The president has signed into law the Families First Coronavirus Response Act {H.R 6207). This sweeping legislation temporarily extends and enhances policies relating to the Family and Medical Leave Act {FLMA) for all employers nationwide with less than 500 employees.
There are two leave-related components of the new legislation. The first, under a provision called the Emergency Family and Medical Leave Expansion Act, includes guidance for ongoing paid leave time up to 72 weeks. The second, under a provision called the Emergency Paid Sick Leave Act, outlines requirements for short-term paid sick leave, up to 80 hours for full-time workers.
Here's our initial take on what the new law means and how you can apply it to your business, broken down into three parts.
Emergency Family and Medical Leave Expansion Act
Emergency Paid Sick Leave Act
Payroll Tax Credits
1. Emergency Family and Medical Leave Expansion Act
This is an extended leave option (up to 72 weeks, with the first two weeks unpaid) for people affected by COVID-19.
Employees that have been employed for at least 30 days are immediately eligible for leave if:
They are sick or have to care for a family member who is sick.
They are caring for a child due to a lack of childcare caused by closures related to COVID-19.
They are on a mandatory quarantine or shelter-in-place order.
Any employer with under 500 workers whose employees were already covered by FMLA is considered a covered employer under this legislation. NOTE: There is an exemption for small businesses of under 50 employees who can prove a hardship to viability, but it will likely be a rough and rigorous process to prove this hardship, because the intent of the law is to provide this relief to workers. More information about the process is yet to be released.
The first two weeks of the leave are unpaid. Employees can choose to use accrued paid sick leave or other accrued paid leave, but employers cannot require it. In section 2 of this article, we'll talk about the paid sick leave component of the law, which allows for 80 hours of paid leave without the 30 days of employment requirement. It appears employees can use the paid sick component of this same bill to pay for the first 80 hours (for full-time workers) of their leave.
The following 70 weeks of the leave are considered paid leave. Employees must receive at least two-thirds of their regular pay, up to $200 per day and $70,000 total.
You're going to have to hold the job for when the employee is able to ret urn. Guidelines around job reinstatement basically follow prior FMLA rules; however, employers with under 25 employees will not have to provide reinstatement if the position no longer exists upon resuming regular business due to the COVID-19 crisis. A reasonable effort to return the employee to a similar role must be demonst rated . Again, be cautious - it might be a high threshold to prove.
These requirements do not preempt state or local paid sick leave requirements, so you still need to provide mandatory sick leave if you live in an area that requires t hat.
2. Emergency Paid Sick Leave Act
Like the Emergency Family and Medical Leave Expansion Act, the paid sick leave component of this act covers employers with less than 500 employees. NOTE: This portion of the law does not carry the hardship component for small employers - it applies to all.
There is no length of service requirement for employees - employees are eligible immediately upon hire.
Leave must be made immediately available for employees impacted by the following situations:
They are subject to a state, local or federal quarantine or isolation order due to COVID-19.
They have been told by heath care providers to self-quarantine due to COVID-19 related concerns. They have the symptoms of COVID-19 and are waiting for diagnosis .
They are caring for a family member who was advised by a health care provider to quarantine or self-isolate due to COVID-19 related concerns.
They are caring for a child whose school or childcare facility has closed due to COVID -19 .
They are under similar quarantine or self-isolating orders due to caring for a child or other family m ember.
Full-time employees receive 80 hours of sick leave. This can be used for the first two weeks of their longer FMLA leave. Part-time employees should be pro-rated based on their regular hours worked.
The cap is $577 per day and $5,770 total if an employee is ill or are subject to quarantine, either mandated or recommended.
The cap is $200 per day and $2,000 total if the employee is caring for others, including family members affected by the illness or a school-aged child whose school or childcare center has been closed.
This specific paid sick leave is not payable upon termination nor does it roll over year to year. Furthermore, it ceases to exist once the employee is able to return to work when the business resumes normal function.
3. Payroll Tax Credits
Paid Sick Leave Credit
There are payroll tax credits available to employers who provide COVID-19 related leave payments to employees. Below is an outline of this general information; more detail about these credits is still pending per the IRS's approval. We'll have more information once the official governance is available.
Employee unable to work due to COVID-19 symptoms {Tier 2):
Cap of $577 per day, total of $5770 (max 70 days).
- Example: Employee is out 74 days due to suspected COVID-19 illness. Employee earns $20 per hours and is full-time; 8 hours x $20 = $760 gross per day x 6.2% = $9.92 employer social security match; $9.92 x 70 days = $99.20 credit
Employee is unable to work due to childcare (daycare or school closure) or caring for someone with COVID -19 {Tier 7).
Credit is for two-thirds of the employee's regular rate of pay:
Employee makes $70,000 or $269.23 per day (annual /260)
$ 269.23 X .67 = $780 . 38
$780.38 x 6.2% = $77.78 (per day)
Employee is out 8 days = 8 x 77.78 = total credit $89.44 Credit cap: $200 per day or $2000 total (70 d ays)
Healthcare credits:
Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period . Guidance on this is still pending from the IRS.
Paid Family Leave Credit
For an Employee taking extended FMLA leave:
Employee unable to work due to COVID-19 symptoms {Tier 2). Employers are eligible for credit against 70 0 % of the qualified leave:
Cap of $200 per day, total of $70 ,0 0 0 (o v e r 70 weeks)
Example: Employee is out three weeks due to suspected COVID-19 illness . Employee earns $20 per hour and is fu ll-t im e: 8 hours x $20 = $760 gross per day x 6.2% = $9.92 employer social security match; $9.92 x 75 d ays = $74 8 . 80 credit.
Employee is unable to work due to childcare (daycare or school closure) or caring for someone with COVID-19 {Tier 1). Employers are eligible for two-third s credit against the qualified leave:
Example: Employee makes $70,000 or $269.23 per day (annual /260)
-$ 269.23 X .67 = $780 . 38
-$780 . 38 x 6.2% = $77.78 (per day)
-Credit cap: $200 per day or $70,000 total (70 w eek s maximum ) Employee is out for seven week s (35 days)
-Total credit: 35 x 77.78 = $397.30
Please note: This is our current analysis based on available information. It is subject to change as additional information is released. TaxBridge Advisors, Corp., Family Financial Strategies, Inc., Strategic Legacy investment Croup, Inc., SLIC High interest Liquid Savings Company, Strategic Legacy Realty Headquarters, Inc. and Strategic Legacy Management Corp. are here to help provide you with support and expertise through these uncertain times. If you have any questions, feel free to contact us.