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Families First Coronavirus Response Act: What Employers Need to Know

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Signed into law on March 18, 2020, the Families First Coronavirus Response Act (FFCRA) contains several provisions relevant to employers. The legislation aims to help offset the growing economic crisis of the coronavirus pandemic. This act will be but one in a number of pieces of legislation that the federal and state governments are currently discussing, refining, and will be voting on or implementing in the coming week. Each of these new developments may have an impact on previous legislation.

Delap is committed to bringing you information as it becomes available and has been confirmed. To that end, we are providing you with a brief overview of the provisions of the bill as of Sunday, March 22, 2020.

The Families First Coronavirus Response Act provides three major provisions for employers:

  1. Temporary targeted expansion of the Family and Medical Leave Act (FMLA) requirements to offer protected leave related to the coronavirus
  2. Employer paid sick leave
  3. Employment tax credits for Paid Sick and Paid Family and Medical Leave

Emergency Family and Medical Leave Act is Temporarily Expanded

  • Applies to employers with fewer than 500 employees.
  • Employers with fewer than 25 employees are not required to provide job-protected leave for an employee in specified circumstances.
  • Eligible employees are those who have been employed for at least 30 calendar days.
  • Healthcare and emergency responders may be excluded.
  • Eligible for up to a total of 12 weeks of job protected leave.
  • Expanded FMLA leave is available only when an employee is unable to work (or telework) due to a need to care for a child under the age of 18 if the child’s school or childcare provider is closed due to public health emergency, defined as an emergency with respect to COVID-19 declared by a federal, state, or local authority.
  • The first 10 days of the leave can be unpaid. An employee may elect to use accrued vacation, personal or medical or sick leave for those days, including paid sick leave as provided by this Act.

Emergency Paid Sick Leave Act

  • Applies to employers with fewer than 500 employees.
  • Employers and government entities must offer Emergency Paid Sick Leave under the Act to all employees, regardless of how long they have been employed by the employer
  • Paid sick leave applies to employees who are unable to work (or telework) and who meet any of the following conditions:
    • Subjected to a federal, state, or local quarantine/isolation order related to COVID-19;
    • Advised by a healthcare provider to self-quarantine related to COVID-19;
    • Experiencing symptoms of COVID-19 and seeking a medical diagnosis;
    • Caring for an individual who is subject to quarantine;
    • Caring for a son or daughter if the school or childcare provider is closed;
    • Any other substantially similar condition as specified by Health and Human Services.
  • Full-time employees are entitled to 80 hours of paid sick leave, and part-time employees are entitled to sick leave equal to the number of hours worked on average over a typical two-week period.
  • Sick leave must be paid at the employee’s regular rate of pay for leave used for the employee’s own illness, quarantine, or care.
  • Sick leave must be paid at two-thirds of the employee’s regular rate if taken to care for a family member or to care for a child whose school has closed, or if the employee’s childcare provider is unavailable due to the coronavirus. Pay is capped at $200-511/day and $2,000-5,110 maximum per employee depending on covered leave purpose.

Wages paid under either of these provisions are considered W-2 wages to the recipient. These wages are exempt from the employer portion of the Social Security tax but are subject to the 1.45% Medicare tax. This act does not preclude existing state and local paid sick leave requirements, and employers cannot require employees to use other leave first. The requirements of sick leave under this act expire December 31, 2020.

Employment Tax Credits Available for Expanded Paid Sick and Paid Family and Medical Leave

Employers that are subject to the provisions of the Families First Coronavirus Response Act are eligible for employment tax credits. These credits were established to help offset the added financial burden on employers.

Employers with less than 500 employees are allowed a refundable credit against employer Social Security tax liability equal to 100% of the qualified sick leave wages paid by the employer, subject to certain limits. The credit is increased by specified health expenses (e.g., employer-paid health plan premiums), but limited to qualified health plan expenses that are excluded from employees’ income as coverage under an accident or health plan.

The credit is effective for sick leave paid beginning April 1, 2020, and applies to both the emergency FMLA expansion and the emergency sick leave.

The basic logistics of the credit are as follows:

The base credit is equal to:

  • Maximum of $511 paid in wages daily for workers who are quarantined, self-quarantined, or who have COVID-19.
  • Maximum of $200 in daily wages for other workers caring for a family member due to the family member’s illness or school closure.
  • The credit will be available for up to 10 days per quarter.
  • The credits are refundable to the employer if they would exceed the employer’s payroll tax

Wages paid under either of these provisions are considered W-2 wages to the recipient. These wages are exempt from the employer portion of the Social Security tax but are subject to the 1.45% Medicare tax. When calculating the credit, the employer portion of Medicare tax paid on the wages and employer-paid health plan costs for a qualified employee for the period during which the sick leave is paid may be included to determine the credit base.

In order to avoid a double benefit, the employer’s gross taxable income is increased by the amount of the credit received. The employer will receive the full tax deduction of all wages paid. No credit will be allowed for wages where the IRC §45S FMLA credit, which is not related to COVID-19, is taken.

As additional guidance becomes available, Delap anticipates releasing updates at: delapcpa.com/covid-19

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