Article originally published March 19, 2020
Last updated March 30, 2020 

Editor’s note: The IRS and the Department of Labor have indicated that additional guidance is forthcoming this week. Article contents will be updated as soon as more information becomes available.

On March 25, 2020, the Department of Labor (DOL) issued two fact sheets, one for employees and one for employers, along with a Q&A related to required leaves as described below. Notably, the Q&A, updated through March 28, 2020, indicates that the paid leave provisions are effective on April 1, 2020, and apply to leave taken between April 1, 2020, and December 1, 2020. The DOL also issued a Q&A related to employer notification/posting requirements.

The Families First Coronavirus Response Act (“FFCRA”) was passed by the House of Representatives early Saturday morning, March 14, 2020, with the backing of the Trump administration. On Monday, March 16, 2020, the House of Representatives made revisions to and ratified the FFCRA and forwarded it to the Senate Tuesday morning, March 17, 2020. Wednesday night, March 18, 2020, the Senate passed the FFCRA, and President Trump signed it into law. The following primary revisions were made prior to the FFCRA being signed into law:

  • employee eligibility for benefits for emergency leave were narrowed and simplified;
  • employee eligibility for sick pay benefits was expanded;
  • employee pay for sick pay benefits was capped at a maximum of $511 per day; and
  • employer tax credits were enhanced to include “qualified health plan expenses.”

These changes have been incorporated into the discussion below.

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 would provide tax credits to employers to offset the costs of providing emergency sick leave. It also would require 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 emergency medical leave, emergency paid sick leave, 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 provides 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 as of March 28, 2020, 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.

Coronavirus Emergency 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” means a provider who receives compensation for providing child care services on a regular basis. The term “school” means an elementary or secondary school.

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 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 emergency leave 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 sick leave and family leave 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 “qualified health plan expenses” – defined as “amounts paid or incurred by the employer to provide and maintain a group health plan…, but only to the extent that such amounts are excluded from the gross income of employees…” – which are allocable to the qualified sick and/or family leave wages. In addition, wages paid by reason of these sick leave and family leave provisions would not be subject to the employer’s share of FICA taxes (i.e., these payments would not be considered to be wages for this purpose).

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 late Friday, March 20, 2020, allows eligible employers that pay qualifying sick or child care 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 emergency and sick leave significantly faster than what was legislated as part of the FFCRA. The sick leave 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 family leave 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. The Department of the Treasury and IRS are in the process of preparing guidance for how to claim this refund, which they intend to issue this week. 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.

Employers couldn’t receive the credit if they’re 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.

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