Families First Coronavirus Response Act Expands Paid Sick Leave Requirements

Introduction

The Families First Coronavirus Response Act, H.R. 6201, was signed into law by President Trump on March 18, 2020. This bill enacts provisions that impose emergency paid leave requirements for employers in certain situations and allows for tax credits in an attempt to protect employers. The version of the bill that passed the House was amended in the Senate to afford greater protection to small businesses and to exclude employees in certain fields from the required sick leave. There are three divisions of the bill that are relevant to employers and employees and should be reviewed and implemented as soon as possible: 1) The Emergency Family and Medical Leave Expansion Act; 2) the Emergency Paid Sick Leave Act; and 3) Tax Credits for Paid Sick Leave and Paid Family and Medical Leave. The provisions of this bill go into effect on April 2, 2020.

The Emergency Family and Medical Leave Expansion Act

The Emergency Family and Medical Leave Expansion Act amends the Family and Medical Leave Act of 1993 to extend eligibility for 12 weeks of leave to employees who have a qualifying need related to a public health emergency. The expansion applies to employers with fewer than 500 employees and covers employees who have been employed for at least 30 days. The initial version of the bill that passed the House allowed for sick employees and those caring for sick family members to take advantage of these protections. However, the final bill clarifies that the only eligible employees are those that are unable to work or telework due to the need to care for a child under 18 because the child’s school or place of care has closed or their paid childcare provider is unavailable due to the public health crisis.

Under this provision, the first ten days of leave may be unpaid. However, the employee may choose to utilize any accrued vacation, personal, or sick leave that is available during this ten day period, including the two weeks of paid sick leave under the Emergency Paid Sick Leave Act (discussed below). The remaining ten available weeks of pay are to be paid at two-thirds of the employee’s regular rate of pay.[1] In no event shall the payment per employee exceed $200 per day or $10,000 in the aggregate.

Any employee who takes leave under this provision is entitled to reinstatement of their position. However, an employer with fewer than 25 employees is not required to restore an employee to their position if: a) the employee takes leave pursuant to the Emergency Family and Medical Leave Expansion Act; b) the employee’s position when the leave commenced does not exist due to economic conditions or other changes in the employer’s operating conditions that i) affect employment and ii) are caused by a public health emergency during the period of leave; c) the employer makes a reasonable effort to restore the employee to an equivalent position with equivalent benefits, pay, and conditions of employment; and d) if the reasonable efforts have failed, the employer makes reasonable efforts to contact the employee in the event an equivalent position later becomes available.

Importantly, the final bill states that an employer of an employee who is a healthcare provider or an emergency responder may elect to exclude such employee from these paid leave provisions. The bill also allows the Secretary of Labor to issue regulations that exclude certain healthcare providers and emergency responders from eligibility under this provision, as well as businesses with fewer than 50 employees if complying with the requirements would jeopardize the viability of the business.

The Emergency Paid Sick Leave Act

The Emergency Paid Sick Leave Act mandates that an employer with fewer than 500 employees provide to each employee paid sick leave in the event that the employee is unable to work or telework for one of the following reasons:

  1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  2. The employee has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19;
  3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
  4. The employee is caring for an individual who is subject to a quarantine order or has been advised to self-quarantine;
  5. The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the childcare provider of such son or daughter is unavailable, due to COVID-19 precautions; or
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Under this provision, an employee is entitled to paid sick time in the amount of 80 hours if a full-time employee, or the number of hours that the employee would work on average over a two week period if a part time employee.[2] If the employee takes this leave in accordance with sections (1)-(3) above, the employee’s required compensation should be at the regular rate of pay or the minimum wage, whichever is greater. However, in no event shall the pay time exceed $511 per day and $5,110 in the aggregate. If the employee’s leave is predicated on sections (4)-(6) above, the employee’s compensation should be at two-thirds of the regular rate of pay, not to exceed $200 per day and $2,000 in the aggregate. Similar to the Emergency Family and Medical Leave Expansion Act, an employer of a health care provider or emergency responder may elect to exclude such employee from this paid sick leave.

