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Families First Coronavirus Response Act

3/23/20 – Deirdre Bird

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What it Means for the Employer and the Employee

President Trump signed into law H.R. 6201: Families First Coronavirus Response Act on March 18, 2020. Among other things, the new law temporarily requires certain employers to provide expanded paid sick and family leave for employees affected by the coronavirus (COVID-19) pandemic. Employers’ increased costs will be offset by new tax credits, which also may be available to self-employed individuals.

Expanded family and medical leave

Families First Coronavirus Response Act amends the federal Family and Medical Leave Act (FMLA) for employers with fewer than 500 employees, and includes small employers with fewer than 50 employees, employers to whom traditional FMLA does not apply. Under the new law, employers with fewer than 500 employees generally must provide employees (including those who work under a multiemployer collective agreement and whose employers pay into a multiemployer plan) with up to 12 weeks of coronavirus-related job-protected leave, part of it paid.

The law requires employers with fewer than 500 employees provide 80 hours of paid sick leave for full-time employees in certain situations (see below for more detail). Part-time employees are entitled to this paid sick leave for the average number of hours worked over a two-week period.

In addition, the new law generally allows the leave in circumstances where an employee is unable to work (or “telework”) due to a need to care for a minor child whose school or paid place of childcare has been closed or is unavailable due to COVID-19.

The traditional FMLA generally requires only job-protected leave, not paid leave. For leave under the new law, only the first 10 days of leave may be unpaid. During the first 10 days of leave, employees may opt to use other paid vacation, sick or personal time off benefits, but employers may not require that employees use other paid leave. The paid leave provided by the new law is provided in addition to the employer’s current paid leave benefits. Decreasing or eliminating current paid leave on or after the law’s enactment date is restricted.

Be aware that certain exemptions and special rules may apply regarding expanded family and medical leave.

Paid sick leave

Under the new law, employees are eligible for paid sick regardless of how long they’ve worked with the employer, and employers cannot require an employee to use other paid leave before the paid sick time.

An employee qualifies for the leave when he or she is unable to work (or telework) because the employee:

  1. Is subject to a COVID-19-related quarantine or isolation order,
  2. Has been advised by a health care provider to self-quarantine, or
  3. Is experiencing COVID-19 symptoms and seeking a medical diagnosis.

When leave is taken for an employee’s own illness or quarantine, the leave is required to be paid at the employee’s regular rate, but no higher than $511 per day ($5,110 total for the 10-day period). Note that certain exemptions and special rules may apply regarding paid sick leave.

Paid family leave

The new law provides employees who’ve been on the job for at least 30 calendar days with up to 12 weeks of Coronavirus-related job-protected family leave, part of it paid.

An employee qualifies for the leave when he or she is unable to work (or telework) because the employee:

  1. Is caring for an individual subject to a COVID-19-related quarantine or isolation order,
  2. Is caring for a son or daughter whose school or place of care has been closed, or whose childcare provider is unavailable, due to COVID-19 precautions, or
  3. Is experiencing substantially similar conditions specified by the U.S. Secretary of Health and Human Services Alex Azar.

After 10 days, leave taken for family leave is required to be paid at two-thirds of the employee’s regular rate, capped at $200 per day ($2,000 total).

Tax credits for employers and the self-employed

Generally, covered employers can take a federal payroll tax credit for 100% of the qualified family and sick leave wages they pay each quarter. The credits generally are available only to employers required to provide benefits by the new law.

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 per day for leave taken to care for others, for up to 10 days. The amount of wages taken into account for the paid sick and family leave for each employee is capped at $10,000 for all calendar quarters. The credits cannot exceed the employer’s portion of social security taxes for the quarter. VonLehman recommends that employers proactively establish a method for tracking employee pay that falls under the Families First Coronavirus Response Act new laws for paid sick leave and paid family leave.

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.

Note that tax credits may also be available to certain self-employed individuals.

Effective dates

The new law provides the paid leave provisions must take effect no later than 15 days after enacted. They expire on December 31, 2020. More relief affecting employees and businesses is sure to follow this legislation. Contact VonLehman’s specialized Human Resources Consulting team at dbird@vlcpa.com or 800.887.0437 for more information related to the Families First Coronavirus Respect Act and for all the latest developments pertaining to COVID-19.