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On March 18, President Donald Trump signed the Families First Coronavirus Response Act, a federal effort to provide a wide range of assistance to American workers due to the COVID-19 outbreak. Not only does the Act provide paid time off for workers affected by the pandemic, it also gives employers the opportunity to receive tax credits to offset the cost of providing paid leave.

Expansion of the Family Medical Leave Act (FMLA) FMLA normally grants up to 12 weeks of unpaid leave to care for oneself or an immediate relative. This provision expands this coverage to employees with a qualifying need related to a “public health emergency,” which is when “the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable because of an emergency with respect to COVID-19 declared by a federal, state or local authority.”

The first 10 days of Emergency FMLA may be unpaid, but an employee can elect to substitute any accrued paid leave (like vacation or sick leave) to cover some or all of the 10-day unpaid period. After the 10-day period, the employer generally must pay full time employees at two-thirds the employer’s regular rate for the number of hours the employee would otherwise be normally scheduled.

The act limits this pay entitlement to $200 per day and $10,000 in the aggregate per employee. Employees who work part time or an irregular schedule are entitled to be paid based on the average number of hours the employee worked for the six months prior to taking emergency FMLA.

Eligible employees must be employed for at least 30 days by a company with fewer than 500 employees. (These companies in turn would get a corresponding tax credits to offset the cost of this leave.) Small employers of fewer than 50 workers would be allowed an exception from providing Public Health Emergency Leave if certain conditions were met. Employers of a healthcare provider or an emergency responder could elect to exclude those employees from the FMLA Expansion act’s requirements.  The benefits would be in effect until Dec. 31, 2020.

Emergency Paid Sick Leave

The Emergency Paid Sick Leave Act imposes additional paid sick leave requirements on employers by effectively filling in the initial two-week gap of unpaid leave left by the FMLA Expansion act. This Act applies to employers with 500 or fewer employees and would be triggered if an employee is unable to work (or telework) for one of the following reasons:

  • subject to a federal, state, or local quarantine or isolation order related to COVID-19;
  • advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • experiencing symptoms of COVID-19 and seeking a medical diagnosis;
  • caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2);
  • caring for their child if the school or place of care is closed, or the child care provider is unavailable, due to COVID-19 precautions; or,
  • 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.

The Paid Sick Leave Act requires employers to provide:

  • 80 hours of paid sick leave to full-time employees
  • Two weeks of paid sick leave to part-time employees, based on the average hours that part-time employee works

Leave in the first three categories above (self-care leave) would be paid at the employees’ regular rate of pay as determined by the FLSA and no less than minimum wage, capped at $511 per day or $5,100 in the aggregate. Leave in the last three categories above (Family Care Leave) would be paid at two-thirds that amount, capped at $200 per day and $2,000 in the aggregate. An employer could not require an employee to use existing paid leave provided by the employer before using paid leave required by the Paid Sick Leave Act. As in the FMLA Expansion, the Secretary of Labor may exclude health care providers and emergency responders from the paid Sick Leave Act requirements.

Tax Credits for Employers

Aware that this new law could be a strain on employers, the act provides refundable tax credits to help offset the costs of providing paid leave. This credit equals 100% of the qualified leave taken by an employee and would be refundable against the 6.2% social security or railroad retirement payroll tax paid by the employer. If the credits are greater than the taxes owed, the employer will get a refund equal to the difference in amount.

The self-employed (business owners, independent contractors and gig economy workers) can also claim this credit against their regular income taxes related to sick or family leave. It will cover 100% of the person’s average daily self-employment income (67% if they’re taking care of a child whose school has closed). The Act directs the Treasury to provide guidance on what documentation self-employed individuals must submit to claim the credit.

It’s important to note, however, that only employers required to provide Emergency FMLA or Emergency Paid Sick Leave are eligible for these credits.

The actual amount of leave an employee can take is subject to caps per individual. These caps vary depending upon the type of leave taken and type of employer:

Type of Leave Employer Max Per Day Per Employee Employer Max Per Quarter Per Employee Self-Employed Max Per Day Self-Employed Max Aggregate
Emergency FMLA Leave $200 $10,000 $200 or average daily self-employment income (whichever is less) $10,000 for up to 50 days
Paid Sick Leave $200 for family care, $511 for self-care 10 days ($2,000 for family care, $5,110 for self-care) $200 for family care, $511 for self-care, or average daily self-employment income (whichever is less) $10,000 for up to 10 days

Now is the time to prepare!  The leave provisions go into effect, and employers are expected to comply, by April 2, 2020.  Start now by putting a system in place to track the hours and wages employees take under the paid leave programs outlined above.

Whether this plan will be in addition to your current leaves practices (if you already offer paid time off) or a completely new undertaking, you might need help. An experienced HR consultant can be a great resource during this process, while a seasoned business tax CPA can help you navigate the tax credits you receive.

In the meantime, James Moore will continue to monitor the Families First Coronavirus Response Act and keep you informed of its progress.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.