Employers, here’s what you need to know about Families First Coronavirus Response Act

From Smith + Malek Attorneys

On March 18, the Families First Coronavirus Response Act was signed into law to help protect workers affected by school and office closures due to COVID-19 by and requiring certain employers to provide additional assistance. If you’re an employer, here’s what you need to know.

How is the Families First Coronavirus Response Act (“Act”) going to impact employers?

This bill is a response to the coronavirus outbreak, and specifically calls employers’ attention to paid sick leave, FMLA expansion, tax implications, and unemployment benefits. Each is discussed in turn below.

What is the Emergency Paid Sick Leave Act?

Under Division E of the Emergency Paid Sick Leave Act, effective April 1, 2020, employers must provide each employee paid sick time to the extent the employee is unable to work or telework. This applies to:

All private employers with fewer than 500 employees and

All employees of such employers, no matter how long employed.

The Secretary of Labor may issue regulations to exempt employers of under 50 employees if the requirement to provide sick leave in accordance with the Act would jeopardize the viability of the business. Requirements under the Act expire on December 31, 2020.

Emergency paid sick leave should be used in the following circumstances:

If an employee is subject to a federal, state, or local quarantine or isolation order;

When an employee is advised by a healthcare provider to self-quarantine;

When an employee is seeking medical diagnosis for symptoms of COVID-19;

When an employee needs to care for an individual who qualifies under #1 or #2;

When an employee needs to care for a child if the child’s school or other place of care is closed due to COVID-19 precautions; or

When the employee is experiencing other substantially similar conditions.

The duration of leave and amount paid per employee is dependent on which of the above circumstances applies to them.

Duration of Leave

For circumstances 1, 2, 3, 4, and 6

A full-time employee is eligible for 80 hours of leave.

A part-time employee is eligible for the number of hours of leave that the employee works on average over a two-week period.

For circumstance 5

A full-time employee is eligible for up to 12 weeks of leave (two weeks of paid sick leave followed by up to 10 weeks of paid FMLA discussed below) at 40 hours a week.

A part-time employee is eligible for leave for the number of hours that the employee is normally scheduled to work over that period.

Calculation of Pay

For circumstances 1, 2, and 3

Employees taking leave are entitled to pay at either their regular rate or the applicable minimum wage, whichever is higher, up to $511/day and $5,110 in the aggregate (over a 2-week period)

For circumstances 4 and 6

Employees taking leave are entitled to pay at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $2,000 in the aggregate (over a 2-week period).

For circumstance 5

Employees taking leave are entitled to pay at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $12,000 in the aggregate (over a 12-week period).

An employee may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for the first two weeks of partial paid leave under this section.

Paid sick time provided under this Act does not carry over from one year to the next. Employees are not entitled to reimbursement for unused leave upon termination, resignation, retirement, or other separation from employment.

Each employer shall post and keep posted, in conspicuous places on its premises where notices to employees are customarily posted, a notice, to be prepared or approved by the Secretary of Labor, of the requirements described in the Act. The model language has not yet been published, but will be published by March 25, 2020.

An employer who violates this section shall be considered to have failed to pay minimum wages in violation of the Fair Labor Standards Act, and is subject to penalties.

How does the Emergency Family and Medical Leave Expansion Act (“FMLA Expansion”) impact employers?

Division C of the Act includes the FMLA Expansion. Effective April 1, 2020, FMLA Expansion applies to all employers with fewer than 500 employees and includes leave for care for a child under the age of 18 if their school or place of care is closed for a public health emergency. The term “eligible employee” means an employee who has been employed for at least 30 calendar days by the employer with respect to whom leave is requested. Specifically, it expands FMLA through December 31, 2020, because of a qualified need related to a public health emergency. The term “qualifying need related to a public health emergency”, with respect to leave, means that the employee is unable to work, or telework, due to a need for leave to care for the son or daughter under 18 years of age of that employee if the school or place of care has been closed, or the child care provider is unavailable, due to a public health emergency.

The pay provision provides:

No pay for the first 10 days of leave.

Employees may use any other leave they have available to them, including new emergency sick leave provided under the Act.

If only using FMLA Expansion, after 10 days, the employee is to receive ⅔ their regular rate of pay for the number of hours they would normally be scheduled to work, up to the maximum of $200/day and $10,000 total.

Note circumstance 5 above combines the time granted under the Emergency Sick Leave Act and FMLA Expansion to provide 12 weeks of paid leave.

If a full-time employees utilizes both Acts under the Families First Coronavirus Response Act, such employee taking leave is entitled to pay at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $12,000 in the aggregate (over a 12-week period).

For employers with fewer than 25 employees, job restoration is required if a job no longer exists because of changes affecting employment caused by a public health emergency and reasonable efforts to find equivalent positions were made, and fail, and a position becomes available within a year of the earlier of (a) the date on which the qualifying need related to a public health emergency concludes; or (b) the date that is 12 weeks after the date on which the employee’s leave under the expanded FMLA provision commenced.

What are the tax implications of the Emergency Paid Sick Leave Act and FMLA Expansion?

Division G of the Act allows for a tax credit for the qualified sick leave wages and FMLA wages paid by the employer per calendar quarter. These tax credits are allowed against the employer portion of Social Security taxes. While this limits application of the tax credit, employers will be reimbursed if their costs for qualified sick leave or qualified family leave wages exceed the taxes they would owe.

Employers are entitled to a refundable tax credit equal to 100% of the qualified sick leave wages paid by employers for each calendar quarter in compliance with the Emergency Paid Sick Leave Act.

Similarly, employers are entitled to a refundable tax credit equal to 100% of the qualified family leave wages paid by employers for each calendar quarter in accordance with the FMLA Expansion.

This section applies only to wages paid with respect to the period beginning on a date, selected by the Secretary of the Treasury, within 15 days of the enactment of the Act (April 1, 2020) and ending on December 31, 2020.

Any wages required to be paid by reason of the Emergency Paid Sick Leave Act and FMLA Expansion shall not be considered wages for purposes of Section 3111(a) of the Internal Revenue Code. Please consult an accountant for further information.

How is unemployment affected by the Act?

The Act provides the state with additional funding for unemployment. It requires employers to provide notification of the availability of unemployment compensation to employees at the time of separation from employment. Such notification may be based on model language used by the Secretary of Labor.