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30 March, 2020

The Families First Coronavirus Response Act

The Families First Coronavirus Response Act was signed into law by President Trump.  Under the new law affected employers (employers with less than 500 employees) will be subject to an expansion of the Family and Medical Leave Act of 1993 (FMLA) and emergency paid sick leave requirements.  The new law will go into effect 15 days after it was signed into law on (March 18, 2020), beginning on April 2, 2020 and will remain in effect until December 31, 2020.

Employers with fewer than 50 employees can elect to opt out of the law if they can prove to the Labor Department that providing the paid leave would jeopardize the viability of the business, meaning that the business would not be able to continue if it were to implement the requirement of the law.  Employers of health care providers and emergency responders can elect to have exclusions from the emergency paid sick leave

The Law contains three areas which will affect employers:  Emergency paid sick Leave, Emergency Family and Medical Leave and the tax credit for employers for providing paid emergency family and medical leave and emergency sick leave.

EMERGENCY FAMILY AND MEDICAL LEAVE

Employers, under the law, are required to provide up to 12 weeks of emergency family and medical leave for employees. To qualify, the employees must have been employed by the employer for 30 calendar days and because of a public health emergency are unable to work (or telework) because they need to care for a child under age 18 whose elementary or secondary school or place of care is closed, or because the child’s care provider (defined as “a provider who receives compensation for providing child care services on a regular basis”) has become unavailable.

The first 10 days (two weeks) of the emergency leave can consist of unpaid leave, but the employee may choose to substitute any accrued unused vacation, PTO or paid sick leave benefits for the unpaid leave.  After the initial 10 days of emergency leave, the employee must be paid for the remainder of the emergency leave period.   Therefore, the employer must provide at least 10 weeks of qualifying paid emergency leave to the covered employee. The paid leave must be at least two thirds of an employee’s regular rate of pay for the last six months and reflect the number of hours an employee would otherwise be normally scheduled to work.

If the employer is unable to determine with certainty, the number of hours that the employee would have worked, the average number of hours for the six-month period ending on the date the emergency leave begins is to be used.  If the employee did not work for that six-month period, then the employer should use the number of normally scheduled work hours per day reasonably expected by the employee as of the employee’s hire date.  The paid leave is capped at $200 per day or $10,000 in aggregate per employee.  Wages paid for family and medical leave are not subject to employer’s 6.2% share of Social Security Tax.

EMERGENCY PAID SICK LEAVE

The law requires employers to provide up to 80 hours of paid emergency sick leave to full-time employees (10 days), as well as paid leave to part-time employees based on a formula.  For part-time employees, the number of hours that the employee usually works, on average, over a two-week period will determine the number of hours of emergency paid sick leave for the period (if they work 30 hours per week then the paid emergency sick leave would be 60 hours).  The 30 calendar day service requirement applicable to the emergency family and medical leave rule does not apply to emergency sick leave.

The emergency sick leave is available for the following six reasons:

  1. The employee is subject to Federal, State or local quarantine or isolation order related to COVID-19.
  • The employee has been advised by a health care provider to self-quarantine due to concerns of related to COVID-19.
  • The employee is experiencing symptoms of COVID-19 and seeking medical diagnosis.
  • The employee is caring for an individual who is subject to quarantine or has been advised to self-quarantine.
  • The employee is caring for a son or daughter (younger than 18) whose school or place of care is closed, or whose childcare provider is unavailable, due to COVID-19 precautions.
  • 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.

Employers must compensate employees for any emergency sick time they take (up to 10 days) at their regular rates of pay with the compensation being capped at $511 per day and $5,100 in the aggregate (for reasons 1-3).

Employers must compensate employees for any emergency sick time the take (up to 10 days) at two-thirds their regular rates of pay with the compensation being capped at $200 per day and $2,000 in the aggregate (reasons 4-6).

Wages paid for emergency sick leave are not subject to the employer’s 6.2% share of the Social Security Tax.

Employees are not required to first use other available paid leave provided by the employer, before using emergency paid sick leave.

TAX CREDITS FOR EMPLOYERS

An employer that provides emergency paid family and medical leave and/or emergency sick pay to employees will be entitled to quarterly refundable tax credits for such payments.

A refundable tax credit for the employers equal to 100% of qualified family and medical leave wages that are paid for each quarter.  The amount of wages paid for family and medical leave cannot exceed the capped total for each employee ($200 per day and $10,000 in aggregate for each employee).   The credit is allowed against the 6.2% employer portion of Social Security payroll taxes.  If the credit exceeds the employer’s total share of Social Security Tax for all employees for any calendar quarter, the excess credit is refundable to the employer in a separate check.  (The credit will also apply to self-employed individuals with some modifications)

A refundable tax credit for the employers equal to 100% of qualified paid emergency sick leave wages that are paid for each quarter.  The amount of wages paid for emergency sick leave cannot exceed the capped total for each employee ($511 per day (reason 1-3) or $200 per day (reason 4-6) and $5,110 or $2,000 in aggregate for each employee).  The credit is allowed against the 6.2% employer portion of Social Security tax for all employees for any calendar quarter, the excess credit is refundable to the employer in a separate check.  (The credit will also apply to self-employed individuals with some modifications.)

Even though wages paid for family and medical leave and emergency sick leave are not subject to employer’s 6.2% Social Security Tax, the employer is still subject to paying the 1.45% employer portion of Medicare tax, however these payments will increase the employer’s quarterly credit amounts.

Summary

In summary, this provides an overview of the consequences of the Families First Coronavirus Response Act, Phase II and how it may affect you as an employer and taxpayer.  There are several issues presented here which will most likely require guidance and assistance.  Please contact our office with any questions.

Contact

As always, please feel free to call 801-619-1400 and/or e-mail our accountants with any questions you may have.

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