The Families First Coronavirus Response Act-and What That Means for Your Business
At this time many businesses are so laser focused on EIDL, PPP, UI, SBA loans and the like that a few other acronyms that are floating around like FFCRA and EFMLA are being overlooked. While we don’t dismiss the importance of all those grant and loan programs, today we want to discuss the federal laws that have been passed through the end of the year and what that may look like for you upon reopening the economy. Please keep in mind that we have consulted several HR experts and employment law attorneys throughout this process and one thing they all agree on is this-these new laws are very fluid and their interpretation changes almost daily as the federal government wades through the process of implementing these new employee protections. We can’t stress enough how important it is to continue following up on these laws, asking questions, and getting clarification from trusted business advisors throughout this process!
The Families First Coronavirus Response Act
The Emergency Paid Sick Leave Act and The Emergency Family and Medical Expansion Act were signed into law on March 18, 2020, as part of the Families First Coronavirus Response Act (FFCRA). The FFCRA requires certain employers to provide employees with paid sick leave and/or expanded family and medical leave for certain proscribed reasons along with tax credits for eligible employers. The provisions will generally apply until December 31, 2020. This summary highlights the provisions of each of these new laws.
FFCRA Notice Requirements
Employers are required to post a notice detailing an employee’s right to take leave under this law. The DOL’s poster is available to download free of charge: Employee Rights: Paid Sick Leave and Expanded Family and Medical Leave under The Families First Coronavirus Response Act (FFCRA)
For more information on the notice requirement see: https://www.dol.gov/agencies/whd/pandemic/ffcra-poster-questions.
Documentation and tax credits for EPSL and EFMLA
Non-governmental employers covered by the FFCRA will be able to claim tax credits equal to 100% of the EPSL and EFMLA paid on their quarterly Form 941, and reduce their quarterly payroll tax payments accordingly. Eligible employers can fund qualified leave wages (and allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified leave wages) by accessing federal employment taxes, including withheld taxes, that are required to be deposited with the IRS and, if necessary by requesting an advance from the IRS using Form 7200. Employers that intend to claim a tax credit for EPSL and EFMLA should retain documentation for their records and consult applicable IRS forms, instructions, and information for the procedures that must be followed to claim a tax credit, including any needed substantiation to be retained to support the credit.
For more information see: https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs
As consultants, we also highly recommend that you reach out to our tax expert to explain the tax implications of all of this as well as to help save you from paying too much taxes because of this and also past business savings.
The Emergency Paid Sick Leave Act
This act requires private employers with fewer than 500 employees and all public employers to provide “for immediate use” two weeks of emergency paid sick time (EPSL) to any employee who is absent for a qualifying reason.
Effective date
The act went into effect on April 1, 2020. Any paid time off used prior to the effective date will not count toward this sick leave requirement.
Eligible employees
All employees are eligible; there are no service requirements that must be met in order to be eligible.
Six qualifying reasons for leave
- Self-Care Reasons
- COVID-19-related quarantine order from local/state/federal government
- COVID-19-related self-quarantine recommended by health care provider
- Employee has COVID-19 symptoms and is seeking a medical diagnosis
- Care for Family/HHS Reason
- Employee caring for someone in quarantine under 1. or 2. above.
- Employee caring for their son or daughter due to school/daycare COVID-19 related closure
- Employee experiencing “any other substantially similar condition specified by the Secretary of Health and Human Services” (Note that as of [date], the HHS has not yet identified any “substantially similar condition” that would allow an employee to take paid sick leave).
Amount of paid leave
Full-time employees are entitled to 80 hours of paid sick time, and part-time employees are entitled to an amount equal to the average number of hours they work over a two-week period. This time must be in addition to any other paid time off employers have already provided to employees.
Employers are required to pay leave:
- At the employee’s regular rate of pay, capped at $511 per day, up to a total of $5,110, for leave for self-care reasons 1, 2, and 3 above; and/or
- At 2/3 the employee’s regular rate of pay, capped at $200 per day, up to a total of $2,000, for leave to care for a family member/Health and Human Services reasons 4, 5 and 6 above.
The paid leave must be immediately available to employees, and employees must be able to use sick leave before using other paid leave benefits provided by the employer.
Job Protection
It’s unlawful to terminate or discipline an employee who takes EPSL or who files a complaint/proceeding relating to the Act.
Exemptions
Employers may exempt certain health care providers and emergency responders from providing EPSL: (1) A health care provider for purposes of this exemption can include anyone employed at any doctor’s office, hospital, health care center, clinic, nursing facility, retirement facility, and other similar entities. (2) An emergency responder is anyone necessary for the provision of transport, care, and nutrition of patients or others needed for the response to COVID-19 and can include but is not limited to military or national guard, law enforcement, correctional institution personnel, fire fighters, emergency medical services personnel, emergency medical technicians, paramedics, and persons with skills or training in operating specialized equipment or other skills needed to provide aid in a declared emergency.
Small businesses may claim an exemption under certain circumstances. An employer, including a religious or nonprofit organization, with fewer than 50 employees is exempt from providing paid sick leave due to school or place of care closures or child-care provider unavailability for COVID-19 related reasons when doing so would jeopardize the viability of the business as a going concern.
