By Katherine L. Wood, Esq.
On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act (the “Act”) which aims to assist employees impacted by the COVID-19 pandemic. The Act takes effect on April 1, 2020. The Act has two key components—expanding Family Medical Leave Act (“FMLA”) coverage and mandating paid sick leave. The two key components of the Act as well as insights from recent guidance issued by the U.S. Department of Labor and Internal Revenue Service are summarized below.
Expanded FMLA Coverage
The Act makes FMLA leave available for a “public health emergency”—until December 31, 2020—when the employee needs leave to care for his or her minor child because the child’s school or place of care has been closed, or the child’s child care provider is unavailable, because an emergency has been declared by a federal, state, or local authority with respect to COVID-19.
Who is covered?
Private sector employers with fewer than 500 employees and all public agencies must provide eligible employees with up to 12 weeks of FMLA leave for “a qualifying need related to a public health emergency.”
If an employee is a healthcare provider or an emergency responder, then the employer may elect to exclude such employee from the leave. In addition, the Department of Labor is authorized to enact regulations that exempt small businesses with fewer than 50 employees from the requirement to provide Public Health Emergency Leave “when the imposition of such requirements would jeopardize the viability of the business as a going concern.”
Employees, both full time and part time, are eligible when they have been on the employer’s payroll for 30 calendar days.
Must employers pay employees on leave?
The first 10 days of the expanded FMLA leave are unpaid. However, employees who qualify for expanded FMLA leave may use accrued paid time off, such as sick leave or vacation time, during the first 10 days of leave. It remains unclear whether the employer can require the employee to use accrued paid time off during this period. Under regular FMLA leave, the employer can mandate the use of accrued paid time off.
After the first 10 days, the employer must pay the employee two-thirds the employee’s regular wages, capped at $200 per day and $10,000 total per employee. Part-time employees are paid based on their average hours worked in the 6 months prior to the leave. If a part-time employee has worked less than 6 months, payments are based on the average hours the employee would typically be scheduled to work.
Is the employee’s job protected while on leave?
The expanded FMLA leave is job protected leave, so employers must place an employee returning from this leave back into the same or equivalent position as the employee was working prior to leave. Small businesses with less than 25 employees, however, are excluded from this requirement if the employee’s former position no longer exists because of changes in the business due to a public health emergency. However, if the employee’s position at a small employer has been eliminated, the employer must make reasonable efforts to contact that employee for up to 1 year after elimination of the position if an equivalent position becomes available.
Paid Sick Leave
Who is covered?
Like the expanded FMLA leave, private sector employers with fewer than 500 employees and all public agencies must provide emergency paid sick leave. Additionally, quasi-governmental agencies and individuals “acting directly or indirectly in the interests of the employer” must comply with the leave provisions—there is little guidance on determining whether an employer is covered under one of these provisions.
Employees are covered by the emergency paid sick leave act immediately upon starting employment. Employees are eligible to take this leave when they are unable to work or telework because:
- 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 because of COVID-19 concerns;
- The employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
- The employee is caring for a child whose school or place of childcare is closed, or the childcare provider is unavailable, due to public health emergency; or
The employee is experiencing substantially similar conditions as specified by the Secretary of Health and Human Services in consultation with the Secretaries of Labor and Treasury.
How much leave must be provided and at what rate of pay?
Full-time employees must be provided with 80 hours of paid sick leave at the employer’s regular rate of pay for the first 3 reasons listed above, or two-thirds the employee’s regular rate of pay for the last 3 reasons listed above. Part-time employee’s rate of pay is calculated based on the number of hours the employee worked, on average, over a two-week period.
Payment of paid sick leave wages is capped at $511 per day and $5,110 total per employee for the first 3 reasons listed above, and at $200 per day and $2,000 total for the last 3 reasons listed above.
