid Leave under the Emergency Family and Medical Leave Expansion Act
The Emergency Family and Medical Leave Expansion Act requires employers with fewer than 500 employees to provide up to 12 weeks of job-protected FMLA leave for “a qualifying need related to a public health emergency” to employees who have been on the payroll for 30 calendar days. This “qualifying need” is limited to circumstances where an employee is unable to work (or telework) due to a need to care for a minor child if the child’s school or childcare has been closed or is unavailable due to a public health emergency.
The first 10 days of emergency FMLA leave can be unpaid. An employee can opt to substitute accrued vacation, personal, or sick leave during this time, but an employer cannot require an employee to do so.
After the 10-day period, the Act requires an employer to provide paid leave at an amount not less than two-thirds of an employee’s regular rate of pay up to $200 per day, or $10,000 in the aggregate.
Emergency FMLA leave is generally job-protected, meaning the employer must restore employees to their prior positions (or an equivalent) upon the expiration of their need for leave. The bill includes an exception to this requirement for employers with fewer than 25 employees, if the employee’s position no longer exists following leave due to operational changes caused by a public health emergency, subject to certain conditions.
Tax Credits for Paid Sick And Paid Family And Medical Leave
To provide financial assistance to employers, the FFCRA provides affected employers with a refundable tax credit for federal income tax purposes. This refundable tax credit applies towards qualified leave wages paid by the employer under each of the Paid Sick Leave and the Emergency FMLA provisions, as well as qualified health plan expenses which are properly allocable to such wages. This tax credit is first applied to reduce an employer’s payment of the employer portion of Social Security taxes (and, if applicable, Railroad Retirement Tax Act taxes (“RRTA” taxes)). Any excess above the employer’s Social Security taxes and RRTA taxes is provided as a direct tax overpayment refund to the employer.
- For sick leave provided under the Paid Sick Leave Provisions, an employer receives a federal income tax credit for the first 10 days of an employee’s paid sick leave entitlement.
- For leave under the Emergency FMLA, an employer receives a federal income tax credit for the full term of an employee’s additional leave up to the 12 weeks permitted.
- An employer’s federal income tax credits will be increased by an allocable portion of the employer’s costs to maintain a group health plan that is attributable to such paid leave for which a tax credit is permitted to the extent such amounts are excluded from the employees’ gross income under Section 106(a) of the Internal Revenue Code.
In addition, qualified leave wages required to be paid by the employer under each of the Sick Leave Provisions and the Additional Paid Leave Provisions will not qualify as wages for purposes of the employer’s Social Security or RRTA tax obligations. Employers should also be aware that, in order to prevent a “double benefit” to the employer, the FFCRA provides that an employer’s gross income will generally be increased by the amount of the new federal income tax credits described above. Furthermore, the credit described above will not be allowed with respect to wages for which an employer is receiving credit under Section 45S of the Code.
If you have questions about how the Families First Coronavirus Response Act will impact your business, please give us a call.
Eric Tiritilli Craig Martin
(402) 397-7300 (402) 397-7300