The Families First Coronavirus Response Act (the Act) was signed into law last week to further combat the economic impact of the COVID-19 outbreak. Some key provisions of the Act are provided below.
Affected employers must be prepared to implement the Act’s leave programs “not later than 15 days after the date of enactment” of March 18th, 2020. Thus, the effective date would be April 2, 2020, with the Act remaining in effect until December 31, 2020.
The new law grants two weeks of paid sick leave and up to 12 weeks of paid family and medical leave.
Under the Act part-time employees also get paid sick leave equivalent to the number of hours they typically work during a two-week period. For example, if a person usually works 20 hours a week they are eligible for up to 40 hours of pay.
Sick leave is to be paid at the usual pay rate capped at $511 per day (or $200 per day at only 2/3 of pay if it is due to childcare and not quarantine/symptoms).
Family leave is to be paid at two-thirds of the usual pay rate capped at $200 per day. Paid family and medical leave would compensate employees earning up to about $75,000 a year for the three-month period.
Emergency Paid Sick Leave
Under the Act, full-time employees will immediately become entitled to up to 80 hours of emergency paid leave only for the following circumstances:
To self-quarantine after a diagnosis of COVID-19 (in which case the paid leave must be equal to the employee’s regular rate of pay);
To obtain a medical diagnosis or care if the employee is experiencing symptoms of COVID-19 (in which case the paid leave must be equal to the employee’s regular rate of pay);
To comply with orders from public health officials or healthcare professionals not to report to work due to the employee being exposed to COVID-19 or experiencing COVID-19 symptoms (in which case the paid leave must be equal to the employee’s regular rate of pay);
To care for a family member who is self-quarantined, obtaining a medical diagnosis or care after experiencing COVID-19 symptoms, and/or complying with an order from a public health official or healthcare professional (in which case the paid leave must be equal to 2/3 of the employee’s regular rate of pay); or
To care for a child whose school or childcare provider is closed due to COVID-19 (in which case the paid leave must be equal to 2/3 of the employee’s regular rate of pay).
The Act provides that this emergency paid sick leave will be in addition to any other paid leave options that the employer provides (including paid sick leave) to employees, the employer will not be able to require an employee to first exhaust other paid leave, and an employer will not be permitted to change other leave policies in light of the Act.
The Act also includes anti-retaliation protections for employees who use the paid sick leave and/or complain of violations of the same.
Emergency Paid Family and Medical Leave
Under the Act, employees will be entitled to job-protected paid family and medical leave if they are unable to work (or telework) and have to care for a child (under age 18) whose school or child care provider is closed due to COVID-19.
Unlike traditional FMLA which applies only to employees who, among other things, have been employed for 12 months, the only prerequisite for leave under the Act is that the employee has been employed for 30 calendar days.
The Act provides that the first 10 days of the leave will be unpaid (unless the employee chooses to use other paid leave, such as emergency paid sick leave available under the Act, during the 10-day period). For the remainder of the leave, the employee must be paid 2/3 of his or her regular rate of pay. Unlike regular FMLA leave, the employer will not be permitted to require the substitution of paid leave.
Family leave is to be paid at two-thirds of the usual pay rate capped at $200 per day.
Under the Act, employees will still only be entitled to a combined 12 weeks of leave (paid and unpaid) during any 12-month period for FMLA-covered reasons.
Payroll tax credit for required paid family leave
Subject to certain limitations, the bill provides an employer payroll tax credit that equals 100% of the qualified family leave wages paid by the employer under the portion of the bill known as the Emergency Family and Medical Leave Expansion Act (Division C of the bill). The Emergency Family and Medical Leave Expansion Act requires employers with fewer than 500 employees to provide public health emergency leave under the Family and Medical Leave Act (FMLA), P.L. 103-3, when an employee is unable to work or telework due to a need for leave to care for a son or daughter under age 18 because the school or place of care has been closed, or the child care provider is unavailable, due to a public health emergency related to COVID-19. (Employers with fewer than 50 employees can be exempted from the requirement.)
The credit is available for eligible wages paid during a period that begins on a date starting on a date within 15 days of enactment (to be designated by Treasury) and through Dec. 31, 2020. The credit would apply against the employer portion of Sec. 3111(a) old age, survivors, and disability insurance (OASDI) taxes or Sec. 3221(a) Tier 1 Railroad Retirement Act excise taxes. The credit is generally available for up to $200 in wages for each day an employee receives qualified family leave wages. A maximum of $10,000 in wages per employee would be eligible for the credit. The amount of the credit is increased by the amount of the Sec. 3111(b) Medicare tax imposed on the qualified family leave wages for which credit is allowed.
