On March 18, 2020, the President signed the Families First Coronavirus Response Act (FFCRA) into law. The FFCRA responds to escalating health and economic issues with stipulations for paid sick leave, free COVID-19 testing, and increased unemployment benefits. Following is a synopsis of FFCRA measures that provide relief for employers. It is important to note that guidance regarding the logistics of these measures is anticipated to be released next week.
In addition to the legislation outlined below, an estimated additional $2 trillion in coronavirus relief for workers and businesses is on the horizon, with passage as early as March 24. KPM will keep you advised on how this, in conjunction with the relief described in this brief, can benefit businesses and their employees. Contact your KPM advisor with questions.
FFCRA amends the Family and Medical Leave Act (FMLA) to set up a temporary emergency paid leave program for those employed at least 30 days. This includes up to 12 weeks of job-protected leave under FMLA for a “qualifying need related to a public health emergency.” These provisions generally apply to private-sector employers with fewer than 500 employees and all government employers.
For these purposes, a “qualifying need” exists if an employee is unable to work or telework because he or she needs to care for a child who is under 18 years of age due to their school or place of care being closed, or because the childcare provider is unavailable due to a public health emergency, such as COVID-19. This Emergency FMLA rule also requires employers to pay employees after 10 days. Employees on leave are to be paid at two-thirds of their regular rate of pay, based on normally scheduled hours, up to $200 per day, with a maximum of $10,000 total.
Emergency Paid Sick Leave
FFCRA requires employers with less than 500 employees to provide paid sick leave to any employee who is unable to work or telework because the employee:
- Is subject to a federal, state, or local quarantine or isolation related to COVID-19
- Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19
- Has COVID-19 symptoms and is seeking medical diagnosis
- Is caring for an individual who is subject to a quarantine or isolation order
- Is caring for a child if the school or day care center has been closed, or the childcare provider is unavailable, due to COVID-19 precautions
- Is experiencing any other substantially similar condition specified by the regulatory agencies
Overall, employees are entitled to at least 80 hours of paid sick leave (prorated for part-time employees) and are immediately eligible upon their date of hire. An employer cannot require an employee who is eligible for paid sick leave to find a replacement or be involved in finding a replacement for their scheduled work shift. Paid leave is limited to $511 per day ($5,110 total) for an employee’s own illness or quarantine (paid at the employee’s regular rate), and $200 per day ($2,000 total) for leave to care for others (paid at two-thirds the employee’s regular rate).
FFCRA offers some relief to employers who are now required to provide paid leave. A payroll tax credit is available for up to $200 per day for Emergency FMLA and up to $511 per day for Emergency Paid Sick Leave payments. The credit is calculated on an individual employee basis for a total of 10 days’ paid leave. Employers should maintain records on employees who qualify for leave, which includes the reason for the leave and the days taken, to substantiate qualifications for the credit.
There also is another tax credit for employers who continue to provide health coverage to employees who take Emergency FMLA or Emergency Paid Sick Leave. Employers may receive a credit for the amount paid toward maintaining the health plan, for the amounts excluded from an employee’s gross income (as it related to federal income tax). This is in addition to wages paid for qualifying leave, but it cannot exceed the credit available for Emergency FMLA and Emergency Paid Sick Leave.
Prompt Tax Payments for Providing Leave
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 childcare leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and childcare 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 childcare 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.
Department of Labor Violations
Failure to pay the required sick leave is treated as a failure to pay minimum wages in violations of the Fair Labor Standards Act (the Act). However, as a part of this new requirement, the Department of Labor (DOL) will be issuing a temporary non-enforcement policy that provides a period for employers to become compliant with the Act. Under this policy, the DOL will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act; the DOL will focus on compliance assistance during the 30-day period.
Small businesses (those with fewer than 50 employees) may also be eligible for an exemption from the leave requirements relating to school closings or childcare unavailability where the requirements would jeopardize the ability of the business to continue. The exemption will be available based on simple and clear criteria that make it available in circumstances involving jeopardy to the viability of an employer’s business as a going concern. The DOL will provide emergency guidance and rulemaking to clearly articulate this standard.