The employer may not require that the employee use other paid leave before taking advantage of the sick leave provided under this section. In addition, the employer may not require the employee to find a replacement to cover any hours during which the employee uses the paid sick time. It is also unlawful for an employer to discharge or otherwise discipline an employee who takes leave under this section. An employer who violates this provision is subject to penalties under the Fair Labor Standards Act, including a fine up to $10,000, imprisonment of no more than six months, and liability to the affected employees in the amount of their unpaid wages and liquidated damages.

Finally, the Secretary of Labor is to issue guidelines to assist employers in calculating the amount of paid sick leave required under this section of the Act. The Secretary of Labor is also authorized to issue regulations that exclude certain health care providers and emergency responders from this provision and to exempt small businesses with under 50 employees from these requirements if the requirements would jeopardize the viability of the business.

Tax Credits for Paid Sick and Paid Family and Medical Leave

Employers will receive dollar-for-dollar refundable tax offset against payroll taxes will be provided to employers to offset any benefits paid to employees in accordance with the Families First Emergency Coronavirus Response Act. The tax credit will also cover the cost of the employer’s health insurance premiums during leave. Eligible employers will be able to claim these credits based on leave provided pursuant to the Act between April 2, 2020 and December 31, 2020.

The bill provides a refundable tax credit equal to 100% of qualified sick leave wages and qualified public health emergency leave wages paid by an employer for each calendar quarter through the end of 2020 and can be claimed on a quarterly basis. The tax credit is applied against the employer’s tax portion of Social Security and Railroad Retirement payroll taxes. Under the Emergency Paid Sick Leave Act, the credit will be capped at $511 per day for individuals seeking personal treatment and $200 per day for individuals caring for another individual. Employers may also take a credit equal to 100% of the wages provided under the Emergency Family and Medical Leave Expansion Act. The credit may not exceed $200 per day or $10,000 in the aggregate for each individual.

These credits are refundable if they exceed the amount the employer owes in payroll tax. However, employers must increase their gross income for the taxable year by the amount of payroll credit received. The U.S. Treasury Department anticipates that reimbursement will be quick and easy to obtain, and any refunds will be sent by the IRS as quickly as possible. The Department has also indicated that businesses can immediately take advantage of these paid leave credits by retaining and accessing funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are insufficient to cover the paid leave costs, employers can seek an expedited advance from the IRS through a claim from that shall be released in the coming weeks.

Conclusion

The provisions of this Act go into effect on April 2, 2020. Each covered employer is required to post in a conspicuous place on its premises a notice of the Act’s requirements.[3] A model notice is provided here. There are many considerations that will affect employers as they prepare to support their employees who might require sick leave from work, and employers should begin to review their policies and prepare to implement these changes.

The Secretary of Labor has been directed to develop additional regulations consistent with this bill to provide further guidance and clarification to employers, and those regulations are expected to be released in April 2020. Additional guidance can be found through the Department of Labor’s FAQ Sheet here.

Should you, your practice, or your business have any questions about the implications of this Act, please contact Peter Mellette, Nathan Mortier, Harrison Gibbs, Elizabeth Dahl Coleman, or Scott Daisley at Mellette PC.

This client advisory is for general educational purposes only and does not cover every provision of the final rule. It is not intended to provide legal advice specific to any situation you may have. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice.

[1] In the event that an employee’s schedule varies week to week and the employer is unable to calculate the regular rate with any certainty, the employer should determine the regular rate based on the average number of hours that the employee would have been scheduled for the previous six month period.

[2] This time is not eligible to roll over to the next year, nor are employees eligible for reimbursement for any unused leave under this Act upon termination, resignation, retirement, or other separation from employment.

[3] As many employees are working remotely, this notice requirement can be met by emailing or mailing this notice to employees or posting this notice on an employee information internal or external website.

Categories: Client Advisory