Interaction with furloughs/layoffs/business shutdowns
Public health emergency leave does not apply to an employee who is furloughed or laid off because of COVID-19 related business slowdown. An employee who is taking public health emergency leave who is furloughed/laid off will cease being eligible for leave, paid or unpaid, but employers must be able to show that the furlough/layoff was based on legitimate business needs. If an entire department is laid off, the business need is clear. If people are selected for layoff, this becomes less clear and you would need to be prepared to demonstrate that the employee would have been furloughed/laid off even if they weren’t taking leave.
Payroll tax credits
The government will provide to eligible employers a refundable FICA credit for 100% of “qualified sick leave wages” paid for a calendar quarter up to a cap of $200 per day ($511 per day for “care for self” reasons) up to 10 days per employee for the year. “Qualified sick leave wages” are wages paid by reason of the paid sick leave law (not paid public health emergency FMLA). Public employers are not eligible for this payroll tax credit. Again, there are so many tax savings available that most tax professionals are not aware of that we recommend a free consultation with or tax expert who can work directly with your tax professional.
The Emergency Family and Medical Leave Expansion Act
This act requires private employers with fewer than 500 employees and all public employers to provide ten days of unpaid leave, and thereafter ten weeks of paid leave, to an eligible employee who takes leave due to “a qualifying need related to a public health emergency.”
Effective date
The act went into effect on April 1, 2020. Any paid time off used prior to the effective date will not count toward this leave requirement.
Eligible employees
Employees who have been employed by the employer for at least 30 calendar days at the time of the leave.
Qualifying reasons for leave
A “qualifying need related to a public health emergency” exists where a federal, state or local authority has declared an emergency with respect to COVID-19 and the employee is unable to work or telework due to a need for leave to care for a minor son or daughter whose school or place of care has been closed or whose child care provider is unavailable.
Amount of leave
Eligible employees are entitled to a total of 12 weeks of leave under the FMLA. The amount of leave available for the public health emergency leave is part of, not in addition to, the employee’s total 12 weeks of FMLA leave.
Amount of paid leave
The first two weeks of leave are unpaid, and the last 10 weeks are paid. Employees can elect to use any available Emergency Paid Sick Leave, vacation, personal or other paid time off during the first two weeks. Once paid leave is required, employees must be paid at lease 2/3 their regular rate for the number of hours the employee would otherwise have worked up to $200 per day ($10,000 total). In addition, if the employer agrees, employees may choose to supplement their EFMLA with additional paid time off or the employer may require the employee to use other paid leave to run concurrently with the paid EFMLA.
Benefits
Benefits must be maintained as they would under a typical FMLA leave. This means that employees can maintain health coverage (medical, dental, vision, health FSA) as if actively working.
Job Protection
Employees must be restored to the same or equivalent position at the end of leave, except for employers with less than 25 employees where the employee’s position has been eliminated due to economic conditions as a result of the public health emergency.
Exemptions
Employers may exempt certain health care providers and emergency responders from providing EFMLA: (1) A health care provider for purposes of this exemption can include anyone employed at any doctor’s office, hospital, health care center, clinic, nursing facility, retirement facility, and other similar entities. (2) An emergency responder is anyone necessary for the provision of transport, care, and nutrition of patients or others needed for the response to COVID-19 and can include but is not limited to military or national guard, law enforcement, correctional institution personnel, fire fighters, emergency medical services personnel, emergency medical technicians, paramedics, and persons with skills or training in operating specialized equipment or other skills needed to provide aid in a declared emergency.
Small businesses may claim an exemption under certain circumstances. An employer, including a religious or nonprofit organization, with fewer than 50 employees is exempt from providing EFMLA when doing so would jeopardize the viability of the business as a going concern. Interaction with furloughs/layoffs/business shutdowns
Interaction with furloughs/layoffs/business shutdowns
Public health emergency leave does not apply to an employee who is furloughed or laid off because of COVID-19 related business slowdown. An employee who is taking public health emergency leave who is furloughed/laid off will cease being eligible for leave, paid or unpaid, but employers must be able to show that the furlough/layoff was based on legitimate business needs. If an entire department is laid off, the business need is clear. If people are selected for layoff, this becomes less clear and you would need to be prepared to demonstrate that the employee would have been furloughed/laid off even if they weren’t taking leave.
Payroll tax credits
The government will provide to eligible employers a refundable FICA credit for 100% of “qualified family leave wages” paid for a calendar quarter up to a cap of $200 per day, a maximum aggregate amount for all calendar quarters of $10,000 per individual. “Qualified family leave wages” are wages paid by reason of an employee taking public health emergency FMLA leave (not paid sick leave). Public employers are not eligible for this payroll tax credit.
For more information about the FFCRA
For more information about EPSL and EFMLA, see the Department of Labor’s detailed Questions and Answers which are separated into the following categories: 1) Definitions; 2) Eligibility; 3) Coverage; 4) Application; 5) Enforcement: Families First Coronavirus Response Act: Q&A (DOL)
