On March 18, 2020, President Trump signed the FFCRA into law. In general the FFCRA requires employers with less than 500 employees to provide a certain amount of paid leave to employees impacted by the coronavirus (COVID 19) and provides a tax credit to employers to mitigate the costs of providing the mandated leave. The Act is intended to ease the economic consequences of the COVID – 19 outbreak. The Act also affects employer sponsored health plans.
The Emergency Family and Medical Leave Expansion Act
The Act includes the Emergency Family and Medical Leave Expansion Act (EFMLEA) (Division C of the Act), which requires employers with fewer than 500 employees and all government entities to provide both paid and unpaid public health emergency leave for as many as 12 weeks of job protected leave to certain employees through December 31, 2020.
This emergency leave generally is available when an employee who has been employed for at least 30 days is unable to work or telework due to a need for leave to care for a son or daughter under age 18 because a school or place of care has been closed, or a childcare provider is unavailable, due to an emergency with respect to COVID-19 that is declared by a federal, state, or local authority. The ﬁrst 10 days of leave may be unpaid, although a worker could choose to use other accrued leave ﬁrst and then receive the required paid leave.
Employers would be required to pay employees an amount calculated on an amount not less than two-thirds of an employee’s regular rate of pay and the number of hours the employee would otherwise be normally scheduled to work, not to exceed $200 per day and $10,000 in the aggregate. As with traditional FMLA leave, EFMLA leave is job protected, and an employer must return the employee to the same or equivalent position upon their return to work. The bill outlines an exception for employers with fewer than 25 employees stating that, if the employee’s job no longer exists due to the coronavirus pandemic, employers would be required to make reasonable eﬀorts to restore the employee to an equivalent position over a one year period.
The bill grants the Secretary of Labor the authority to issue regulations exempting: (1) certain healthcare providers and emergency responders from taking leave under the bill; and (2) small businesses with fewer than 50 employees from the requirements of the bill if it would jeopardize the viability of the business.
Emergency Paid Sick Leave Act
Under the Emergency Paid Sick Leave Act (EPSLA) (Division E of the Act), private employers with fewer than 500 employees, and public employers of any size, must provide 80 hours of paid sick time to full-time employees who are unable to work (or telework) for specified virus-related reasons. Part time employees are entitled to sick time based on their average hours worked over a 2 week period. This amount is immediately available regardless of the employee’s length of employment. The maximum amounts payable vary based on the reason for absence.
Employees who are (1) subject to a quarantine or isolation order, (2) advised by a health provider to self-quarantine, or (3) experiencing symptoms and seeking diagnosis, must be compensated at their regular rate, up to a maximum of $511 per day ($5,110 total). Employees caring for an individual described in category (1), (2), or (3), caring for a son or daughter whose school is closed or child care provider is unavailable, or experiencing a “substantially similar condition” specified by the government must receive two-thirds of their regular rate, up to a maximum of $200 per day ($2,000 total).
Employers cannot require employees to find a replacement worker or use other sick leave before this sick time. Employers may exclude health care providers and emergency responders, and the DOL can issue regulations exempting businesses with fewer than 50 employees.
EFMLEA and EPLSA Tax Credits
Any amount paid by an employer under EFMLA is eligible for a 100% refundable tax credit, equal to 100% of the qualiﬁed emergency family leave wages required to be paid by the Emergency Family and Medical Leave Expansion Act. The credit is claimed against the tax imposed by section 3111(a) (the employer portion of the Social Security taxes) each calendar quarter through the IRS Form 941. The amount of qualiﬁed leave wages taken into account for each employee is capped at $200 per day and $10,000 for all calendar quarters. If the credit exceeds the employer’s total liability for any calendar quarter, the excess credit is refundable to the employer.
The EPSLA credit for each employee is equal to the lesser of the amount of his leave pay or either (1) $511 per day while the employee is receiving paid sick leave to care for themselves, or (2) $200 if the sick leave is to care for a family member or child whose school is closed. An additional limit applies to the number of days taken into account for all preceding calendar quarters.
The amount of the EPSLA and EFMLEA credits are increased by the portion of the employer’s “qualiﬁed health plan expenses” that are properly allocable to qualiﬁed sick leave wages or qualiﬁed family and medical leave wages. Qualiﬁed health plan expenses means amounts paid or incurred by the employer to provide and maintain a group health plan (as deﬁned in Code Sec. 5000(b)(1), but only to the extent that such amounts are excluded from the gross income of employees by reason of Code Sec. 106(a).
In addition, the credits allowed to employers for wages paid under the EPSLA and EFMLEA are increased by the amount of the tax imposed by Code Sec. 3111(b) (the 1.45% hospital insurance portion of FICA) on qualiﬁed sick leave wages, or qualiﬁed family leave wages for which credit is allowed under Act Sec. 7001 or Act Sec. 7003. The credits are refundable to the extent they exceed the employer’s payroll tax.
Employers don’t receive the credit if they’re also receiving the credit for paid family and medical leave established by the 2017 Tax overhaul (P.L. 115-97).
Wages paid under the EPSLA and EFMLEA are not considered wages under Code Sec. 3111(a) (employer tax-old age, survivors and disability insurance portion of FICA; 6.2%) or under Code Sec. 3221 (a) (employer’s railroad retirement tax).
Special Considerations for Self-Employed Individuals
Self-employed individuals may only take into account those days they are unable to work for qualiﬁed reasons under the Emergency Family and Medical Leave Credit or the Emergency Paid Sick Leave Credit. They must maintain documentation to be prescribed by the Treasury to establish their eligibility for the credit.
The Act also provide for similar refundable credits against the self-employment tax. It covers 100% of a self-employed individual’s sick leave equivalent amount, or 67% of the individual’s sick-leave equivalent amount if they are taking care of a sick family member, or taking care of a child following the child’s school closing for up to 10 days. The sick-leave equivalent amount is the lesser of average daily self-employment income or either (1) $511/day to care for the self-employed individual or (2) $200/day to care for a sick family member or child following a school closing, paid user the EPSLA.
Self-employed individuals can also receive a credit for as many as 50 days multiplied by the lesser of $200 or 67% of their average self-employment income paid under the EFMLEA.
These rules apply only to days occurring during the period beginning on a date selected by the Secretary of the Treasury, which is during the 15-day period beginning on the date of the enactment of this Act (March 18, 2020), and ending on December 31, 2020.