If an employer claims the credit, the employer’s gross income will be increased by the amount of the credit (meaning the credit is not taken into account for purposes of determining any amount allowable as a payroll tax deduction, deduction for qualified family leave wages, or deduction for health plan expenses), and no credit will be allowed for wages for which a Sec. 45S family and medical leave credit is claimed. The credit would not apply to the federal government, the government of any state or any subdivision of a state, or any agencies or instrumentalities of these entities. Employers also could elect not to apply the new provision for any calendar quarter.
The credit would not apply to the U.S. government, the government of any state or any subdivision of a state, or any agencies or instrumentalities of the foregoing. Employers can elect not to apply the new provision for any calendar quarter.
The credit can be increased by certain qualified health plan expenses of the employer that are allocable to qualified family leave wages for which the credit is allowed.
Payroll tax credit for required paid sick leave
Subject to certain limitations, the bill provides an employer payroll tax credit that equals 100% of the qualified sick leave wages paid by the employer under the portion of the bill known as the Emergency Paid Sick Leave Act (Division E of the bill). The Emergency Paid Sick Leave Act requires employers with fewer than 500 employees to provide up to 80 hours of paid sick time through the end of this year if the employee is unable to work due to being quarantined or self-quarantined or having COVID-19 or because the employee is caring for someone who is quarantined or self-quarantined or has COVID-19 or if the employee is caring for children whose school has been closed because of COVID-19 precautions. (Employers with fewer than 50 employees can be exempted from the requirement.)
The credit is effective for sick leave wages paid starting on a date within 15 days of enactment (to be designated by Treasury) and through Dec. 31, 2020. The credit will apply against Sec. 3111(a) OASDI taxes or Sec. 3221(a) Tier 1 Railroad Retirement Act excise taxes. The credit is generally available for up to $511 in wages (for workers who are quarantined or self-quarantined or who have COVID-19) and wages of up to $200 for other workers for each day an employee receives qualified sick leave pay. The credit would be available for up to 10 days per calendar quarter. The amount of the credit is increased by the amount of the Sec. 3111(b) Medicare tax imposed on the qualified sick leave wages for which credit is allowed.
To prevent double benefits, employers’ gross income will be increased by the amount of the credit (meaning the credit is not taken into account for purposes of determining any amount allowable as a payroll tax deduction, deduction for qualified sick leave wages, or deduction for health plan expenses), and no credit will be allowed for wages for which a Sec. 45S family and medical leave credit is claimed. The credit would not apply to the federal government, the government of any state or any subdivision of a state, or any agencies or instrumentalities of these entities. Employers also could elect not to apply the new provision for any calendar quarter.
The credit can be increased by certain qualified health plan expenses of the employer that are allocable to qualified sick leave wages for which the credit is allowed.
Comparable tax credits for self-employed individuals
If you are a self-employed individual who is affected by the coronavirus emergency, the Act allows you to claim a refundable credit against your federal income-tax bill, including the self-employment tax. If the credit exceeds your bill, the government will issue you a payment for the excess.
The credit equals: 1) 100% of the self-employed person’s sick-leave equivalent amount plus 2) 67% of the sick-leave equivalent amount for taking care of a sick family member or taking care of your child following the closing of the child’s school.
The sick-leave equivalent amount equals the lesser of: 1) your average daily self-employment (SE) income or 2) $511 per day for up to 10 days (up to $5,110 in total) to care for yourself due to the coronavirus or $200 per day for up to 10 days (up to $2,000 in total) to care for a sick family member or your child following the closing of the child’s school due to the coronavirus.
In addition, you can claim a coronavirus emergency family-leave credit for up to 50 days. The credit amount would equal the number of qualified family-leave days multiplied by the lesser of 1) $200 or 2) your average daily SE income. The maximum total family-leave credit would be $10,000 (50 days times $200 per day).
These credits for self-employed individuals are only allowed for days during the period beginning on a date specified by the Secretary of the Treasury and ending on Dec. 31, 2020. The beginning date will be within 15 days of the March 18 date the Act became law.
Warning: To properly claim the credits, self-employed individuals must maintain whatever documentation the IRS requires in future guidance. Your tax professional can help with that.
We will provide additional information as it becomes available. View additional firm updates and resources related to COVID-19 anytime at https://www.kwccpa.com.