Article originally published March 19, 2020
Last updated April 13, 2020
There have been many changes and updates issued by both the Department of Labor (DOL) and the Internal Revenue Service (IRS) since the Families First Coronavirus Response Act (FFCRA) was signed into law on March 18, 2020. Among the guidance issued by the DOL are two fact sheets, one for employees and one for employers, along with a Q&A related to required leaves. The IRS has been regularly updating its website and includes a link to Coronavirus Tax Relief. This link includes information in the form of FFCRA FAQs, along with various other news releases and guidance.
Individuals affected by the novel coronavirus could receive paid leave, food assistance and expanded unemployment insurance, in addition to increased Medicaid funding to states under the House-passed version of the FFCRA.
The measure provides tax credits to employers to offset the costs of providing Expanded Family Medical Leave (EFML) and Emergency Paid Sick Leave (EPSL). It also requires insurers, Medicare, Medicaid, and other federal health programs to fully cover testing and related services for the virus.
Note that the FFCRA does not apply to private sector employers with 500 or more employees. Such larger employers remain subject to the Family and Medical Leave Act of 1993.
This article is intended to provide information relating to the expansion of EFLM, EPSL, and employer tax credits related to these expanded employee benefits.
As a preface to the discussion below, please note that, for both emergency paid leave and sick leave purposes, the Q&A issued by the DOL clearly states that the leave requirements are not retroactive. An employer cannot deny an employee the paid leave required as of April 1, 2020 because the employer provided paid leave prior to that date for one of the covered reasons. In other words, if an employer provided paid leave prior to April 1, 2020, that employer will be required to provide additional paid leave starting April 1, 2020.
Also, please note that the updated Q&A provides additional clarifications to employers, such as whether a business that is closed must still provide emergency or paid sick leave, addressing intermittent and teleworking situations, employee documentation requirements, etc. This updated Q&A states that if employers send workers home and stop paying them, these workers are not entitled to expanded family or paid sick leave if the employer closes the worksite (and also addresses the reality of telework) for a lack of business, or because the business is required to close pursuant to a federal, state or local directive.
Expanded Family Medical Leave
The FFCRA creates an emergency paid leave program to directly respond to the coronavirus. Private sector employers with fewer than 500 workers and government entities must provide as many as 12 weeks of job-protected leave under the Family and Medical Leave Act (FMLA) for employees who are unable to work, if the employer has work for the employee, due to a need to provide care for a child younger than 18 if the school or place of care has been closed, or the child care provider is unavailable, due to a public health emergency with respect to COVID-19. For this purpose, a “child care provider” is someone who cares for your child. This includes individuals paid to provide child care, like nannies, au pairs, and babysitters. It also includes individuals who provide child care at no cost and without a license on a regular basis, for example, grandparents, aunts, uncles or neighbors. See DOL Q&A # 68.
For purposes of emergency leave, the FFCRA defines an eligible employee to include an individual who has been employed for at least 30 days by the employer. The employee does not need to have worked a specific number of hours to be eligible.
The first 10 days of leave could be unpaid, though a worker could choose to use accrued vacation days, personal leave, or other available paid leave for unpaid time off. Following the 10-day period, workers would receive a benefit from their employer that will be at least two-thirds of their normal pay rate, capped at $200 per day. The maximum total pay an employee may receive under this provision is an aggregate of $10,000.
The Labor Department is authorized to issue regulations to:
- Exclude certain healthcare providers and emergency responders from paid leave benefits.
- Exempt small businesses with fewer than 50 employees from the paid leave requirements if it would jeopardize the viability of the business as a going concern.
Workers under a multiemployer collective bargaining agreement and whose employers pay into a pension plan will have access to paid leave.
Emergency Paid Sick Leave
Private sector employers with fewer than 500 workers and government entities will have to provide employees that are unable to work, if the employer has work for the employee, paid sick time off if:
- The employee is subject to a federal, state or local quarantine or isolation order related to COVID-19.
- The employee has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19.
- The employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis.
- The employee is caring for an individual who is subject to an order described in the first bullet point above or has been advised as described in the second bullet point above.
- The employee is caring for a child if the child’s school or place of care has been closed or is unavailable due to COVID-19 precautions.
- The employee is experiencing any substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
When the leave is needed for the employee’s own condition or circumstance (the first 3 reasons above), the pay must equate to what the employee would otherwise be paid, capped at $511 per day and $5,110 in the aggregate. When the leave is needed to care for a child or other individual, or due to a “substantially similar condition” (the last 3 reasons above), the required payment is 2/3 of the employee’s pay, capped at $200 per day and $2,000 in the aggregate. Full-time employees would receive 80 hours of sick leave under the new emergency leave program and part-time workers would be granted time off that is equivalent to their scheduled or normal work hours in a two-week period. These provisions apply to all employees. There is no 30-day employment requirement for emergency sick leave, as with respect to EFML as noted above.
Employers with similar existing paid leave policies are required to provide workers with the emergency paid sick time. An employer cannot require a worker to use any other available paid leave before using the sick time.
Employers are prohibited from:
- Requiring a worker to find a replacement to cover their hours during time off.
- Discharging or discriminating against workers for requesting paid sick leave or filing a complaint against the employer.
An employer could be subject to civil penalties for a violation of paid sick leave requirements. Workers under a multiemployer collective bargaining agreement and whose employers pay into a pension plan will have access to paid emergency leave.
