By Brandon J. Grable
March 24, 2020
Last week, President Trump signed the Families First Coronavirus Response Act (FFCRA or the Act) enacting a temporary/mandatory paid emergency leave requirement and expanded the Family & Medical Leave Act.
- The Act takes effect on April 2, 2020.
- The Act impacts all private employers that employ 500 or fewer employees.
- Paid Leave capped at 10 days; 100 percent of employee’s rate not to exceed $511 per day or $5110 in the aggregate.
- FMLA expansion only applies to those employees impacted by school closures related to COVID-19, and is capped at 12 weeks; 2/3 of employee’s rate not to exceed $200 per day or $10,000 in the aggregate.
- Businesses with fewer than 50 employees may seek exemption if providing these benefits “would jeopardize the viability of the business as a going concern.”
- Employers can immediately take advantage of tax credits offsetting emergency leave-related wages.
- Further guidance expected from Department of Labor on Wednesday, March 25, 2020.
Mandatory Paid Leave (Qualified Sick Leave):
The Act requires employers to provide up to 10-days of paid leave to all employees who are affected by COVID-19. Paid leave is available under the following circumstances:
- 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 health care 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 a quarantine order or who has been advised by a health care provider to self-quarantine;
- To care for the child of such employee if the school or place of care has been closed, or the child care provider of such child is unavailable, due to COVID-19 precautions; and
- if the employee is experiencing any other 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.
If an employee is absent due to one of these six reasons, employers must pay 100% of the employee’s regular wages up to $511 per day (but no more than $5110 in the aggregate.) This leave is separate and apart from the other paid leave policies that an employer might have. Furthermore, employers cannot require employees to use any other form of leave prior to using leave provided for under this Act.
Full time employees are entitled to 80 hours of paid leave and part-time employees are entitled to an amount equal to the number of hours that such employee works on average over a two-week period.
FMLA Expansion (Child Care Leave):
Typically, employees are not eligible for FMLA leave until they have worked for an employer for at least 12 months and 1250 hours. For all employees employed for 30 consecutive days, expanded FMLA leave is available if such employees need to be absent from work to take care of children whose schools or daycares have closed due to concerns over COVID-19. The first 10 days are unpaid; however, employees would be able to utilize the paid sick leave discussed above. After the first 10 days, eligible employees are eligible for paid leave at 2/3 their regular
pay rate of pay, but not to exceed $200 per day or $10,000 in the aggregate.
Prompt Payment for the Cost of Providing Leave
While the Department of Labor has not released formal guidance interpreting the leave provisions of the Act, the IRS (jointly with the Department of Treasury and Department of Labor) recently announced that employers can take advantage of an “immediate dollar-for-dollar tax offset against payroll taxes.”
The joint release stated the following:
“Under guidance that will be released next week, eligible employers who pay qualifying sick or child-care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child-care leave that they paid, rather than deposit them with the IRS.
“The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes and the employer share of Social Security and Medicare taxes with respect to all employees.
“If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.”
The notice also provided the following examples:
If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments, and file a request for an accelerated credit for the remaining $2,000.
Please consult with your tax advisor if you have any questions about the tax implications of the FFCRA. Contact our office if you have any questions or concerns about the legal implications of the FFCRA.
IRS Press Release: https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus
Joint release by Treasury, IRS, and DOL: https://www.dol.gov/newsroom/releases/osec/osec20200320
To keep up to date with all related guidance published by the Department of Labor, go to https://www.dol.gov/agencies/whd/pandemic