President Trump has signed into law the Families First Coronavirus Response Act (H.R. 6201, Families First Act). This act temporarily requires certain employers to provide job-protected leave and paid sick leave for employees affected by the coronavirus (COVID-19) pandemic. Small employers would potentially be eligible to receive a tax credit when they provide paid sick leave as a result of COVID-19.
Paid Sick Leave
Employers with less than 500 employees must now provide paid sick leave to their employees. Full-time employees must be provided 80 hours of paid sick leave; part-time employees must be provided with paid sick leave for the average number of hours they normally work over a two-week period. All employees are eligible for paid sick leave regardless of their length of service, and employers can’t require employees to use other paid leave before using this paid sick time.
The paid sick leave is available if an employee is unable to work (or telework) for one of the following six reasons:
1. To self-isolate or quarantine due to a federal, state, or local quarantine or isolation order related to COVID-19;
2. To quarantine due to COVID-19 concerns on the advice of a health care provider;
3. To obtain a medical diagnosis or care if the employee has COVID-19 symptoms;
4. To care for someone (not limited to family) experiencing one of the first two situations listed;
5. To care for the employee’s son or daughter if the school or place of care has been closed, or the child care provider is unavailable, due to COVID-19 (the Secretary of Labor could exempt businesses with fewer than 50 employees from this requirement if it would jeopardize the viability of a business as a going concern); or
6. The employee is experiencing another substantially similar condition to those above if specified by the Secretary of Health and Human Services in consultation with the Secretaries of Labor and the Treasury.
When leave is taken for an employee’s own illness or quarantine (reasons 1 through 3 above), the leave is required to be paid at the employee’s regular rate, but no higher than $511 per day ($5,110 total). For leave taken for reasons 4 through 6 above, the leave is required to be paid at two-thirds of the regular rate, capped at $200 per day ($2,000 total).
Expanding the Family Medical Leave Act
In addition to Paid Sick Leave, the Families First Act has expanded the Family Medical Leave Act (FMLA) which now applies to employers with less than 500 employees. If an employee has been employed at least 30 calendar days, that employee is now eligible for leave with their job protected as is required under current FMLA provisions. The circumstances which qualify for family medical leave now includes any employee who is unable to work, whether on site or remotely, because they need to care for a minor child due to the closure of the child’s school or day care provider related to COVID-19.
Only the first ten days of leave will be unpaid (However, the first ten days of unpaid leave may qualify to be paid from existing accrued leave otherwise available to the employee.) After 10 days, the employer must provide paid leave at two-thirds of their usual rate. This pay requirement is limited to $200 per day and $10,000 total per employee.
Please note that any wages required to be paid by reason of the FMLA Expansion Act or Paid Sick Leave Act would not be subject to the Employer portion of Social Security Tax. Additionally, in order to aid small employers with the new requirements, a new federal payroll tax credit is available for 100% of the qualified family and sick leave wages they pay per quarter. The wages paid under the Family Medical Leave Act are eligible for the payroll tax credit, limited to $200 per day and $10,000 annually for each employee. The eligible sick leave wages is limited to $511 per day for an employee’s own illness and $200 per day when the leave is used to care for others. There are also tax credits available to self-employed taxpayers under certain circumstances.
For the most current information about the Families First Coronavirus Response Act, please visit the U.S. Department of Labor’s website.
The rules are complex, and various requirements need to be met in order to qualify for certain employee benefits and employer tax credits. Please contact your tonneson + co representative should you have any questions or if you would like to discuss your exact circumstances.