On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (“FFCRA”) into law in response to the COVID-19 pandemic. The FFCRA goes into effect on April 1, 2020. This new law provides a wide range of relief for Americans including two new paid leave laws.
The FFCRA contains the Emergency Family and Medical Leave Act (“EFMLA”) and the Emergency Paid Sick Leave Act (“EPSLA”). These laws apply to employers with fewer than 500 employees.
The Emergency Family and Medical Leave Act
The EFMLA allows employees to take up to 12 weeks of job-protected leave. The provisions are only in effect until December 31, 2020. To be eligible, the employee must have been on the employer’s payroll for 30 days. Under the law, eligible employees may use EFMLA leave to care for a child (under the age of 18) of an employee if the child’s school or place of care has been close, or the childcare provider is unavailable, due to a coronavirus.
The first 10 days of this EFMLA leave may be unpaid. An employee may choose to use accrued paid time off, but an employer cannot require an employee to do so. After the first 10 days, employers must pay the EFMLA leave at no less than two-thirds of the employee’s regular rate of pay for the number of hours the employee would normally be scheduled to work. The EFMLA limits each employee to a maximum of $200 per day and a $10,000 total.
Under the law, the U.S. Secretary of Labor has the ability to issue regulations to exclude certain health care providers and emergency responders from the list of those employees eligible for EFMLA leave. The Secretary of Labor can also exempt small businesses with fewer than 50 employees if these requirements would jeopardize a business’ ability to maintain operations.
As mentioned above, this leave is job-protected, which means an employer is required to return an employee who takes EFMLA to the same or equivalent position once the employee returns to work. This requirement could be waived for employers with less than 25 employees if the employee’s position does not exist after taking EFMLA leave due to an economic downturn or other conditions that affect employment caused by a public health emergency during the period of leave.
The Emergency Paid Sick Leave Act
The EPSLA provides eligible employees with up to 80 hours of paid sick leave and allows eligible employees to take paid sick leave because the employee is:
Employees can receive paid sick leave if they are caring for anybody under a quarantine or isolation order, it is not limited to only family members.
Under the EPSLA, paid sick leave wages are capped at $511 per employee per day up to a total of $5,110 for any of the first three reasons set forth above (the employee is subject to a quarantine or isolation order, is advised by a health care provider to self-quarantine, or is experiencing symptoms of COVID-19).
If an employee needs to take sick time for any of the other reasons covered under the EPSLA, the employee’s sick time is paid at a rate of two-thirds their regular rate, with a cap of $200 per day and $2,000 total.
Paid sick leave under the EPSLA does not carry over to the following year and may be used in addition to any paid sick leave an employee has accrued under an employer’s policy.
EPSLA provides full-time employees with 80 hours of paid sick leave. Part-time employees are paid based on the average number of hours the employee worked over a two-week period. For example, an employee who works an average of 20 hours per week would be entitled to 40 hours of paid sick leave under the EPSLA.
The EPSLA is also only in effect until December 31, 2020.
Tax Credits for the EFMLA and EPSLA
The FFCRA provides refundable tax credits for employers who are required to provide leave under the EFMLA and EPSLA. The tax credits will be used against the employer portion of Social Security and Medicare taxes. However, employers will also be reimbursed for any costs mandated by these leaves that exceed the taxes they would owe.
Last week, the Internal Revenue Service (“IRS”) and the Department of Labor (“DOL”) released a guidance that explains how the tax credit process will work. The guidance also stated that the DOL will not bring enforcement actions against employers within the first 30 days the FFCRA is in effect as long as the employer is acting in good faith in an effort to comply.
The IRS and DOL guidance states that employers can immediately recoup payments made under the leave provisions of the FFCRA by keeping a portion of the deposit the employer would otherwise pay as part of their employees’ federal, social security and Medicare taxes.
Eligible employers who pay for qualifying EFMLA and EPSLA leave will be able to retain the amount of qualifying sick and child care leave that they paid, rather than pay the IRS that amount in payroll taxes.
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 the employer cannot completely cover the cost of the qualified paid leave with payroll taxes, they will be able to file a request for an accelerated payment from the IRS to cover their additional costs. The IRS stated that they expect to process these requests in two weeks or less. More information on the procedure for the accelerated payments are expected this week.
Employers need to maintain clear records showing all paid leave provided under EFMLA and EPSLA in order to support their claim for a tax credit.
DOL Issues FFCRA Q&A’s
The DOL released a “Questions and Answers” page which provides guidance on some compliance issues regarding the FFCRA. Here are some important takeaways from the Q&A’s.
As mentioned above, employers with fewer than 50 employees may be exempt from the paid leave requirements under the FFCRA if providing the paid time off would jeopardize the viability of their business.
The Q&A’s state that to use this small business exemption, employers need to document why their business meets the criteria set forth by the DOL, which will be detailed in regulations that have yet to be released. Therefore, at this point it is unclear how the small business exemption is going to be enforced by the DOL.
The Q&A’s also make clear that any employer that has provided paid leave to employees for any reason allowed under the FFCRA before the April 1 effective date has not satisfied the requirement under the law. The guidance states that the FFCRA imposes new leave requirements on employers that is effective on April 1, 2020.
Therefore, any paid leave for a reason identified in the EPSLA or EFMLA that an employer has provided prior to April 1 does not retroactively satisfy the requirements under the law. If an employee again requests leave allowed under the FFCRA on or after April 1, the employer would need to provide additional leave and the prior leave would not count under its tax credit.