On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act (FFCRA) which provides paid sick leave and family leave. A summary of key elements follows:
Emergency Paid Sick Leave Act
For employees of companies and government agencies with less than 500 workers, up to 80 hours of emergency paid sick leave will be provided. Part-time employees are also covered based on the average hours worked in a two-week period. The requirements will not apply to companies with 500 or more employees. The employee must be unable to work (or telework) due to the specific qualifying criteria.
Employees meeting the following criteria can qualify to receive the lesser of their regular pay or $511 per day (maximum of $5,110 per employee):
- Employee experiences symptoms of COVID-19 and is seeking medical diagnosis
- Employee has been advised by a medical provider to self-quarantine due to COVID-19 concerns
- Employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19
Employees meeting the following criteria can qualify for the lesser of 67% of regular pay or $200 per day (maximum of $2,000 per employee):
- Employee is caring for an individual who is subject to quarantine or self-quarantine as above
- Employee is caring for his or her child if the school or place of care of the child has been closed, or the childcare provider is unavailable, due to COVID-19 precautions
- The employee is experiencing substantially similar conditions as specified by the Secretary of Health and Human Services
Emergency Family and Medical Leave Expansion Act
Employees eligible for emergency paid leave may also qualify for the new Family and Medical Leave Expansion Act (FMLA) for up to twelve weeks. The first two weeks are unpaid under FMLA but may otherwise be covered under the Act above. Accrued leave can also be used during these two weeks. The remaining 10 weeks are paid at 2/3 of the employee’s regular rate, for the number of hours the employee would otherwise be scheduled to work (with a maximum payout of $200 per day and $10,000 total.)
The benefits cover employees who are unable to work (or telework) because they are required to care for their child under age 18 due to COVID-19 closure. To receive FMLA benefits, employees must have been on the employer’s payroll for 30 calendar days. The benefits apply to companies with less than 50 employees that aren’t otherwise required to provide FMLA benefits, and as with sick leave, employers with 500 or more employees are again excluded. The Department of Labor has the authority to exempt certain businesses from the expanded requirements if they jeopardize their viability as a going concern. For all intents and purposes, companies should not assume they will receive the exemption.
FICA and Medicare Taxes
Any wages paid by reason of the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Act are not subject to FICA or Medicare tax on the employer, but remain subject to such taxes on the employee.
The bill provides for refundable tax credits to employers equal to the required payments to employees. The credit is applied against the employer’s share of FICA and Medicare tax liability for the quarter in which the sick leave pay is paid. If the total sick leave payments made by the employer exceed its share of such taxes, the difference is refundable. The specific timing of when an employer can reduce payroll tax deposits to take advantage of the credit is still unclear at this time.
Self-employed taxpayers also receive a benefit, in the form of a credit against self-employment tax. The credit is subject to the daily limit of 67% of average daily self-employment income, or $200.
The new rules require protection of the employee’s job status upon return. There is an exception to this for employers with fewer than 25 employees, if the position no longer exists following the leave due to operational changes caused by COVID-19.
Sequence and Rules for Leave
The paid leave is in addition to existing PTO, vacation or other paid leave. The new rules require an employer allow the employee to first use sick leave under the new sick leave law, then decide to use any remaining accrued paid leave. Employers cannot require employees to use any existing paid leave first.
The ACT is effective April 2,2020, and will run through December 31, 2020. Benefits provided are prospective only.
Employers will need to work closely with their payroll providers in the months ahead to ensure compliance.