On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (FFCRA) into law as a means of giving certain employees paid sick and family leave for those affected by the coronavirus. Payroll tax credits will be available to employers required to offer employees these provisions to offset those employers’ increased costs. These tax credits may also be made available to self-employed individuals.
Changes to the Family and Medical Leave Act
For employers with fewer than 500 employees and all government employers, the FFCRA amends the federal Family and Medical Leave Act (FMLA). These employers must generally provide employees who have been working for the organization for at least 30 days (including those who work under a multiemployer collective agreement and whose employers pay into a multiemployer plan) with up to 12 weeks of job-protected leave if they have a qualifying need related to the coronavirus health emergency. Additionally, 10 of those weeks must be provided as paid leave.
The new law generally allows an employee to exercise the leave option in circumstances where they are unable to work or telework because they need to care for a minor child whose school or paid place of childcare has been closed or is otherwise unavailable because of COVID-19.
Historically, the FMLA generally required only job-protected leave, not paid leave, for employees who had been employed by the organization for at least 12 months. The FFCRA alters these prior provisions. Under the FFCRA, only the first 10 days of job-protected leave may be unpaid (though those 10 days might qualify for paid sick leave as described below).
Following the 10-day period, covered employers must provide paid leave at two-thirds of an employee’s normal rate. The pay requirement is limited, however, to $200 per day and $10,000 total per employee.
Certain exemptions and special rules may apply regarding expanded family and medical leave, however.
New Rules for Emergency Paid Sick Leave
Under FFCRA, full-time employees are entitled, in certain situations, to 80 hours of paid sick leave to be paid by employers with more than 500 employees. Part-time employees are also eligible for paid sick leave for the average number of hours worked over a two-week period.
Employees are eligible for paid sick leave as of their date of hire. Employers can’t require an employee to use other paid leave before the paid sick time.
When leave is taken for an employee’s own illness or quarantine and that employee is unable to work or telework due to the following reasons, the leave must be paid at the employee’s regular rate (limited to $511 per day and $5,110 total). The employee’s paid leave is contingent upon being:
- Subject to a COVID-19-related quarantine or isolation order,
- Advised by a health care provider to self-quarantine, or
- Affected by COVID-19 symptoms and seeking a medical diagnosis.
Employers are obligated to provide paid sick leave at two-thirds the regular rate (limited to $200 per day and $2,000 total) to employees who are taking leave for their own illness or quarantine and who are unable to work or telework because they are:
- Caring for an individual subject to a COVID-19-related quarantine or isolation order,
- Caring for their child whose school or place of care has been closed, or whose childcare provider is unavailable, due to COVID-19, or
- Experiencing substantially similar conditions specified by the U.S. Secretary of Health and Human Services.
Certain exemptions and special rules may apply regarding paid sick leave.
Eligibility for Employer Tax Credits
Covered employers are generally permitted to take a Federal payroll tax credit for 100% of the qualified family and sick leave wages they pay each quarter. The tax credits are primarily available only to those employers required by the new FFCRA to provide benefits.
The cap is set at $200 per day and $10,000 for all calendar quarters for the amount of wages taken into account for paid family leave for each employee. The amount of wages taken into account for paid sick leave is limited to $511 per day for leave taken for the employee’s own illness or quarantine and $200 for leaves taken to care for others.
Wages taken into account when computing the credit amount won’t be taken into account when computing the existing Section 45S business tax credit for paid family and medical leave.
Tax credits may also be available to certain self-employed individuals.
Effective Dates for Families First Coronavirus Response Act Provisions
The new law provides that the paid leave provisions must take effect no later than 15 days after being enacted. Unless extended, the provisions expire on December 31, 2020. More relief affecting employees and businesses is expected to follow this legislation and we will keep you updated as information becomes available.
For additional information from the U.S. Department of Labor, you can consult their Employee Paid Leave Rights Fact Sheet, Employer Paid Leave Requirements Fact Sheet, and Questions and Answers documents.
If you have questions regarding the Families First Coronavirus Response Act and how it may impact you, please contact your Untracht Early advisor for additional guidance.