New DOL Guidance and Other Considerations
On March 20, 2020, the DOL added two new resources to its slowly growing COVID-19 library:
- Families First Coronavirus Response Act: Employee Paid Leave Rights available at https://www.dol.gov/agencies/whd/pandemic/ffcra-employee-paid-leave
- Families First Coronavirus Response Act: Employer Paid Leave Requirements available at https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave
While the new guidance does little more than re-state the Act in plainer language, DOL revealed some new information about how it will enforce the law:
The Department will observe a temporary period of non-enforcement for the first 30 days after the Act takes effect, so long as the employer has acted reasonably and in good faith to comply with the Act. For purposes of this non-enforcement position, “good faith” exists when violations are remedied and the employee is made whole as soon as practicable by the employer, the violations were not willful, and the Department receives a written commitment from the employer to comply with the Act in the future.
Otherwise stated, the first 30 days will be a bit of a trial period for employers, as long as they are trying to do the right thing. In footnote one of the employee guidance, the DOL indicated that it expects to issue regulations about the Act in April 2020.
Finally, employers should keep in mind that FMLA leave may also be available where the employee or a covered family member has a “serious health condition” related to COVID-19. Under those circumstances, the normal FMLA rules, including the more restrictive definitions of covered employers and employees and the unpaid nature of the leave, apply.
Who Pays for the Sick Leave or Time?
Employers must pay the benefits, but they will receive a tax credit for doing so. On March 20, 2020, Treasury, IRS and DOL announced a 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-related leave available at 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
As noted above, a small business may be exempt from the coronavirus-related paid leave requirement (and thus less interested in this relief) if you have less than 50 employees and payment would jeopardize the continued viability of your business.
Summary of Benefits:
|For EMPLOYEES, PAID SICK LEAVE:||Conditions for Eligibility:|
|Up to 80 hours of paid Sick Leave at 100% of your pay for up to $511/day for 10 days (Type 1)||You can’t work because you are quarantined or you have Covid-19 symptoms, or are seeking a diagnosis|
|Up to 80 hours of paid Sick Leave at 2/3 of your pay up to $200/day for 10 days||You can’t work because you are taking care of another who is quarantined, you are taking care of you child when his/her children’s school is closed or your child’s school is closed or the child’s provider is not available for Covid-19 related reasons|
|Up to 10 more weeks of paid FMLA at 2/3 of your pay||You can’t work because you are taking care of your child when his/her school is closed or the child’s provider is not available for Covid-19 related reasons|
FOR EMPLOYERS WHO ARE PAYING FOR THIS LEAVE—SICK LEAVE TAX CREDIT AGAINST PAYROLL TAXES INCLUDING EMPLOYEE WITHHOLDINGS:
- If Type 1 employee, tax credits equal to 100% of the employee’s pay, up to $511/day for 10 days
If Type 2 employee, tax credits equal to 2/3 of the employee’s pay, up to $200/day for 10 days
PLUS: Refundable Child Care Leave Credit for Type 2 Employee:
Credit equal to 2/3 of the employee’s pay, up to $200/day, for up to 10 weeks/$10,000
PLUS: Health Care Premium Tax Credit:
Dependent upon costs to maintain an employee’s health insurance during the leave period
The recent IRS guidance makes clear that employers are able to recoup these payments immediately by keeping a portion of the deposit it otherwise would pay as part of their employees’ federal, social security and Medicare taxes:
When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees’ share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.
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.
In other words, it means that any taxes held in escrow for payment on federal, social security and Medicare taxes now could be used to pay employees taking paid leave under the law effective April 1. Notably, this would allow employers to draw funds from the payroll and income tax they withhold from or pay on behalf of all employees and not just those to whom they must provide paid leave under the new statute. The IRS also provides guidance as to how businesses will be reimbursed immediately.
Hurwitz & Fine continues to monitor and analyze these updates and advise employers on matters related to the coronavirus outbreak. Please contact any member of the firm’s Employment Practices team for guidance on this evolving issue at 716-849-8900 or visit our website at www.hurwitzfine.com