Employer Tax Credits
The FFCRA provides payroll tax credits to employers to cover wages paid to employees while they are taking time off under the bill’s EFML and EPSL provisions, through the end of 2020. Note that, given the effective date of April 1, 2020, paid leave mandated by the FFCRA for any day prior to that will not qualify to be claimed as an employer payroll tax credit. The tax credits would equal 100% of qualified wages paid, subject to the caps noted below. The credit base also includes allocable qualified health plan expenses (see “Determining the Amount of Allocable Qualified Health Plan Expenses” in the FFCRA FAQs), as well as the employer’s share of Medicare tax on qualified leave wages.
Under the FFCRA, the credit that can be claimed is technically only for the employer portion of FICA. However, Information Release 2020-57, which was issued March 20, 2020, allows eligible employers that pay qualifying leave to retain an amount of payroll taxes equal to the amount of qualifying sick and child care leave they pay, rather than depositing them with the IRS. The payroll taxes eligible for retention by the employer include employees’ federal income tax withholding, the employee share of Social Security and Medicare taxes, and the employee share of Social Security and Medicare taxes with respect to all employees.
The credit will be claimed on employer quarterly payroll tax returns (Form 941 series). The provisions contained in Information Release 2020-57 should allow employers to recoup the cost of leave significantly faster than what was legislated as part of the FFCRA. The EPSL credit for each employee will be for wages of as much as $511 per day while the employee is receiving paid sick leave to care for themselves, or $200 if the sick leave is to care for a family member or child if their school is closed. The limit in a given quarter will be 10 days per employee less the aggregate number of days taken into account for all preceding calendar quarters.
The EFML credit for each employee will be for wages of as much as $200 per day while the employee is receiving paid leave, or an aggregate of $10,000.
The credit will be refundable if it exceeds the amount the employer owed in employment taxes on a quarterly payroll tax filing. In addition, the IRS recently issued newly created Form 7200, Advance Payment of Employer Credits Due to COVID-19, which can be filed to request an advance payment of the credit should the employer deem it necessary. The IRS expects that it will be able to issue any such refund requests within two weeks or less. Any credit claimed on a quarterly or refundable filing will increase the taxable income of the employer.
Note that employers must retain records and documentation related to and supporting each employee’s leave to substantiate the credits, as well as the applicable filings with IRS to claim the credits. These records must be retained for 4 years. See “How Should an Employer Substantiate Eligibility for Tax Credits for Qualified Leave Wages?” in the FFCRA FAQs issued by the IRS.
Employers cannot receive the credit if they are also receiving a credit for paid family and medical leave established by the 2017 tax overhaul (Public Law 115-97). In addition, state and local governments are not eligible to claim these credits.
The Department of the Treasury will need to issue regulations or guidance to ensure employers don’t manipulate the credit, to minimize compliance and recordkeeping burdens, to waive penalties for underpayments in anticipation of the credit, and to establish a process to recapture credits when there’s an adjustment.
Here is a helpful chart for you to use which summarizes a number of key provisions noted above:
IF (1) the employee has been employed for at least 30 days; (2) is currently working; (3) work is available for the employee to perform; and (4) the employee asks for time off for the following SPECIFIC reasons, THEN follow this chart to provide the appropriate response, recordkeeping, and pay:
| Reason for Leave Request |
Duration | Pay | Maximum Pay |
|---|---|---|---|
| . | |||
| Employee quarantined due to local, state, or federal order | 80 hours | 100% | Regular rate, up to $511 per day and $5,110 in the aggregate |
| . | |||
| Employee tested positive for, or exhibits symptoms of, COVID-19 | 80 hours | 100% | Regular rate, up to $511 per day and $5,110 in the aggregate |
| . | |||
| Employee ordered to self-quarantine by a healthcare provider | 80 hours | 100% | Regular rate, up to $511 per day and $5,110 in the aggregate |
| . | |||
| Employee caring for a family member who has been diagnosed with or exhibits symptoms of COVID-19 | 80 hours | 2/3 pay | 2/3 regular rate, up to $200 per day and $2,000 in the aggregate |
| . | |||
| Employee required to care for a child because school or child care provider is unavailable due to COVID-19 | 80 hours | 2/3 pay | 2/3 regular rate, up to $200 per day and $2,000 in the aggregate |
| . |
Keep in mind that pay for part-time employees is pro-rated based on normal hours worked.
Once paid sick leave has been exhausted, which covers the two week waiting period imposed by the emergency FMLA, EFMLA pay may go into effect, but only if (1) the employee has been employed for at least 30 days; (2) the employee was working until the paid sick leave request was made; (3) work is available for the employee to perform; and (4) the employee asks for time off because the employee is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.
| Reason for Leave Request | Duration | Pay | Maximum Pay |
|---|---|---|---|
| . | |||
| Employee unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19 | 10 weeks (after two week waiting period) |
2/3 pay | 2/3 regular rate, up to $200 per day and $12,000 in the aggregate |
Self-Employed Tax Credit
The measure provides a similar refundable credit against self-employment tax. It would cover 100% of self-employed individuals’ sick-leave equivalent or 67% if they were taking care of a sick family member or child if their school was closed.
Their sick-leave equivalent amount will be capped at $511 per day if caring for themselves or $200 if caring for a family member. It would be available for 10 days. Self-employed individuals could receive a family leave credit for as many as 50 days for the lesser of $200 or their average daily self-employment income.
Self-employed individuals will have to submit documentation, as required by The Department of the Treasury. The measure will establish alternate requirements for self-employed individuals who also receive sick-leave pay from an employer. It will also establish rules for the credit to be provided in U.S. territories.
Please contact your GBQ representative if you have questions, or if you would like to discuss any of this information in further detail. To view a list of FAQs related to the Act, click here.
