UPDATE – The DOL Issues Updated Guidance – The Families First Coronavirus Response Act is Effective April 1, 2020
On March 18, 2020, the U.S. Senate approved the House-passed Families First Coronavirus Response Act (“FFCRA”). The bill was sent to and signed by the President on March 18, 2020 and will be effective April 1, 2020. This revised date was announced yesterday afternoon, after the Department of Labor (“DOL”) issued new “Questions and Answers” (https://www.dol.gov/agencies/whd/pandemic/ffcra-questions) and is one day earlier than the originally anticipated April 2, 2010 effective date.
The DOL has indicated that it will issue a model notice for the new law no later than March 25, 2020. The DOL has also indicated that it will publish regulations that address the application of certain provisions to employers with less than 50 employees; regulations which will establish the criteria used to assess if an under-50 employer will be exempt from the new law because its compliance would jeopardize the viability of the business. These regulations are expected in April 2020, though the DOL has not indicated when in the month of April these regulations will be forthcoming.
COVID-19 Legislation – Employer Obligations Under The Revised Families First Coronavirus Response Act
On March 14, 2020, the U.S. House of Representatives approved the Families First Coronavirus Response Act (“FFCRA”) in response to the COVID-19 pandemic and its impact on U.S. employees. Just two days later, on March 16, 2020, the House revised the bill, modifying or eliminating entirely some of the earlier bill’s key provisions. It was this version of the bill that was passed by the Senate and signed by the President on March 18.
The final bill provides two types of assistance, both of which will apply to the vast majority of employers. First, FFCRA provides for 80 hours of paid sick leave for employees, for the reasons outlined below. Second, it expands the scope of FMLA leave to provide for care of a child whose school or place of care is closed due to the COVID-19 public health emergency.
Unlike the “traditional” FMLA, which defines a covered employer as having 50 or more employees, FFCRA applies to employers with fewer than 500 employees. The bill does contain language allowing the Secretary of Labor to exclude health care providers and emergency responders from the definition of employees who are eligible to take such leave, and to exempt small businesses (defined as those with fewer than 50 employees), if the required leave would jeopardize the viability of their business.
Emergency Paid Sick Leave
FFCRA provides 80 hours of paid sick leave for full-time employees. Part-time employees would receive paid sick leave on a pro-rated basis. Under the final bill, employees would be eligible for paid sick leave if the employee is unable to work or telework, under the following circumstances:
- The employee is subject to a 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 because of COVID-19;
- The employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
- The employee is caring for an individual ordered or advised to quarantine or isolate as described in (1) or (2) above;
- The employee is caring for a son or daughter whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 precautions; or
- The employee is experiencing substantially similar conditions as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.
Under the final bill, paid leave, where taken for reasons 1, 2, or 3 above is paid at the employee’s regular rate of pay (subject to a cap of $511 per day ($5,110 in total)); and when taken for reasons 4, 5, and 6, is paid at two-thirds the employee’s regular rate (subject to a cap of $200 per day ($2,000 in total)). FFCRA paid sick leave is available immediately, regardless of length of employment. Note that sick leave under FFCRA must be provided in addition to whatever paid sick leave, PTO or vacation pay the employer already provides. And while an employer can allow an employee to use employer provided sick-leave or PTO before using leave under the FFCRA, the employer cannot require it. Finally, employers may not retaliate against employees for taking paid sick leave under FFCRA.
Emergency Family and Medical Leave Expansion
FFCRA’s FMLA expansion will allow covered employees to take 12 weeks of FMLA leave between enactment and December 31, 2020 for “a qualifying need related to a public health emergency.” This “qualifying need” is now limited to instances where an employee is unable to work or telework due to the need to care for a child if the child’s school or place of child care has been closed or the child care provider is unavailable, due to a public health emergency. This is a substantial departure from the original version of the bill.
Key provisions under the revised bill include:
- A covered employee includes anyone employed by the employer for 30 days or more.
- The first 10 days of any coronavirus-related family leave may be unpaid, but subsequent time must be paid in an amount that is not less than two-thirds of an employee’s regular rate of pay. Unlike the original bill, the amended legislation limits the amount of required pay for leave to no more than $200 per day and $10,000 total.
- Employees can elect to substitute any accrued paid vacation, parental, medical or sick leave for unpaid leave, but employers cannot require employees to substitute paid leave for unpaid leave.
- The leave is job-protected, meaning an employer must return the employee to the same or equivalent position upon return, with limited exceptions, including an exception that will apply to employers with fewer than 25 employees, when the individual employee’s position no longer exists due to economic conditions or operational changes related to the COVID-19 public health emergency and the employer makes reasonable efforts to restore the employee to an equivalent position. In order to qualify for the exception, the employer must make reasonable efforts to contact the displaced employee for up to one year after they are displaced.
The DOL will observe a temporary period of non-enforcement for the first 30 days after the Act takes effect, so long as the employer has acted reasonably and in good faith to comply with the Act. Given the Act’s effective date of April 1, 2020, this non-enforcement period should extend until May 1, 2020. The DOL has indicated that “good faith” will exist when violations are remedied and the employee is made whole as soon as practicable by the employer, the violations were not willful, and the employer provides the DOL with a written commitment to comply with the law going forward.
Sick Leave Credit
Employers may receive tax credits for amounts paid to an employee who is unable to work because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis. Eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days.
Employers may receive tax credits for amounts paid to an employee who is caring for someone with Coronavirus, or is caring for a child because the child’s school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus. Eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
Child Care Leave Credit
In addition to the sick leave credits outlined above, an employer may receive a tax credit for an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the coronavirus. Eligible employers may receive a refundable child care leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit. Eligible employers are also entitled to a tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees’ share of Social Security and Medicare taxes. The employers are then required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 Series) with the IRS.
Per the Department of Treasury and the IRS, under guidance that is expected this week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS. The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.
If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.
*Example Provided by the IRS/Department of Treasury
If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.
Shuttleworth & Ingersoll will continue to closely monitor this and other legislative activity. Please contact any of our employment attorneys if you need additional guidance regarding this update or COVID-19 in general.
Sara Sidwell is an Attorney with Shuttleworth & Ingersoll. Sara’s practice focuses on employment and labor law and is based out of the Coralville office. She has practiced employment law for nearly fifteen years, both in-house and in private practice, and has extensive experience counseling both large and small employers on all aspects of employment law, including discrimination, harassment and retaliation claims, wage and hour compliance, non-compete issues and workforce reductions.